Consolidated financial statement, December 2012

Transcription

CONSOLIDATED
MANAGEMENT
REPORT
The consolidated financial statements for the year ended December 31, 2012, consisting of the statement of financial
position, the statement of income, the statement of comprehensive income, the statement of changes in equity and
cash flows and the related explanatory notes, are prepared in accordance with the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB) and as adopted by the E.U.
The explanatory notes describe the consolidation principles adopted and indicate the accounting standards used in
drawing up the consolidated financial statements. Also, the explanatory notes provide comments on individual
balance sheet and profit and loss account items.
The Group consists of Rottapharm S.p.A. and its direct and/or indirect subsidiaries.
Pagina
1
The Group business purpose is the research, production and sale of pharmaceutical and phyto-pharmaceutical
products, and production and sale of personal hygiene, dermatological and nutraceutical products.
MANAGEMENT
REPORT
In order to better examine the Group results of operations for the year ended December 31, 2012 the table below
shows the profit and loss account of the Group compared with prior year:
For the year ended December 31,
of which
2012
non
2011
recurring
Financial Income
Financial Expense
Gain/Loss on Equity Investments ICO
Other Revaluat./Write down of other financial asset
Other FIinancial Income and Expense
Profit (loss) before taxes from continuing operations
Income tax expense
Net profit from continuing operations
Attributable to:
Equity holders of the parent
Non-controlling interests
(112,711)
(114,968)
(155,188)
(15,831)
(35,681)
105,373
22,487
(38,520)
19
8
(2)
89,372
(17,911)
71,461
72,487
(1,027)
527,886
14,350
542,236
(3,105)
(1,071)
(4,177)
11,259
7,082
1,244
(115,056)
(117,064)
(153,649)
(12,771)
(27,644)
116,052
10,981
(34,787)
(57)
(482)
91,706
(2,516)
(2,670)
(5,187)
(5,187)
(30,787)
60,919
61,545
(625)
2
Costs for raw materials, supplies, consumables and goods
Costs for personnel
Costs for services
Other costs
Depreciation, amortization & write off
Operating profit
522,716
17,036
539,752
Page
Net Revenue
Other income
Total net revenue and other income
of which
non
recurring
MANAGEMENT
REPORT
The consolidated Net Revenue for the year ended December 31, 2012
amount to Euro 522.7 million. The decrease as compared to the year
ended December 31, 2011 (Euro 5.1 million) is mainly attributable to
Spain and Portugal. The rest of the Group grew in comparison to 2011
for about 3%.
We report below the detail of sales by company relating to the period
to which this report is related:
Company
Country
Rottapharm S.p.A.
Italy
205,873
199,834
Rottapharm Madaus Gmbh, Madaus GmbH
Germany
119,181
119,779
0%
Rottapharm S.L.
Spain
43,055
52,514
-18%
Euromed SA
Spain
24,137
23,930
1%
Rottapharm S.a.r.l.
France
25,823
22,929
13%
Laboratorios Delta L.t.d.a.
Portugal
24,646
35,827
-31%
Rottapharm L.t.d.
Ireland
21,103
17,085
24%
Rotta Thailand
Thailand
16,688
13,289
26%
Madaus GesmbH
Austria
16,013
15,874
1%
Madaus Pharma S.A.
Belgium
12,614
13,857
-9%
Madaus Sp z.o.o.
Poland
5,117
4,225
21%
Rottapharm Hellas
Greece
4,073
4,414
-8%
Dermogroup S.r.l.
Italy
2,334
2,116
10%
Integral S.A.
Luxembourg
1,350
1,240
9%
Madaus Pharmaceuticals Priv. Ltd
India
710
972
-27%
522,716
527,886
-1%
Var. %
3%
For management purposes the segment reporting format on the basis of the geographical area, according to the
country in which the business units generating the relevant sales are located, are used by management to understand
the financial performance of the Group. In addition, Group management use also the Net Revenue by customer
location (according to the country in which our products were sold) in order to understand the financial
3
2011
Page
Total Net Revenue
2012
MANAGEMENT
REPORT
performance of the Group. For this reason, in the following analysis of the Group operations for 2012, they are presented
also additional geographical information of net revenue from third-pary customers, based on the locations of such
customers.
Rottapharm S.p.A. - Italy
For the year ended December 31
2012
of which
non recurring
2011
Net Revenue
205,873
199,834
Other income
11,983
11,192
217,855
211,026
16,074
14,670
(55,978)
(52,178)
Costs for personnel
(38,695)
Costs for services
(63,478)
I/C Net revenue
Other costs
(7,068)
EBITDA
68,711
Global Environment
The Italian economy is going through its second worst
recession in five years. Problems in the financial sector,
fiscal austerity and weak prospects of the neighboring
external markets caused a significant reduction in the
economic activity in the country in 2012: GDP fell for
the fifth consecutive quarter in Q3, reaching -2.4% on
an annual basis. Tighter credit conditions, rising
unemployment and consequent collapse of domestic
demand (-3.4%) have hampered the growth of many
activities. The recession should continue in 2013, with
a consequent reduction in GDP (-1.1%) and a further
increase in unemployment (12.1%).
