INTERIM REPORT JANUARY JUNE 2017

Transcription

1 INTERIM REPORT JANUARY JUNE 2017

2 INTERIM REPORT APRIL JUNE 2017 Net sales amounted to SEK 1,401 million (1,235), an increase of 13.4% increased by 0.9% and amounted to SEK 242 million (240) corresponding to an margin of 17.3% (19.4) Operating profit (EBIT) amounted to SEK 123 million (150) Profit after tax amounted to SEK 76 million (84) corresponding to a net margin of 5.4% (6.8) Earnings per share amounted to SEK 1.19 (1.67) before dilution and SEK 1.19 (1.67) after dilution JANUARY JUNE 2017 Net sales amounted to SEK 2,729 million (2,208), an increase of 23.6% increased by 6.6% and amounted to SEK 401 million (376) corresponding to an margin of 14.7% (17.0) Operating profit (EBIT) amounted to SEK 168 million (218) Profit after tax amounted to SEK 77 million (108) corresponding to a net margin of 2.8% (4.9) Earnings per share amounted to SEK 1.15 (2.14) before dilution and SEK 1.15 (2.13) after dilution Net debt to Equity was 0.6 (0.4) During February the acquisition of Kemwell India was completed 13% Sales increase 242 MSEK, 17% margin KEY FIGURES Apr Jun Jan Jun Jul 16 Jun 17 Jan - Dec SEK million Change in % Change in % LTM 2016 Net sales 1,401 1, ,729 2, ,199 4,678 1/ EBIT 1/ margin (%) 1/ Earnings per share (SEK) 1/ Return on equity (%) 1/ Equity per share (SEK) 1/ Equity ratio (%) 1/ Net debt 1/ 3,256 1,807 1,894 Net debt to Equity 1/ Net debt to 1/ / APM: Alternative Performance Measures, see financial definitions after note 4 Recipharm AB (Publ) Interim report, January June 2017 / 2 /

3 COMMENTS BY THOMAS ELDERED, CEO Sales and developed well and in line with our expectations for the quarter. Sales overall developed well and we report the highest ever sales and actually also for a quarter. We benefitted somewhat from phasing from the first quarter but different to the strong second quarter last year we did not see any material special positive effects or non-recurring items. While the business mix was somewhat negative, currency tailwinds gave us growth also excluding acquisitions. As we are making significant growth driving expansion investments I was pleased to see the good operating cash flow. We continue to gain important new business with both new and current customers, especially in the Sterile Liquids segment. Business activity was slightly lower in the Solids & Others segment, particularly in Europe. The Development & Technology segment reported slow growth for development services while even though product rights and IP performed somewhat better than our plans, this was still not as favourable as last year. The acquisitions we completed last year have generally performed well. Integration has been fully in line with our plans except for the development business in the US where we have seen certain setbacks. In India business was negatively affected towards the end of the quarter in anticipation of general tax reforms. While business activity picked up during the quarter for our highly interesting acquisition in Bengaluru, completed in February, we are still behind our plans. Our project to implement serialisation capability across the group is progressing according to plan. We have reason to believe that we are well positioned to benefit from this global new requirement. The capacity expansion projects for Sterile Liquids in France and Italy are fully in line with our plans in terms of cost and time to complete whereas we now see a further delay, possibly into next year, of the ramp-up of lyophilisation in Germany. We see several examples of good performance in terms of sales growth and profitability among our operating companies and we are getting valuable recognition from many customers for our global service offering. This is very promising for the future and we are making good progress in line with our overall objectives. But looking to the short term, certain delays are causing some uncertainty and together with the non-recurring costs in the first quarter this may make it a bit of a challenge to fully reach the margin target for The market is providing us with good opportunities for accretive acquisitions and major outsourcing projects. Even though we now have a leading asset base and global footprint we see good and highly interesting opportunities which we intend to explore. Our growth driving strategies will deliver and I m confident that our long-term objectives will be achieved as we are becoming a global CDMO leader. The company invites investors, analysts and media to a telephone conference with a web presentation (in English) on 25 July at 10:00 am CET where CEO Thomas Eldered and CFO Henrik Stenqvist will present and comment on the interim report and answer questions. Information about the conference can be found on the company website: Recipharm AB (Publ) Interim report, January June 2017 / 3 /

