9 March 2020, Felix Burkhard, CFO: Annual financial statements 2020

Galenica Group

Annual financial statements 2020

Felix Burkhard, CFO

Media and analysts' conference, 9 March 2021

Galenica - Health and wellbeing are at the heart of what we do.

Step by step upwards 2020: Break due to COVID-19

Galenica Group

Stable result despite COVID-19

Net sales (in million CHF)

EBIT adjusted1) (in million CHF)

3'301

3'480

2019

2020

166.9

168.6

2019

2020

1)

Details of the adjustments of IAS19 and IFRS16 effects, in the Annual Report 2020, pages 89 and 90

Strong expansion of the pharmacy network

Net sales (in million CHF)

Expansion of the pharmacy network

Elements of growth:

1'516

1'556

2019

2019	2020
Pharmacies added	+19	+17
Pharmacies restructured	-8	-7
Net pharmacies added	+11	+10

2020

Expansion1) : +5.6%

Organic2) : +0.4%

+3.2% -0.5%

thereof one-time effect of process optimisation3) :

+1.2% Organic growth w/o one-time effect

thereof impact of price cuts4) : -1.8%

-1.7% -1.6%

• 1) Calculated only including point of sales without a full year period comparison, Annual Report 2020, page 88

• 2) Consolidated net sales less expansion effect, Annual Report 2020, page 88

• 3) As a part of a process optimisation, various intersegmental sales transactions were discontinued at the beginning of 2020.

• 4) Mandatory price reductions of medications reimbursed by health insurers of the specialities list (SL/LS) released by the Federal Office of Public Health (FOPH), calculated based on

  volumes of previous period, Annual Report 2020, page 88

COVID-19 related sales losses compensated by strong online growth

Pharmacies in high-frequency locations strongly affected:

−	Sales of webshops tripled	Sales losses of cough & cold and travel-
Average fall in sales -23%	−	Mediservice sales > CHF 300 Mio.	related products compensated by higher
−
Impact on organic sales growth of	(+5.7%)	sales of nutrition, prevention, hygiene
−
Retail business sector -1.9%	products

Strong online growth:

Absence of cough & colds:

Products & Brands

Strong sales growth due to expansion of product portfolio

Net sales (in million CHF)

Elements of growth:

2019

2020

Expansion1) : +9.2% +17.3%

Organic2) : +2.1% -7.9%

thereof Swiss market : -0.1% -7.2%

International sales

Sales in the Swiss Market

• 1) Calculated only including business activities without a full year period comparison (acquisitions and new license agreements), Annual Report 2020, page 88

• 2) Consolidated net sales less expansion effect, Annual Report 2020, page 88

Growth of OTC market driven by prevention products

Consumer Healthcare Market 2020

Total cough & cold products part of OTC segment:

Source: IQVIA Pharmatrend for pharmacies and drugstores in Switzerland, streetprices

OTC +4.4%

Personal care -3.7%

Patient care +12.3%

Nutrition +4.0%

Health & Beauty Segment

Stable EBIT despite significant impact of COVID-19

Net sales (in million CHF)

EBIT adjusted1) (in million CHF)

1'621

1'671

2019

2020

123.7

123.9

2019

2020

Estimated impact of COVID-19:

− EBIT: negative impact of CHF -8 to -10 million

1)

Details of the adjustments of IAS19 and IFRS16 effects, in the Annual Report, pages 89 and 90

Services

Strong sales development due to market share gains

Net sales (in million CHF)

2019

2020

One-time effect of adapted invoicing models2):

Growth w/o one-time effect:

impact of price cuts3):

+5.5%

• 1) Details of the adjustments of IAS19 and IFRS16 effects, in the Annual Report 20, pages 89 and 90

  EBIT adjusted1) (in million CHF)

  44.7

  45.4

  2019

  2020

  Estimated impact of COVID-19: − Net sales: +1.4% − Neutral impact on EBIT: additional sales compensated by additional costs

• 2) In the context of the new Ordinance on Integrity and Transparency in the Therapeutic Products Sector (OITTP), agreements with suppliers as well as invoicing models were adapted to the new transparency obligations, which influenced the sales development in the Services business sector.

• 3) Mandatory price reductions of medications reimbursed by health insurers of the specialities list (SL/LS) released by the Federal Office of Public Health (FOPH), calculated based on volumes of previous period, Annual Report 2020, page 88

Swiss pharmaceutical market by channel 2020

Value (ex-factory): CHF 6,331.7 million CHF +176.9 million / +2.9%

Volume (packs): 183.0 million -3.3 million / -1.8%

Drugstores 67.5 million +13.1%

Hospitals 1'633.9 million +3.1% 25.8%

Physicians 1'600.4 million +3.1%Pharmacies 3'029.8 million +2.4%

Source: APO/SD/DRO/SPI Index, Swissmedic A, B, C, D

Medicines Swissmedic lists A, B, C, D, sold from suppliers and wholesalers to hospitals, physicians and drugstores

09.03.2021 ©©IGQaVleIAnicSawGitrzoeuprland - Swiss pharmaceutical market 2020

Drugstores

16.6 million 3.6% -3.2%

Hospitals 9.1%

6.6 million 22.5% +8.7%

Physicians 1.2% 41.2 million -3.1%

Galenica Group

EBITDA and EBIT adjustments1)