Markets in which the company operates
During 2012 the pharmaceutical market in Italy has
suffered for the first time in its history, a decrease of
0.76%. The analysis of the pharmaceutical market
shows the following key aspects:
- The territorial health spending is falling. Spending on
pharmacy confirms its negative trend (-5.2%) mainly
due to lower average prices (-5%) as a result of the
patent loss and a small decrease in volumes while
hospital spending continues to grow although also in a
much weaker pace (+4.7%);
- The effects of the economic crisis on patients is clear:
the consumption of reimbursed drugs increased by 1%
while that of non-reimbursed drugs decreased by - 3%
and that of self-care drugs by - 5.2%;
(39,888)
(936)
(60,984)
(1,566)
(4,310)
(936)
68,335
(1,566)
- Sales of generics represent 64.8% of reimbursed
drugs in value (90% in volume), continuously
increasing;
- The latest changes in the regulation of the
pharmaceutical market are profoundly changing the
distribution and competitive scenario;
The nutraceutical market has confirmed in 2012 its
growth to over 1.9 billion euro turnover confirming a
high potential market and of particular interest to the
Rottapharm Madaus. This growth occurred both in the
pharmacy channel (+2.7%) and in the supermarket
chains (+10.4%).
Nutraceuticals in pharmacies represent a market of
over 1.6 billion euros.
The Italian cosmetic market, which until now had
resisted the crisis, recorded in 2012, an overall decline
of 1.4% to 6.2 billion euros (6.3 billion Euro in 2011)
and a further contraction of 1.5% is expected for 2013.
The pharmacy channel has decreased by 2%. The
propensity to consume of Italian households is
obviously hampered by the difficult economic
environment and the political and financial situation is
not conducive to a quick recovery in consumption. The
scenario that has characterized the last months of 2012
is represented by important alternatives in the
distribution channel (sole-brand organizations) and in
4
Total net revenue and other income (third parties)
of which
non recurring
Page
/000 EURO
****
The changes that have occurred in recent years in the
markets require the company to be more competitive
and able to adapt promptly to the new market scenari.
The ability to (r) innovate quality products supported
by a strong scientific background is a strength that
distinguishes Rottapharm but would not be self
sufficient; success is achieved by people and that is
why the company is focusing, through a developed
process of selection and training, its human resource
management on the reorganization of its commercial
and central structures in order to improve their skills
and competitiveness.
Total employees at December 31st, 2012 are 572 (582
at December 31st, 2011).
MANAGEMENT
REPORT
the offer, with the diffusion of the so-called "Private
label" products and of new brands from non-European
countries with very aggressive prices.
Total Net Revenue at September 30, 2012 of Rottapharm S.p.A. amount to Euro 205.9 million in comparison
with 199.8 million at December 31, 2011. Net Revenue by business line are as follows:
/000 EURO
2012
2011
Variation
Net revenue - Information Line
85,987
85,013
1%
Net revenue - Consumer Health Line
77,013
77,657
-1%
163,000
162,670
0%
42,783
37,072
17%
Total Net Revenue - Italian market
Net revenue - Export
Net revenue - Royalties
Total Net Revenue Export
Total Net Revenue
90
92
0%
42,873
37,164
17%
205,873
199,834
3%
Net Revenue on the Italian market amount to some Euro163 million at December 31, 2012. The analysis by
business area evidences that:
- Net Revenue on the Information Line increased by some 1% to Euro 86 million. The nutraceutical
Armolipid (Euro 26.6 million vs Euro 25 million) and Estromineral (Euro 8.4 million vs Euro 8.2 million)
confirm their positive trend, with an overall increase of 5.2%. These products, resulting from the internal
research, reached 34.8 million Euro turnover. The growth trend of Armolipid, supported in particular by
Armolipid Plus and Armolipid Prev, was higher than the market average and the product has thus confirmed
its position as the absolute leader on the market. It should be noted that the product Armolipid Plus is the
top first nutraceutical sold in pharmacy (Euro 26.5 million euro). The product line Armolipid, consisting of 4
references, occupies the third place (5th in 2011) with 32.5 million euros, behind the product line Polase (9
references for 47.1 million euros) and the product line Multicentrum (more than 20 references with 48.5
million Euro). The dietary supplement Estromineral, thanks to an effective promotion and an ever richer
range of products, continued its growth by + 1.8%, confirming once again its leadership on the market of
reference with a market share of over 26% in value.
The distribution of those products which were no longer actively promoted by the network of the
Page
Worth to be emphasized is the performance of the newly launched products Ditreol (launched in June
2012) and Forgest (launched at the end of December 2011) reaching a total of about Euro 2 million in Net
Revenue in their first year in the Rottapharm portfolio.