4 REVENUES NET SALES PER SEGMENT Apr Jun Jan Jun Jan - Dec SEK million Sterile Liquids , ,930.2 Solids & Others , , ,166.0 Development & Technology Eliminations and others Total 1, , , , ,678.3 APRIL - JUNE 2017 Net sales Net sales increased by SEK million and amounted to SEK 1,400.7 million, an increase by 13.4 percent. Sales were positively impacted by currency effects of SEK 41.0 million. Acquisitions contributed with SEK million or 12.7 percent of the sales increase. Sales, excluding acquisitions and the currency effect above, decreased by SEK 32.0 million. The decrease is mainly due to the volatile Thyrosafe business (35.3 m) and a retroactive price increase (10.6 m retroactive effect) both occurred in the second quarter last year. Other operating revenue Other operating revenue amounted to SEK 46.1 million (37.6), mainly consisting of royalty income, pass-through costs and currency gains on operating receivables and liabilities. JANUARY - JUNE 2017 Net sales Net sales increased by SEK million and amounted to SEK 2,728.7 million, an increase by 23.6 percent. Adjusted for recent acquisitions, SEK million and SEK 54.7 million currency translation effect, sales increased by 0.6 percent. The volatile Thyrosafe business had a negative effect on the growth rate year to date. Other operating revenue Other operating revenue amounted to SEK 81.3 million (71.0), mainly consisting of royalty income, pass-through costs and currency gains on operating receivables and liabilities. SALES BRIDGE, APRIL JUNE NET SALES PER QUARTER (MSEK) Sales, SEK million Sales, % ,235 Currency Acquisitions Organic Total ,401 SALES BRIDGE, JANUARY JUNE Sales, SEK million Sales, % ,208 Currency Acquisitions Organic Total ,729 Recipharm AB (Publ) Interim report, January June 2017 / 4 /

5 RESULTS PER SEGMENT Apr Jun Jan Jun Jan - Dec SEK million Sterile Liquids Solids and Others Development & Technology Eliminations and others Total APRIL - JUNE 2017 amounted to SEK million (240.0), an increase of 0.9 percent. The margin to sales decreased from 17.9 percent to 17.3 percent. The acquisition effect was SEK 19.3 million and the currency effect was SEK 8.3 million. without currency- and acquistion-effects decreased SEK 25.5 million partly due to SEK 10.6 million retroactive price increase, while the remaining difference is quite evenly shared between segments and mostly related to temporary demand variations. (SEK MILLION), MARGIN PER QUARTER AND LTM MARGIN ,0% 20,0% 16,0% 12,0% 8,0% 4,0% 0,0% Raw materials and consumables Raw materials and consumables amounted to SEK million (341.9). The increase is mainly related to the acquisitions, SEK 58.4 million. Overall, the material cost ratio to product sales has increased by 1.1 percent to 28.8 percent (27.7). This increase is mainly an effect of recent acquisitions and their higher relative share of material cost. Other external costs Other external costs amounted to SEK million (275.8). The increase is mainly related to the acquisitions, SEK 43.4 million. The cost to sales ratio increased 0.6 p.p. to 23.0 percent (22.3), mainly due to delay in sales and transition expenses for the recent acquisition in India and one off costs in projects and tech transfers. Employee benefits expense Employee benefits expense amounted to SEK million (394.5). The increase is mainly related to the acquisitions, SEK 45.9 million and the annual salary increase. The capacity expansion in Sterile Liquids segment is offset by headcount reductions in Solids, but due to the reductions in Solids and Other s sales the ratio of employee expenses to sales increased to 33.0 percent (31.9). Depreciation and amortisation Depreciation and amortisation amounted to SEK million (90.5). Depreciations increased mainly from the sterile capacity expansion in Wasserburg and amortisation increased mainly due to the recent acquisitions. % %, R12 BRIDGE, APRIL JUNE SEK million Currency +9 Acquisitions +19 Retroactive prices -11 Other -15 Total Financial items Financial Net amounted to SEK million (-18.1) Interest income and similar revenues amounted to SEK 1.3 million (0.7) and interest expenses and similar costs amounted to SEK 25.3 million (18.7). Tax The income tax amounted to SEK 22.4 million (47.7). The relatively low tax rate in Q2 is mainly a phasing effect due to uneven distribution of results from operating units in different countries between quarters. Profit after tax Profit after tax amounted to SEK 76.2 million (83.7). Recipharm AB (Publ) Interim report, January June 2017 / 5 /

6 JANUARY JUNE 2017 amounted to SEK million (376.4), an increase of 6.5 percent. The margin to sales decreased from 17.0 percent to 14.7 percent. The acquisitions during the last 12 months generated SEK 62.2 million and the currency effect was positive by SEK 11.3 million. excluding acquisitions and currency translation effects decreased by SEK 48.6 million. The lower was mainly due to lower capacity utilization in Solids and to some extent costs related to capacity expansion in Steriles. Raw materials and consumables Raw materials and consumables amounted to SEK million (606.4). The increase is mainly related to the acquisitions, SEK million. Overall, the material cost ratio to sales has increased by 3.2 percent to 30.6 percent. This increase is partly caused by a higher relative share of material cost from recent acquisitions. Other external costs Other external costs amounted to SEK million (503.6). The increase is mainly related to the acquisitions, SEK million. The ratio to sales increased 0.3 percentage points to 23.1 percent (22.8) mainly due to new customer projects and other one off costs. Employee benefits expense Employee benefits expense amounted to SEK million (753.6). The increase is mainly related to the acquisitions, SEK million, the capacity expansion in the Sterile Liquids segment and the annual increase in salaries. The ratio of employee expenses to sales improved to 33.4 percent (34.1) mainly due to different cost structure in some of the recent acquisitions. Depreciation and amortisation Depreciation and amortisation amounted to SEK million (158.0), of which SEK million (83.2) is depreciation and SEK million (74.8) is amortisation of intangible assets. The increase in depreciation of SEK 30.6 million (local currency) was partly from acquisitions (17.5) and the new lyophilisation facility, while the increase in amortisation of SEK 39.6 million was almost entirely due to recent acquisitions. Financial items Financial Net amounted to SEK million (-40.1). Interest income and similar revenues amounted to SEK 3.1 million (2.9) and interest expenses and similar costs amounted to SEK 54.8 million (43.1). Tax The income tax amounted to SEK 39.0 million (69.7). Profit after tax Profit after tax amounted to SEK 77.2 million (108.5). ACQUISITIONS The acquisition completed during the last 12 months is Kemwell India (February ). This acquisition contributed SEK 78.8 million to Net Sales and SEK 4.3 million to during the quarter. For additional information related to the acquisitions, refer to note 2. BRIDGE, JANUARY JUNE SEK million Currency +11 Acquisitions +62 Other -48 Total Recipharm AB (Publ) Interim report, January June 2017 / 6 /