EBITDA (in million CHF)

EBIT (in million CHF)

2019 2020 in % EBITDA adjusted 210.4 Adjustment IAS 19 -0.1 213.6 +1.5% 43.0 Adjustment IFRS 16 50.0 52.9 EBITDA 260.3 309.5 +18.9%

2019 2020 in % EBIT adjusted 166.9 Adjustment IAS 19 -0.1 168.6 +1.0% 43.0 Adjustment IFRS 16 2.7 1.8 EBIT 169.5 213.3 +25.9%

1) Details of the adjustments in the Annual Report 2020, pages 89 and 90

Galenica Group Financial result and taxes

Financial result (in million CHF)

-3.2	-2.4
-2.4
-2.9

-4.7

-6.1

2019

2020

Financial result adjusted1)

Effects of IAS19 and IFRS161)

• 1) Details of the adjustments of IAS19 and IFRS16 effects, in the Annual Report 2020, pages 89 and 90

• 2) Details of one-time effects of deferred taxes, in the Annual Report 2020, pages 112

Taxes (in million CHF)Tax rate excluding one-time effects2)

-29.7	-35.9
-8.4

-35.9

-38.1

2019

Taxes excluding one-time effects

2020

One-time effects of deferred taxes 20192)

Galenica Group Pleasing net profit growth

(in million CHF)

2019

• 1) Details of one-time effects of deferred taxes, in the Annual Report 2020, pages 112

  172.7 +37.8%

  2020

• 2) Details of the adjustments of IAS19 and IFRS16 effects, in the Annual Report, pages 89 and 90

One-time effects of deferred taxes1)Net profit comparable, adjusted2) and excluding one-time effects of deferred taxes1)

Effects of IAS19 and IFRS162)

Galenica Group Investments

(in million CHF)

% of net sales

53.0

57.0

18.9	20.5
34.2	36.5

2019

Investments in intangible assets

Investments in tangible assets

2020

Ongoing investments in strategic efficiency projects : − Replacement of the ERP system in Wholesale and pre-wholesale as well as renovation of distribution center

Lausanne-Ecublens to be completed by 2023 − Remaining investments of ~CHF 44-48 million (investments in 2020: CHF 15.2 million)

Galenica Group

Condensed Cash Flow Statement

in million CHF 2019 2020
Cash flow from operating activities before working capital changes 237.4 Payment of lease liabilities -47.6 Cash flow from operating activities before working capital changes adjusted 189.8	238.8 -49.1 189.7
Working capital changes 13.0 Cash flow from operating activities adjusted 202.8	-14.4 175.3
Cash flow from investing activities without M&A -57.8 Free cash flow before M&A 145.0	-57.3 118.0
Cash flow from M&A -77.1 Free cash flow 67.9	-58.4 59.6

Galenica Group Solid balance sheet

(in million CHF)

Debt coverage1)

Debt coverage adjusted2)

2.1x 1.8x

1.5x 1.7x

1'000

• 1) Net debt / EBITDA, Annual Report 2020, page 93

  1'053

• 2) Net debt adjusted / EBITDA adjusted excluding effects of IAS19 und IFRS16, Annual Report 2020, page 93

• 3) Detail of the adjustments in the Annual Report 2020, page 92

Equity adjusted3)

Effect of IFRS163)

Net debt adjusted3)

IAS19 and IFRS16 effects on equity3)

Dividend 2020

Proposal to the Annual General Meeting

2019	2020
(in CHF)
Gross dividend per share	1.80	1.80
of which paid out from retained earnings	0.90	0.90
of which paid out from capital contribution reserves	0.90	0.90

Outlook regulation

Reduction in drug prices

Generics prices "Reference price system"

Distribution margin

SBR IV  SBR V

OTC products1): category changes, online trade

1) Swissmedic categories C, D

New Segment structure as of 1st January 2021

− No major changes within the segments

−

As in the past, additional details on net sales within the segments will be provided

Guidance 2021

Assumptions:

• − Persistent negative impact of COVID-19 in the first months of 2021.

• − Lack of colds, absence of a seasonal flu epidemic and continued low mobility will continue to have a particularly strong impact on pharmacy sales in high-frequency locations and at Verfora.

• − Significant improvement and normalisation of the situation from Q2 and especially in H2 of 2021.

Guidance 2021: − Galenica Group net sales +1% to +3% − EBIT (excluding the effects of IAS 19 & IFRS 16) +2% to +5% − Dividend for 2021 at least at prior-year level.

Mid-term Guidance

• − Expected market growth in the next few years: +1% to +2%

• − Galenica plans to grow faster than the market thanks to − consistent implementation of the strategic programs,

  − further expansion and optimisation of the pharmacy network and the Verfora product portfolio.

• − Galenica expects to increase its return on sales (ROS) in the medium term, i.e. in three to five years (2024 - 2026),

  − to over 8% in the Products & Care segment − and to up to 2% in the Logistics & IT segment.

• − Galenica continues to pursue a policy of at least stable dividends that grow in line with results and continues to aim for net debt in the order of +/- 2 × EBITDA (adjusted for leasing in accordance with IFRS 16) in the medium term.

Step by step upwards Determined despite persistent COVID-19 headwinds

Disclaimer

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