5
Net Revenue of pharmaceutical product Pafinur (antihistamine), supported by an effective information from
medical sales force, reached Euro 5.7 million (+15.5%).
MANAGEMENT
REPORT
Rottapharm’s medical representatives (Dona, Ananase, Legalon, Cistalgan, Urivesc, Uralyt and Terafluss) has
been entrusted exclusively to a third party distributor in order to revitalize the sales of these products.
- The consumer health line reports a 1% decrease mainly due to the Hair line (Biothymus, Aftir and
Biomineral; Euro 10.3 million vs Euro 11.3 million), the Derma line (Dermafresh, NoAll, Dermoflan; Euro 5.5
million vs Euro 6 million) and to the Babygella line (Euro 6 million vs Euro 6.9 million). The sales of the
products of the Solar line (Dermasol and Carovit) have reached Euro 6.5 million (Euro 6.1 million in 2011).
The products of the Sugella line have confirmed their leadership on the market with total Net Revenue
amounting to Euro 36.3 milliom (Euro 36.6 million in 2011).
Also for the Consumer Health line, the new launched products have performed well: Ialumar has totalled
some Euro 1 million and Fortilase Cell has accounted for Euro 0.5 million.
The distribution of those products which were no longer actively promoted by the network of the
Rottapharm’s medical representatives (Reparil, Recto Reparil and Agiolax) has been entrusted exclusively to
a third party distributor in order to revitalize the sales of these products.
The impoverishment of the consumers as well as the even more restricted access to credit facilities have
raised the problem of the credit collection that the company is monitoring carefully and the necessity to
accept longer payment terms from selected customers. Using this as a “tool” for improve the Company
Market Share.
The overseas sales turnover (EEC + Non-EEC) at December 31, 2012 amount to some 42.8 million vs 36.7 million
at December 31, 2011. The increase is driven by the performance in the North East Asian markets (Taiwan, Hong
Kong, Cina and Malesia) where sales have reached some 9.4 million at December 31, 2012 with an increase of some
32.2%.
Var.
Euro/000
%
11.347
26,5%
12,164
33.2%
-6.7%
1.802
4,2%
1,458
4.0%
23.6%
Bielorussia
612
1,4%
537
1.5%
13.9%
Azerbaijan
175
0,4%
315
0.9%
-44.3%
Kazakistan
883
2,1%
-
Russia
Ukraine
Total Russia and CIS
2012/2011
14.820
34,6%
14,474
39.5%
2.4%
Taiwan
7.694
18,0%
6,578
17.9%
17.0%
Hong Kong
4.809
11,2%
1,675
4.6%
187.1%
China
4.767
11,1%
4,276
11.7%
11.5%
Malaysia
3.387
7,9%
3,092
8.4%
9.5%
Corea
1.426
3,3%
1,904
5.2%
-25.1%
Pakistan
929
2,2%
778
2.1%
19.5%
Philippines
902
2,1%
661
1.8%
36.4%
Singapore
774
1,8%
698
1.9%
10.9%
Vietnam
729
1,7%
930
2.5%
-21.6%
2.546
6,0%
1,613
4.4%
57.8%
42.782
100,00%
36,680
100.00%
16.64%
Others
Total
6
2011
%
Page
2012
Euro/000
MANAGEMENT
REPORT
Rottapharm|Madaus GmbH - Madaus GmbH – Madaus Holding GmbH –Germany
/000 EURO
Net Revenue
Other income
I/C Net revenue
Costs for personnel
Costs for services
Other costs
EBITDA
2012
of which non
recurring
2011
119,181
517
119,698
119,779
986
120,765
29,967
28,732
(48,042)
(30,794)
(33,750)
(1,359)
36,034
(274)
(274)
(47,668)
(28,819)
(33,753)
(2,564)
36,693
of which non
recurring
(592)
(818)
(1,410)
Global Environment
German economy is suffering a slowdown as a
consequence of the crisis in the Eurozone and
weakeness in business confidence, industrial orders
and tightening credit conditions. The unemployment
rate increased from 5.4% in Q3 2012 to 5.8% in Q4
2012. GDP is expected to recover in 2013 (0.2% in
2012), supported by recovery in export trade and
business confidence.
health insurance funds (where the most favourable price
is decisive for being awarded the contract with a health
insurance); manufacturer rebates of 16% for
pharmaceuticals without reference price; price
moratorium that prevents the pharmaceutical companies
to increase prices for reimbursed pharmaceutical
products until the end of 2013; new regulation on
package sizes; early benefit assessment for new patented
drug; introduction of a new remuneration system for
pharmacies and wholesalers (wholesalers receive a fix
rate of Euro 0.70 per pack plus a variable rate of 3.15%
The German pharmaceutical market increased by some with a cap of Euro 37.80; pharmacists receive a fee of 3%
2.1% in 2012, representing some Euro 38.9 billion of
plus Euro 8.35 per sold package less the SHI discount of
which +2.1% for Rx products (to Euro 32.9 billion) and + Euro 2.35).