7 MANUFACTURING SERVICES STERILE LIQUIDS The business segment Sterile Liquids consists of manufacturing of products on behalf of pharmaceutical companies and covers sterile technologies including liquid vials and ampoules, lyophilisation and blow-fill-seal products. Sales increased by 8.4% remained unchanged margin of 21.9% (23.7) APRIL JUNE 2017 Net sales Sales for Sterile Liquids increased by SEK 43.1 million to SEK million, an increase of 8.4 percent. The currency translation effect was SEK 27.6 million. Sales in local currency increased by SEK 15.5 million (3.0 percent) mainly due to a recovery from supply induced delays in first quarter this year. for Sterile Liquids remained unchanged, albeit including 4.8 percent positive currency effect. in local currency decreased SEK 5.8 million mainly due to phasing between sales and manufacturing in the period. SALES BRIDGE, APRIL JUNE Sales, SEK million Sales, % Currency Acquisitions Organic growth Total BRIDGE, APRIL JUNE SEK million Currency +5.8 Acquisitions 0.0 Other -5.8 Total JANUARY JUNE 2017 Net sales Sales for Sterile Liquids increased by SEK million to SEK 1,092.5 million, an increase of 23.7 percent. The currency translation effect was SEK 35.2 million. The acquisitions contributed with SEK million or 16.0 percent of the sales increase. Sales excluding acquisitions and currency effects increased by SEK 32.9 million equivalent to 3.7 percent mainly due to increased demand for injectable products including penicillins. for Sterile Liquids increased by SEK 20.7 million to SEK million, equivalent to an margin of 19.4 percent (21.6). The acquisitions contributed with SEK 26.2 million and the currency effect was SEK 7.0 million. in local currency, excluding acquisitions, decreased by SEK 12.6 million mainly related to one-off costs in Italy due to delays in sourcing, as well as the start up costs in the new lyophilisation line in Germany. Recipharm AB (Publ) Interim report, January June 2017 / 7 /

8 MANUFACTURING SERVICES SOLIDS & OTHERS The business segment Solids & Others consists of manufacturing of products on behalf of pharmaceutical companies and covers tablets, capsules, semi-solids and non-sterile liquids. Sales increased by 18.7% increased by 3.4% margin of 14.8% (16.9) APRIL JUNE 2017 Net sales Solids & Others increased sales by SEK million to SEK million, an increase of 18.7 percent. The currency effect was SEK 7.6 million. The acquisitions contributed with SEK million or 25.9 percent to the sales increase. Sales, excluding acquisitions and currency effects, decreased by SEK 47.9 million compared with same quarter last year. The decrease was dominated by the volatile Thyrosafe business and the retroactive price increase occurred in second quarter last year. Still, there is a net reduction mainly due to discontinuation of certain contracts. for Solids & Others increased by SEK 3.2 million to SEK 98.3 million, corresponding to an margin of 14.8 percent (16.9). The acquisitions contributed with SEK 19.1 million and the currency effect was SEK 1.6 million. excluding acquistions and currencies was SEK 17.5 million lower than last year largely due to the retroactive price increase and in lesser extent one off effects incurred in new customer projects and lower volumes. SALES BRIDGE, APRIL JUNE Sales, SEK million Sales, % Currency Acquisitions Organic Total BRIDGE, APRIL JUNE SEK million Currency +1.6 Acquisitions Retroactive prices Other -6.9 Total JANUARY JUNE 2017 Net sales Solids & Others increased sales by SEK million to SEK 1,264.8 million, an increase by 23.5 percent. The currency effect was SEK 9.6 million. The acquisitions contributed with SEK million or 28.0 percent to the sales increase. Sales, excluding acquisitions and currency effects, decreased by SEK 55.4 million compared to second quarter last year. The decrease is mainly due to discontinuation of certain contracts and variations in Thyrosafe tender business. for Solids & Others decreased by SEK 12.6 million to SEK million, corresponding to an margin of 11.2 percent (15.1). The acquisitions contributed with SEK 37.3 million and the currency effect was SEK 2.6 million. excluding acquistions and currencies was SEK million, SEK 52.4 million less compared to the same period in the previous year. The decrease was mainly related to the lower volumes in discontinued contracts and the Thyrosafe business, and included one off costs related to new customer projects Recipharm AB (Publ) Interim report, January June 2017 / 8 /