3.4% for OTC products to Euro 6 billion, Generic products The regulations regarding health related data for food are
represent some 27% of total sales value (+7% to Euro
also new. The European Commission has published in
10.4 billion) and some 45% of total units sold.
May 2012 a list with 222 health-related data for food in
the official journal of the EU. All non-approved health
In the last decade, demographic change and medical
claims – with the exception of those that have not been
progress led to a cost explosion in the German healthcare examined yet finally – are prohibited on food packages as
system. Health expenditure per capita rose from Euro
of December 14, 2012. This means more transparency for
2.530 in 1999 to Euro 3.400 in 2009. Different measures the consumers in the EU and better protection from
were consequently adopted to contain the health
misleading and mispurchasing when selecting food.
expenses: cuts in the drugs’ prices; rebate and tender
agreements between pharmaceutical companies and
Page
Net Revenue on domestic market have recorded a 3.9% increase to Euro 62.1 million confirming that the strategic
decision taken in the last years (focus on few key products and reduced dependence over reimbursed products) are
producing the expected results. The development of the gynaecology line started in 2008 with the pill Bellissima,
followed in 2010 by Evaluna and continued year-to-date with Mayra. With a turnover of Euro 12.5 million (+28.7%), the
line has already obtained a market share of more than 36.6%. Also the urologics with UriVesc – the first daily single dose
administration with trospium chloride – achieved a high growth of +42.1% to Euro 10 million. Sales of Dona decreased by
some 7.3% to Euro 7.6 million due to an overall decline in the arthritis market..
7
Net Revenue of the German Group companies at December 31, 2012 amount to some Euro 119.2 million (Euro
119.8 million at December 31, 2011).
MANAGEMENT
REPORT
Overseas Net Revenue amount to Euro 57 million at December 31, 2012 vs Euro 60 million at December 31, 2011
and are detailed as follows:
57.073
100%
60.023
12%
9%
6%
13%
43%
%
Var. 2012vs2011
17%
-1%
-100%
41%
23%
13%
-10%
28%
-61%
-29%
137%
-25%
13%
-33%
-40%
13%
19%
8%
-25%
17%
68%
-48%
103%
-63%
3%
13%
-10%
-9%
25%
13%
20%
-4%
23%
24%
38%
6%
26%
-18%
21%
17%
144%
-10%
15%
12%
100%
-5%
8
TOTAL
17%
2011
/000 Euro
2.445
1.938
1.630
746
787
7.546
1.646
4.929
1.116
200
137
8.028
3.523
526
716
4.765
1.902
896
2.691
530
1.645
398
8.062
10.592
4.880
2.409
1.335
1.339
944
1.399
22.899
2.747
2.250
1.499
1.123
241
863
8.723
%
Page
Korea
Japan
Thailand
Malaysia
Others
Total Asia
Brasil
China
Russia
Brazil
India
Total BRIC
Hungary
Bulgaria
Others
Total East Europe and CIS
Swiss
Italy
U.K.
Finland
Sweden
Others
Total Europe
Saudi Arabia
Egypt
United Arab Emirates
Kuwait
South Africa
Iraq
Others
Total Middle East and Africa
USA
Venezuela
Argentina
Mexico
Australia
Others
Total Americas and Australia
2012
/000 Euro
2.869
1.923
1.051
969
6.813
2.104
1.934
792
474
103
5.407
2.105
592
854
3.551
2.218
1.507
1.408
1.078
603
411
7.224
9.646
6.112
2.723
1.601
1.289
1.158
1.742
24.271
3.473
1.843
1.813
1.313
589
777
9.808
MANAGEMENT
REPORT
Rottapharm S.L. – Spain
I/C Net revenue
Costs for personnel
Costs for services
Other costs
EBITDA
Global Environment
The Spanish economic situation is in a very delicate
position. Signs of recovery are not expected in the short
term: following a decline of some 1.3% in 2012, the GDP
is expected to decline further in 2014 by 1.4%.
Unemployment in Spain has reached an alarming level
(above 25% in 2012) and is expected to further increase
in 2013. The strong implementation of policies requiring
austerity as the sole route to correct fiscal imbalances
does not favours job creation and particularly affects the
sectors like pharmaceuticals that have direct impact on
public spending.
The pharmaceutical sector remains one of the most
affected by the measures to reduce public spending.
Regardless of the Royal Decrees that the Central
Government has enacted, each of the 17 Autonomous
regions is taking its own measures to contain or
regulating the prescription. This worsens the already
difficult situation in the sector but, also requires
significant investments as pharmaceutical companies
need to act differently according to the region where it
operates and maintain permanent contact with officials
from the Ministry of Health, the 17 regions and
Pharmaceutics Bar (51, one per province).
During the year, the Spanish Government has announced
some additional measures to reduce the health
expenditure: (i) price cuts (ii) prescription of generics
(iii) introduction of a copayment for pensioners, (iv)
reduction of the current reimbursement, (v)
dereimbursement of drugs and (vi) definition of new
price references (vii) creation of a selected pricing
2011
43,055
998
44,053
52,514
324
52,838
160
208
(25,312)
(11,314)
(7,372)
(1,322)
(1,107)
(1,381)
(1,381)
(30,199)
(10,925)
(8,702)
(1,236)
1,985
of which non
recurring
(546)
(285)
(831)
system. In addition, the Andalusia Region has promoted a
tender for the supply of an active ingredient that would
give to the winner of the auction the exclusivity for a
period of 2 years, eliminating any possibility for the other
pharmaceutical companies to sell their own products
during these 2 years.
The pharmaceutical market has suffered a decline of some
11.3%: the number of prescriptions has decreased by
3.8% whilst the average cost per prescription has
decreased by some 7.8%, with the obvious negative
effects on the pharmaceutical industry.
Generics now represent more than 40% of the
pharmaceutical market in values and more than 67% in
units.
The market of Consumer Healthcare products is
strongly affected by the crisis (the unemployment rate is
25%). The lack of financing of the pharmacies that have
closed in various autonomous communities, in protest
against defaults and delays of the Ministry of Health in the
payment of financed products, has reduced the expected
trend for this market.
The overall turnover showed a loss of -2.9% in value and
5.2% in units in 2011 as compared with 2010. It should
be mentioned that the Government has put in place some
measures to control and limit any increases in the price of
those products that have been dereimbursed.
9
Net Revenue
Other income
2012
of which non
recurring
Page
/000 EURO
The evolutions of sales and short-term prospects have
compelled to make significant cuts in the workforce
regarding the previous year. The 149 employees who
made up the staff at the year end represent 11% less
compared to the previous year.
The medical visit network has been reduced by 14
persons (14%), mostly via layoffs due to economic
objectives. The first sentences of the cases that have
reached court were favourable to the interests of the
Company. The measures on financed products have
had a severe impact on the medical visit commercial
networks of all pharmaceutical companies.
The structure of Central workers inevitably has also
been affected, and nearly all departments have
suffered some cropping, special mention to the
elimination of internal IT area.
Rottapharm SL has recorded some Euro 1.3 million of
non recurring expenses in 2012 in relation with the
restructuring of its marketing and sales force
structure.
10
The decision to dereimburse Plantaben was taken in
2011 by the company on a voluntary basis, despite
the risk that was assumed at that time. The entry into
the market of generic laboratories with similar
products, especially Cinfa, would have been a disaster
if the company had not anticipated the
dereimbursement. At present, the rest of the group
products is considered EXO (not financed medicine
but neither advertising) while Rottapharm has
achieved in the meantime the status of advertising
product for Plantaben. In the first two months of 2013
an advertising campaign will be realized with the
objective to boost the sales of the product.
Products actively promoted and relevant for the
future of the company continue to grow.
Unfortunately the cruise speed, due, among other
things to the severe crisis (remember that the
unemployment rate is around 25%), do not yet
compensate the decline of some historical products.
The evolution of the most important is: Armolipid
+24.4%, +25.3% for Glaan, Fortilase +208. Ialumar
has also been launched successfully. In its first year
this product has achieved sales of 0.9 million euro.
Page
Price reductions, the exclusion of financing of
therapeutic groups, discounts, based in sales, in the
form of return to the Authorities, the prescription by
active principle, the system of the lower price and the
reference prices have affected so adversely the sales
of the company.
The loss in products, Plantaben / Plantago ovata and
Xicil account for 60% of the loss of turnover
compared to the previous year.
Xicil (Glucosamine original molecule) has been
affected by the measure that forced the prescription
of a generic to the detriment of the branded product,
even if they are at the same price. During the last
months of the year, in order to not only stem the
decline in sales but to recover some of the revenues,
Rottapharm S.L. has decided to change the name of its
owned generic to EFG XICIL expecting to take
advantage in 2013 from the strength of the brand,
without the obstacle of not being generic.
MANAGEMENT
REPORT
Net Revenue of Rottapharm SL on the domestic market have reached some Euro 39.9 million at December 31,
2012 in comparison with Euro 49.6 million at December 31, 2011.