9 DEVELOPMENT & TECHNOLOGY The business segment Development & Technology provides pharmaceutical development services. It also includes a register of patents, technologies and product rights, and sales of own products to distributors and partners. Sales decreased by 2.7% decreased by 2.3% margin of 20.6% (20.5) APRIL JUNE 2017 Net sales Development & Technology decreased sales by SEK 6.0 million to SEK million, a decrease by 2.7 percent. The acquisitions contributed with SEK 18.0 million and the currency translation effect was SEK 6.2 million. The volatile Thyrosafe business influenced the sales by SEK million. Sales adjusted for Thyrosafe grew by 5.1 million (2.3 percent) and was mainly driven by trending demand for erdosteine and other APIs. SALES BRIDGE, APRIL - JUNE Sales, SEK million Sales, % Currency Acquisitions Organic Total for Development & Technology decreased by SEK 1.1 million to SEK 44.5 million, equivalent to an margin of 20.6 percent (20.5). The acquisitions contributed with SEK 0.2 million and the currency translation effect was SEK 1.6 million., excluding acquisitions and currency effects, decreased by SEK 2.8 million versus last year mainly due to product mix among own products and lower efficiency ratios in development services due to current weak demand. BRIDGE, APRIL - JUNE SEK million Currency +1.6 Acquisitions +0.2 Product mix and dev. services -2.8 Total JANUARY JUNE 2017 Net sales Development & Technology increased sales by SEK 40.6 million to SEK million, an increase of 10.1 percent. The acquisitions contributed with SEK 34.2 million and the currency translation effect was SEK 9.5 million. Reduced sales of Thyrosafe was SEK 27.0 million. The adjusted sales, increased by SEK 23.9 million, mainly driven by strong demand for erdosteine and other APIs. for Development & Technology increased by SEK 14.1 million to SEK 87.9 million, equivalent to an margin of 19.8 percent (18.3). The acquisition effect was negative by SEK -1.3 million and the currency translation effect was SEK 2.2 million., excluding acquisitions, increased by SEK 13.2 million versus last year mainly as a consequence of favorable product mix. Recipharm AB (Publ) Interim report, January June 2017 / 9 /

10 CASH FLOW Apr - Jun Jan - Jun Jan - Dec SEK million CF operating activities before changes in WC CF from changes in working capital (WC) CF from investing activities , , , ,033.1 CF from financing activities , ,834.4 Total APRIL JUNE 2017 Cash flow from operating activities before changes in working capital was to SEK million (157.9) while changes in working capital was SEK million (-18.8). Cash flow from investing activities was SEK million (-1,102.0) of which SEK million is a correction of the amount for purchase consideration for Kemwell India reported in Q1, with a corresponding correction included in amount for repayment of borrowings. SEK million (-84.6) was investments in property, plant and equipment. The increase is mainly due to new equipment for serialisation, expansion of blow-fill-seal capacity in Kaysersberg and capacity investments in Wasserburg (new freeze drying and packaging capacity). Cash flow from financing activities was SEK million (116.2.), mainly related to the payment of dividend in May as well as new loans. JANUARY JUNE 2017 Cash flow from operating activities before changes in working capital was to SEK million (271.4) while changes in working capital was SEK million (-192.8). Cash flow from investing activities was SEK -1,233.4 million (-1,655.2) of which SEK million (-1,520.0) was acquisition of subsidiaries and SEK million ( ) was investments in property, plant and equipment. The increase is mainly due to new equipment for serialisation, expansion of blow-fill-seal capacity in Kaysersberg and capacity investments in Wasserburg (new freeze drying and packaging capacity). FINANCING AND RETURN KEY FIGURES FINANCING AND RETURN Jan Jun Jan - Dec SEK million Return on operating capital (%) Return on equity Net debt to Net debt to equity Equity to assets (%) The return on operating capital decreased to 4.5 from 5.8 last year. The decrease is due to the increase in operating capital from the acquisitions made in 2016 and Return on equity decreased to 3.3 from 3.5 in the same period previous year and from 4.9 at the end of The decrease is mainly due to a higher equity in the period. The net debt to ratio increased to 4.2 from 3.2 compared to the same period in the previous year. The increase in net debt is mainly due to the increase of debt from acquisitions and no full year effect of the acquisition of Kemwell India, which impacted the ratio negatively. The interest bearing debt at June amounts to SEK 3,704.0 million of which SEK 2,625.6 million was used of the SEK 3 billion loan facilities. Net debt in relation to equity was 0.6 (0.4), well below the target of maximum 0.8. The equity to assets ratio decreased compared to last year due to an increase of assets mainly from the acquisition of Kemwell India. Recipharm AB (Publ) Interim report, January June 2017 / 10 /