MANAGEMENT
REPORT
Please find below the detail of the Net Revenue by products and by customers’ locations:
LEGALON
ARMOLIPID PLUS
LERCAPRESS
MUCOVITAL
GLAAN GRAGEAS - PIEL
IALUMAR
EPINITRIL
HODERNAL
GLAAN LACTOCAPIL
DOMPERIDONA
MONOCID
ESTROMINERAL
GO ON
Others - Spain
Total Domestic Net Revenue
Export - France
Export - Others
Total Export
Total Sales
1.274
1.264
1.165
876
829
820
815
734
%
12%
10%
8%
8%
5%
4%
4%
3%
3%
3%
3%
2%
2%
2%
2%
2%
/000 Euro
5,812
4,894
3,853
3,629
3,907
1,725
3,240
3,124
1,190
947
982
1,526
831
591
773
Var.
% 2012vs2011
11%
-8%
9%
-8%
7%
-10%
7%
-7%
7%
-46%
3%
-3%
6%
-51%
6%
-55%
2%
2%
2%
3%
2%
0%
1%
1%
7%
34%
19%
-43%
0%
38%
-5%
703
665
627
534
501
5.702
40.014
2%
2%
1%
1%
1%
13%
93%
337
1,267
641
471
613
9,415
49,768
1%
2%
1%
1%
1%
18%
95%
109%
-48%
-2%
13%
-18%
-39%
-20%
3.027
14
3.041
7%
0%
7%
2,740
7
2,746
5%
0%
5%
10%
113%
11%
43.055
100%
52,514
100%
-18%
11
TROMALYT
BOREA
AGIOLAX
PLANTABEN
XICIL
AMCHAFIBRIN
GLIZOLAN
PLANTAGO OVATA MADAUS
/000 Euro
5.374
4.494
3.454
3.379
2.129
1.675
1.604
1.399
2011
Page
2012
MANAGEMENT
REPORT
Euromed S.A. – Spain
I/C Net revenue
Costs for personnel
Costs for services
Other costs
EBITDA
EUROMED is a company that develops,
manufactures and sells standardised herbal extracts
and natural active principles used in the production
of pharmaceutical, dietary supplements, cosmetic
and functional food products.
The facilities are located in Mollet del Valles
(Barcelona) where they extracted more than 3.000
tons of biomass according to GMP, NSF, ISO 9001,
ISO 14001 and HACCP norms.
The core business of the company is focused on the
extracts of Milk Thislte seeds, Saw palmetto berries,
St John's Wort herb and Valerian root among others.
The major natural active principle is the Escin from
Horse chestnut. EUROMED's portfolio covers about
thirty different botanical species.
EUROMED keeps the sales and consolidates its
profitable organic growth despite the crisis of
several European markets and the $ currency
variability. The strengthening of dollar versus euro
over the first half lead a slight diminution in $ sales.
EUROMED acts in order to achieve maximum
efficiency by improving the operating margin in
2012, optimising several production process, saving
costs such as selling biomass waste and adjusting
selling prices according to the fluctuation price of
the raw materials among others. All these actions
allow to ensure the improvement of the margin and
strength its future competitiveness.
of which non
recurring
2011
24,137
802
24,938
23,930
50
23,980
9,837
10,162
(12,949)
(5,380)
(7,543)
(1,144)
7,759
(13,333)
(5,245)
(7,611)
(702)
7,251
of which non
recurring
EUROMED has achieved almost the same third
party sales versus 2011 (€ 24mio in 2012 vs € 23.9
in 2011) despite the differences in $ currency and
having the same capacity production.
Furthermore in 2011 it had the chance to sell €850
T of biomass, a specific opportunity business at that
time. This amount has been compensated in 2012
selling extracts generating more margin and having
more profitable business for the future.
The company has over 300 clients in almost 30
countries, 72% in the pharmaceutical market, 25%
dietary supplements and 3% in cosmetic and
functional food. The pharmaceutical market in
western Europe is stable. The global environment in
the euro zone contributed to stop the groth in the
last years, and many herbal medicines come out of
the reimbursement. However several
pharmaceutical companies are still looking for
herbal medicines as an alternative to OTC products
in order to compensate the general price reduction
of the pharmaceutical products.
The growth of dietary supplements in Europe is
unpredictable due to the uncertain regulations and
the market has slowed down due to crisis in several
countries.
The US market has been recovered after some years
of recession and the trend is positive. Moreover the
requirements are changing for dietary supplements
becoming stricter. FDA is more active is this field.
This situation can lead to a reduction in the number
of competitors in a few years. US customers are
12
Net Revenue
Other income
2012
Page
/000 EURO
The future of the company is focused on enlarging
its activity in the emerging markets such as Asia,
Eastern countries and South America as well as
developing new products, innovating new forms
and enhancing the sales of natural active principles.
At the end of year 2012, 108 people were employed
by Euromed, 8 of which are in state of semiretirement with a work commitment of 15%.
MANAGEMENT
REPORT
receiving more inspections than before and they are
more conscious about quality issues, however this
market continues characterising by strong
competition of the Chinese manufactures for the
customers who do not care about quality standards.
During 2012 it has been obtained the GMP
certificate from NSF International, delegated entity
of F.D.A. for the obtaining of Dietary supplements
and sales in North american market.