11 PARENT COMPANY Recipharm AB (publ) includes Group management and functions that provide services to the business. The parent company s net sales was SEK 58.9 million (56.1) and operating result was SEK million (-37.0) during the period January to June Investments amounted to SEK 60.9 million (7.0), mainly due to the serialisation project. EMPLOYEES The average number of employees (equivalent to full-time employees FTE ) during the period was 4,111 (2,638), of which 1,330 FTEs is an effect of recent acquisitions. SIGNIFICANT EVENTS DURING THE PERIOD Recipharm announced April 11 the appointment of Henrik Stenqvist as Recipharm s new Executive Vice President and CFO effective on April On April 21 Recipharm announced the delivery of its first batch of serialised drug products to Saudi Arabia, following the introduction of new regulatory requirements in March The 300,000 project, which is in addition to a wider 40 million investment into new serialisation technology and processes to comply with the European Falsified Medicines Directive (FMD), enables Recipharm to supply serialised products to Saudi Arabia. employed by the group during the entire savings period and that certain performance criteria are met. Participation for senior executives, operating company management team members and certain key employees, who are also eligible for performance shares, requires that participants acquire Saving Shares for an amount not exceeding 10 percent of the annual fixed salary. This program comprises up to 1,059,000 shares of series B. SIGNIFICANT EVENTS AFTER THE PERIOD END On July 20 it was announced that Recipharm and LIDDS together have set up a manufacturing line for LIDDS novel prostate cancer drug, Liproca Depot, at Recipharm in Solna, Sweden. The manufacturing line is dedicated to the first product based on LIDDS innovative NanoZolid technology. Clinical trial material has already been produced and the facility is ready for future commercial manufacturing of Liproca Depot or other pharmaceutical formulations based on the NanoZolid technology. The manufacturing line has been adapted for GMP production and is industrialised according to a unique process invented by LIDDS, involving the installation of novel equipment that is new to the pharmaceutical industry. Recipharm announced on April 24 the opening of a newly built GMP suite for clinical trial material (CTM) manufacture at its facility in Research Triangle Park, North Carolina, USA. The suite, which represents a $750k investment, is intended to produce CTM for clinical studies up to Phase II for non-sterile dosage forms, including metered dose inhalers and semi-solid topical products. The Annual General Meeting resolved to implement a share-based incentive program The program is based on the same conditions as previous program 2016 (which is described in the Annual Report 2016, pages 69-70). The share-based incentive program shall cover as many employees of the Recipharm group as possible and gives the employees a possibility to acquire shares series B in Recipharm at market price up to a maximum of 5 percent of each participant s annual fixed salary ( Saving Shares ). If the shares are saved by the employee over three years and the employment in Recipharm is kept, the employee will be allocated the corresponding number of shares free of charge. The group s senior executives, operating company management team members and certain key employees will, in addition, be able to receive additional shares of series B in Recipharm ( Performance Shares ) free of charge, provided that the participant is Recipharm AB (Publ) Interim report, January June 2017 / 11 /

12 SHARES Recipharm s class B shares were first available for trading on Nasdaq Stockholm on April THE LARGEST SHAREHOLDERS (30 JUNE) Shareholder Capital (%) 2017 Capital (%) 2016 Votes (%) 2017 Votes (%) 2016 Flerie Participation AB 1/ Cajelo Invest AB 1/ Lannebo fonder Första AP-fonden Kemfin Holdings / Flerie Participation AB is controlled by CEO Thomas Eldered and Cajelo Invest AB is controlled by Chairman Lars Backsell. FINANCIAL CALENDAR Interim report Jan Sep 2017 November 9, 2017 Full year report Jan Dec 2017 February 22, 2018 CONTACT INFORMATION: Thomas Eldered, CEO, tel Henrik Stenqvist, CFO, tel ir@recipharm.com The undersigned Board members assure that this Interim report provides a true and fair view of the development of the Group s and Parent Company s operations, position and performance as well as describing material risks and uncertainties faced by the companies being part of the Group. Stockholm, July Thomas Eldered (CEO) Lars Backsell (Chairman) Carlos von Bonhorst Anders G. Carlberg Olle Christenson Marianne Dicander Alexandersson Helena Levander Wenche Rolfsen Tony Sandell This information is information that Recipharm AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 07:45 CET on July 25, This interim report and other financial information about Recipharm AB (publ) are available at This report is prepared in Swedish and thereafter translated into English. Should any differences occur between the Swedish and the English version, the Swedish version shall prevail. This report has not been reviewed by the company s auditors. Recipharm AB (Publ) Interim report, January June 2017 / 12 /

13 FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF PROFIT AND LOSS Apr - Jun Jan Jun Jan Dec SEK million Revenue Net sales 1, , , , ,678.3 Other operating revenue , , , , ,833.1 Operating expenses Raw materials and consumables ,398.2 Other external costs ,060.3 Employee benefits expense ,550.8 Depreciation and amortisation Other operating expenses Share of result in participations , , , , ,448.8 Operating profit Interest income and similar revenues Interest expenses and similar costs Net financial income/expense Profit before tax Income tax Profit for the period OTHER COMPREHENSIVE INCOME: Apr Jun Jan Jun Jan - Dec SEK million Items that may be reclassified subsequently to profit or loss Translation differences Gains/losses from fair value valuation of financial instruments Deferred tax relating to items that may be reclassified Total Items that will not be reclassified to profit or loss Actuarial gains/losses on pensions Deferred tax relating to items that will not be reclassified Total Other comprehensive income for the period Comprehensive income for the period Net profit distributed to: Parent company s shareholders Non-controlling interest Group comprehensive income distributed to: Parent company s shareholders Non-controlling interest Earnings per share before dilution (SEK) Earnings per share after dilution (SEK) Recipharm AB (Publ) Interim report, January June 2017 / 13 /