Net Revenue of Euromed S.A. total 24.1 million Euro at December 31, 2012. Please find below the detail of the Net
Revenue by customers’ locations:
2011
/000 Euro
8.021
6.949
2.255
1.158
666
855
605
562
274
393
137
158
156
105
132
53
91
1.362
23.929,7
%
34%
29%
9%
5%
3%
4%
3%
2%
1%
2%
1%
1%
1%
0%
1%
0%
0%
6%
100%
2012 vs
2011 (%)
0,2%
0,5%
-8,6%
3,1%
53,7%
14,9%
39,9%
15,0%
88,9%
-14,5%
133,9%
24,1%
-7,5%
32,0%
-11,4%
95,8%
11,7%
-79,7%
0,4%
13
%
33%
29%
9%
5%
4%
4%
4%
3%
2%
1%
1%
1%
1%
1%
0%
0%
0%
2%
100%
Page
U.S.A.
Germany
Spain
Switzerland
Egypt
France
Italy
United Kingdom
Australia
Canada
Japan
Brazil
Netherland
Belgium
Argentina
South Korea
India
Others
TOTAL
2012
/000 Euro
8,036
6,984
2,060
1,193
1,024
982
847
647
518
336
319
196
144
139
117
105
101
391
24,137
MANAGEMENT
REPORT
Rottapharm S.a.s. - France
Costs for personnel
Costs for services
Other costs
EBITDA
Global Environment
Like most of EU countries, France faced economics
troubles in 2012. Public spending accounts for almost
57% of national output, the public debt stands at over
90% of GDP (and rising) and the country seems to be
running a near-permanent budget deficit. In addition,
in January France lost its AAA grade from the rating
agency Standard & Poor’s.
France is enhancing competitiveness over the future
and is aiming at achieving sustained growth by
making the products and services more attractive.
GDP increased by some 0.2% in 2012 and should
grow just over 0 in 2013. The unemployment rate is
10.5% in 2012, expected to grow at 11% in 2013.
The French pharmaceutical market decreased by
some 2.3% in 2012, of which -2.9% for the
reimbursed drugs.
French government faces difficulties to balance the
overall budget for the next few years, in particular the
budget and the recurrent deficit of “Sécurité Sociale”.
In consequence, measures have been adopted through
the “PLFSS” (the annual law defining how the Social
of which non
recurring
25,823
296
26,119
(12,086)
(6,809)
(6,976)
(1,234)
(986)
2011
of which non
recurring
22,929
218
23,147
(208)
(208)
(10,997)
(8,460)
(7,476)
(905)
(4,691)
Security System is financed) to act in two directions:
increasing the revenues and reducing the expenses.
Most of the measures related to the revenues impact
pharmaceuticals companies, such as Rottapharm,
mainly through the increasing of tax burden. Among
them, are these two principal:
- A broaden base for the calculation of the tax on the
promotion for refundable products: for example,
congresses expenses are now included, meaning a
major increase of the amount due to Tax
Administration.
- An increased rate for the tax on the annual
turnover: from 1% to 1.6%.
Meanwhile, the Health Minister and Budget Minister
decided to apply costs savings for a total of Euro 1.8
billion through different measures.
Net Revenue in France total Euro 25.8 million at
December 31, 2012 vs Euro 22.9 million at December
31, 2011. As detailed in the table below, the priority
products represent some 75% of total Net Revenue
and are Go-On at Euro 6.7 million (+24% in
comparison with 2011), Saugella at Euro 6.2 million
(+2% in comparison with 2011) and Ceris at Euro 4.6
million (-3% in comparison with 2011).
14
Net Revenue
Other income
2012
Page
/000 EURO
Legalon
Others
Total
1.603
1.131
25.823
%
30%
24%
21%
8%
6%
/000 Euro
6,319
6,096
5,449
1,989
1,405
6%
4%
100%
1,393
1,203
23,854
Leader since March 2011, Go-On is driving the
market to the top. In one year some 20.000
treatments were sold.
The intimate hygiene market showed a slight
slackening in the evolution (+ 0.9% in turnover and +
1.6% in units). Saugella did the second best evolution
behind Saforelle.
Ceris: The volume of the market is important: 3.8
million units and 36.2 million Euros. The product
suffers from the entry on the market of a new
reimbursed competitor with a very high price. Despite
a negative evolution in 2012 (-6%) Céris remains
leader of the market in units with 42% of market
shares.
6%
5%
100%
15%
-6%
8%
MANAGEMENT
REPORT
26%
26%
23%
8%
6%
2012 vs 2011
(%)
24%
2%
-3%
7%
14%
%
Personnel expenses have been reduced by 1.6 million
due to the termination at December 31, 2011 of some
24 term employment contracts.