14 CONSOLIDATED STATEMENT OF FINANCIAL POSITION, CONDENSED Jun 30 Dec 31 SEK million Note ASSETS Non-current assets Product rights Goodwill 2, , ,063.9 Customer relations 2, , ,059.4 Other intangible assets Property, plant and equipment 2, , ,281.1 Non-current financial assets Total non-current assets 8, , ,107.6 Current assets Inventories Accounts receivable 1, Other receivables Prepaid expenses and accrued income Cash and cash equivalents Total currents assets 2, , ,722.8 TOTAL ASSETS 11, , ,830.4 SHAREHOLDERS EQUITY AND LIABILITIES Share capital Other paid-in capital 4, , ,026.5 Reserves Retained earnings (including net profit) Equity attributable to Parent Company shareholde 4, , ,787.0 Equity attributable to Non-Controlling interest Total equity 5, , ,130.1 Non-current liabilities Interest-bearing liabilities 3, , ,550.8 Provisions Deferred tax liability Other non-current liabilities Total non-current liabilities 4, , ,648.3 Current liabilities Interest-bearing liabilities Overdraft facility Accounts payable Tax liabilities Other liabilities Accrued expenses and prepaid income Total current liabilities 1, , ,052.1 TOTAL EQUITY AND LIABILITIES 11, , ,830.4 Recipharm AB (Publ) Interim report, January June 2017 / 14 /

15 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SEK million Retained earnings Equity attr. to parent company Non- Share capital Other paidin capital Reserves incl. net profit shareholdercontr. interest Total equity Equity at 1 January , , ,740.5 Profit January-December Other comprehensive income Non-controlling interest Transactions with owners: New share issue 8.4 1, , ,701.4 Share-based incentive program Dividend Convertible bond, equity share Equity at 31 December , , ,130.1 Profit for January-June Other comprehensive income Non-controlling interest Transactions with owners: Share-based incentive program Dividend Equity at 30 June , , ,080.5 Recipharm AB (Publ) Interim report, January June 2017 / 15 /

16 CONSOLIDATED CASH FLOW STATEMENT Apr Jun Jan Jun Jan - Dec SEK million Note Operating activities Profit before tax Adjustments for items not affecting cash - Depreciation, amortization and impairment of assets - Changes in provisions Gains from disposal of short-term investment Share of result of associated companies Other Income taxes paid Operating cash flow before changes in working capital Cash flow from changes in working capital Change in inventories Change in operating receivables Change in operating liabilities Operating cash flow Investing activities Acquisition of property, plant and equipment Disposal of property, plant and equipment Acquisition of intangible assets Acquisition of subsidiaries/operations, net of , , ,520.0 cash acquired Acquisition of financial assets Disposal of short-term investment Cash flow from investing activities , , , ,033.1 Financing activities Dividend paid to Parent Company shareholders New share issue , ,258.7 Issue of convertible bonds Change in overdraft facility Loans raised , , ,349.7 Repayment of borrowings ,691.2 Cash flow from financing activities , ,834.4 Total cash flow for the period Cash and cash equivalents at beginning of period Translation difference on cash and cash equivalents , Cash and cash equivalents at end of period Interest received Interest paid Recipharm AB (Publ) Interim report, January June 2017 / 16 /

17 PARENT COMPANY STATEMENT OF PROFIT AND LOSS Apr Jun Jan Jun Jan - Dec SEK million Revenue Net sales Other operating revenue Operating expenses Other external costs Employee benefits expense Depreciation and amortisation Other operating expenses Operating profit/loss Financial items Profit/loss after financial items Appropriations and tax Profit/loss for the period OTHER COMPREHENSIVE INCOME Apr Jun Jan Jun Jan - Dec SEK million Items that may be reclassified subsequently to profit or loss Translation differences Other comprehensive income for the period Total comprehensive income for the period PARENT COMPANY STATEMENT OF FINANCIAL POSITION, CONDENSED Jun 30 Jan - Dec SEK million ASSETS Non-current assets Intangible assets Property, plant and equipment Non-current financial assets 6, , ,307.2 Current assets , ,079.9 TOTAL ASSETS 7, , ,458.1 SHAREHOLDERS EQUITY AND LIABILITIES Equity 3, , ,775.4 Liabilities 3, , ,682.7 TOTAL EQUITY AND LIABILITIES 7, , ,458.1 Recipharm AB (Publ) Interim report, January June 2017 / 17 /

18 ACCOUNTING PRINCIPLES, RISKS, DEFINITIONS AND NOTES Accounting principles The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) which have been approved by the European Commission for application within the EU. This interim report was prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company applies the Annual Accounts Act and the Swedish Financial Reporting Board s recommendation RFR2, Accounting for Legal Entities. The accounting principles and calculations in this report are the same as those used for the 2016 Annual Report. New or amended standards or interpretations of standards effective as of 1 January 2017 have not had any significant impact on Recipharm s financial statements. Significant risks and uncertainties A detailed description of risks is provided in the 2016 Annual Report, on page 32. Recipharm AB (Publ) Interim report, January June 2017 / 18 /

19 NOTE 1 NUMBER OF SHARES AND POTENTIAL SHARES A-shares B-shares D-shares Total Number of shares as of 31 December ,222, ,494, ,000 63,217,532 Conversion of shares 130, ,000 0 Number of shares as of 30 June ,222,858 47,624, ,000 63,217,532 Potential shares, 808,569 (93,497), are related to Recipharm's share-based incentive program as well as the convertible bond issued in October Of total number of shares the company holds 186,946 B-shares and 370,000 D-shares. This is to secure delivery of shares to participants in the Share-based incentive program. The Annual General Meeting on 10 May 2017 resolved on a dividend of SEK 1.50 per share. The dividend was paid in May. NOTE 2 BUSINESS COMBINATIONS Kemwell India On April Recipharm announced the signing of two separate agreements to acquire Kemwell's pharmaceutical CDMObusinesses. The first acquisition, comprising US and Swedish operations, was completed on May The second, comprising operations in India, was conditional on governmental approvals and was closed on February The acquired Indian business employed around 1,400 people at closing of the acquisition and comprises both development services as well as commercial manufacturing of solid, semi-solid, liquid and topical dose products. The solid dosage plant was commissioned in 2008 and has approvals from US FDA and EU amongst many other regulatory bodies. The oral liquids production plant was commissioned in 2011 and is specialized in automated high thorughput large volume manufacturing, mainly for the Indian subcontinent. The development business is a rapidly growing business with a comprehensive service offering including formulation development, small scale manufacturing for clinical trials and a large analytical service business. The purchase price for the shares was SEK million (including cash and cash equivalents of SEK 20,0 million) and was paid in cash. Transaction costs amount to SEK 4.7 million of which SEK 1.1 million is reported in 2017 and SEK 3.6 million was reported in The consolidated statement of profit and loss for the period includes net sales of SEK million and operating profit of SEK million attributable to Kemwell India. Recipharm net sales for the year, calculated as if the company was acquired at the beginning of the financial year, would have been SEK 2,751.2 million and operating profit SEK million. For the 12-month period ending on December , the Indian business generated revenues of approximately INR 2,263 million (SEK 288 million) and of INR 280 million (SEK 36 million). Assets and liabilities in the acquired company were: 1) Carrying amount Fair value Adjustment 2) Fair Value in the group Intangible assets Property, plant and equipment Financial assets Accounts receivable and other operating assets Cash and cash equivalents Deferred tax liability Interest-bearing liabilities Provisions Accounts payable and other operating liabilities Net identifiable assets and liabilities Group goodwill 1) Purchase consideration ) The purchase price allocation has not been finalized and consequently the fair value adjustment presented above is preliminary. 2) Fair value adjustment consist of customer relations, SEK million. The recognized value of goodwill represents the combined value of synergies, employee competence and experience. Recipharm AB (Publ) Interim report, January June 2017 / 19 /

20 NOTE 3 SEGMENT ANALYSIS For control purposes Recipharm is separated into three segments: Manufacturing Sterile Liquids (MFG-SL), Manufacturing Solids & Others (MFG-SO) and Development & Technology (D&T). The business segment MFG-SL includes manufacturing of products on behalf of pharmaceutical companies and covers sterile technologies including liquid vials and ampoules, lyophilisates and blow-fill-seal products. The business segment MFG-SO includes manufacturing of products on behalf of pharmaceutical companies and covers tablets, capsules, semi-solids and non-sterile liquids. The business segment D&T provides pharmaceutical development services. It also includes a register of patents, technologies and product rights, and sales of own products through distributors. The segment reporting is based on the structure the management follow the business. Transactions between segments are based on same conditions as for external customers. SEK million Jan Jun 2017 Jan Jun 2016 MFG-SL MFG-SO D&T Other 1) Total MFG-SL MFG-SO D&T Other 1) Total Net sales, external 1, , , ,207.8 Net sales, internal Depreciations Impairments EBIT Goodwill 1, , , , ,282.4 Non-current assets 3, , , , , , , ,669.3 Total assets 4, , , , , , , , ) The segment Other also includes eliminations. SEK million Jan Dec 2016 MFG-SL MFG-SO D&T Other 1) Total Net sales, external 1, , ,678.3 Net sales, internal Depreciations EBIT Goodwill 1, ,063.9 Non-current assets 3, , , ,107.6 Total assets 4, , , , ) The segment Other also includes eliminations. Geographical area Net sales Fixed assets Jan-Jun 2017 Jan-Jun 2016 Jan-Dec 2016 Jun Jun Dec Sweden , , , ,236.7 Italy , , ,917.3 France Portugal , , ,057.8 India , , ,361.1 Germany Spain Other Total 2, , , , , ,107.6 Recipharm AB (Publ) Interim report, January June 2017 / 20 /

21 NOTE 4 EARNINGS PER SHARE EARNINGS PER SHARE Apr - Jun Jan Jun Jan - Dec SEK million Note Parent company s shareholders: Earnings per share before dilution (SEK) Earnings per share after dilution (SEK) Profit before dilution (SEK thousand) 75,425 83,073 72, , ,682 Effect from potential shares (SEK thousand) 8,980-17,986-8,338 Profit after dilution (SEK thousand) 84,406 83,073 90, , ,019 Average number of shares before dilution 1 63,218 49,615 63,218 50,497 56,875 (thousand) Potential shares (thousand) Average number of shares after dilution (thousand) 63,496 49,625 64,026 50,590 57,302 Recipharm AB (Publ) Interim report, January June 2017 / 21 /

22 GLOSSARY CDMO CER CMO LTM Contract, Development and Manufacturing Organisation Constant Exchange Rate Contract Manufacturing Organisation Latest Twelve (12) Months FINANCIAL DEFINITIONS NON-IFRS PERFORMANCE Return on equity Return on operating capital margin Equity per share Non-interest-bearing liabilities Net debt Net debt/equity ratio Net debt in relation to Net sales (CER) Operating capital (average) Operating cash flow per share Earnings per share (EPS) Earnings per share after dilution Interest-coverage ratio Operating profit Operating margin Equity/assets ratio Debt/equity ratio INDICATORS DEFINITION AND REASON FOR USE Net profit for the year (12-month period) divided by average total equity Return on equity shows the return on the company s equity Operating profit (12-month period) divided by average operating capital Return on operating capital shows the return disregarding financial assets and financing Profit before financial items, taxes and depreciation shows operating profit, which is also used in combination with other data for measurement purposes Profit before financial items, taxes and depreciation divided by net sales The margin shows operating profit in relation to net sales Shareholders equity on the balance-sheet date divided by the number of shares (balance-sheet date) Equity per share shows the equity generated to the shareholders per share Includes deferred tax liability Measures non-interest-bearing liabilities Interest-bearing liabilities less cash and cash equivalents Net debt is calculated to show the net of interest-bearing liabilities and cash Net debt divided by shareholders equity The debt/equity ratio is an indication of financial strength, relationship between net debt and equity Net debt divided by (rolling 12-month basis) Net debt in relation to shows the impact of and risk level for liabilities CER: Constant Exchange Rates Net sales (CER) shows net sales without the impact of currency exchange rates and, in many cases, this comparison is a fairer measure Net debt plus shareholders equity (average opening and closing balance for the period) Measures the use and efficiency of capital Cash flow from operating activities (12 months) divided by the weighted average number of shares (12-month rolling basis) Cash flow per share provides an indication of value; how much cash and cash equivalents each share generates Profit for the period distributed to parent company shareholders divided by average number of shares before dilution Measures earnings per share before dilution Profit for the period distributed to parent company shareholders divided by average number of shares after dilution Measures earnings per share after dilution Operating profit plus financial income divided by financial expenses Measures the company s ability to cover its interest expenses Operating profit before financial items and tax Operating profit shows the earnings from operations, including depreciation/amortisation and impairment losses Operating profit divided by net sales Measures the profitability of operations Shareholders equity divided by total assets The equity/assets ratio shows how much of total assets are financed using shareholders equity Interest-bearing liabilities divided by shareholder's equity The debt/equity ratio is an indication of financial strength, relationship between debt and equity Recipharm AB (Publ) Interim report, January June 2017 / 22 /

23 THE PHARMACEUTICAL CDMO MARKET CDMOs, such as Recipharm, provide pharmaceutical companies with diverse manufacturing and development services from managing a product s transition from laboratory to full-scale commercialisation.outsourcing development and manufacturing services enables pharmaceutical companies to focus on their core business, such as R&D and marketing, and can crucially reduce costs, time-to-market, and risk. In addition, CDMOs can provide access to technology due to their highly specialised knowledge. In a world of increasingly technological and supply chain complexity, CDMOs with their focussed operations are typically well equipped to assimilate, develop and master the latest technologies. ABOUT RECIPHARM Recipharm is a leading Contract Development and Manufacturing Organisation (CDMO) in the pharmaceutical industry employing around employees. Recipharm offers manufacturing services of pharmaceuticals in various dosage forms, production of clinical trial material and APIs, and pharmaceutical product development. Recipharm manufactures several hundred different products to customers ranging from big pharma to smaller research and development companies. Recipharm s turnover is approximately SEK 5.3 billion and the company operates development and manufacturing facilities in France, Germany, India, Israel, Italy, Portugal, Spain, Sweden, the UK and the US and is headquartered in Stockholm, Sweden. The Recipharm B-share (RECI B) is listed on Nasdaq Stockholm. For more information on Recipharm and our services, please visit Recipharm AB (Pub) Corp ID Address Drottninggatan 29, Box 603, SE Stockholm Recipharm Telephone AB +46 (Publ) Interim report, Fax January June / 23 /