At the end of year 2012, 88 people were employed by
Rottapharm France (125 in 2011)
On March 1st, 2013, the Company has acquired a
business unit from Novartis Santé Familiale (France)
composed of marketing authorizations and medical
representatives relating to a portfolio of nutraceutical
products (Zyma) representing a turnover of
approximately of overe 10 million in France.
15
Go-On
Saugella
Ceris
Extranase
Osaflexan
/000 Euro
7.819
6.233
5.299
2.130
1.608
2011
Page
2012
MANAGEMENT
REPORT
Laboratorios Delta Lda – Neo Farmaceutica S.A. – Portugal
/000 EURO
Net Revenue
Other income
Costs for personnel
Costs for services
Other costs
EBITDA
Global Environment
Portuguese GDP declined by some 2% in 2012 and is
expected to further decline by some 2.6% in 2013.
Portuguese government has announced additional
austerity measures that are likely to futher impact
the domestic demand: higher taxes and significant
job cuts in the public sector will lead to higher
unemployment ( 16.9% in 2012) and lower the
purchasing power with a consequent significant
impact on the consumer spending.
The Portuguese pharmaceutical market decreased by
some 8.6% in 2012 (-19.7 for generics that represent
some 16% of total market and -6.6% for Rx products
totalling some 84% of total market).
2012
of which non
recurring
24,646
390
25,037
(13,081)
(6,626)
(6,633)
(1,485)
(2,788)
2011
of which non
recurring
35,827
415
36,242
(1,242)
(135)
(1,377)
(19,411)
(7,476)
(8,183)
(534)
638
(1,018)
(1,018)
Numerous cost containment measures have been
adopted by the Portuguese government between the
end of 2011 and the begin of 2012:
- Electronic Prescription (end 2011) that rendered
compulsory the prescriptiom of the lower price drug;
- Margin reduction for Wholesalers and Pharmacies
(begin 2012) that led to a significant reduction in
their inventories;
- Price reduction of reimbursed product (March 2012)
by some 10%;
- Prescription by molecula name (May 2012) that
weaken the sales of branded products;
- “Agreement” betwen Industry and Government
(August 2012) that represent a compulsory 3% fee
over turnover to be paid to the Health authorities;
Net Revenue in Portugal have significantly reduced from Euro 35.8 million at December 31, 2011 to Euro 24.6
million at December 31, 2012.
The company has completed in 2012 a restructuring
of its internal (regulatory, logistic, medical and
makarketing) and external workforce with an overall
reduction of 18% in its headcount.
Total employees at December 31st, 2012 are 106
(129 at December 31st, 2011). The relating cost in the
2012 profit and loss amounts to Euro 1.4 million.
16
The change in the strategy adopted by the company
in 2011 requires some time before the effects on the
profitability of the company can be noted: the IMS
sales for the products promoted by the sales force
report a positive evolution which is however not
sufficient to compensate the loss recorded in the
turnover of the historical pharmaceutical products.
The Portuguese company is experiencing a very
critical phase of its history but local management is
confident that the radical changes that have been
made are fundamental for the future return to
profitability.
Please find below the detail of the Net Revenue by
products:
Page
The loss in sales of Laboratorios Delta SA are due to
the several measures adopted by the Portuguese
government and, in particular: Euro 3 million
attributable to the cuts in prices and Euro 7.3 million
attributable to the reduction from 9 months to 6
months of inventories at wholesalers. The loss is also
due to a significant decrease in the overall
pharmaceutical market.
3.885
3.699
3.587
1.886
1.787
1.388
1.362
1.073
965
950
636
561
557
403
1.909
24.646
/000 Euro %
8,246
23%
1,683
5%
5,232
15%
1,567
4%
1,726
5%
1,237
3%
1,558
4%
1,906
5%
1,552
4%
1,820
5%
1,242
3%
1,436
4%
1,363
4%
383
1%
4,873
14%
35,827
100%
MANAGEMENT
REPORT
%
16%
15%
15%
8%
7%
6%
6%
4%
4%
4%
3%
2%
2%
2%
8%
100%
Var. 2012
vs 2011
-53%
120%
-31%
20%
4%
12%
-13%
-44%
-38%
-48%
-49%
-61%
-59%
5%
-61%
-31%
17
/000 Euro
Cardiovasc
Alipza
Tromalyt
Isoket
Herbesser
Epinitril
Agiolax
Viartril
Spasmoplex
Monoket
Ananase
Levotuss
Legalon
Saugella
Others
Total
2011
Page
2012
MANAGEMENT
REPORT
Rottapharm Ltd - Ireland
/000 EURO
2012
of which non
recurring
2011
21,103
85
21,188
17,085
404
17,489
I/C Net revenue
46,844
56,515
(22,856)
(7,595)
(12,208)
(1,241)
24,133
(27,207)
(8,482)
(11,699)
(1,617)
25,000
Net Revenue
Other income
Costs for personnel
Costs for services
Other costs
EBITDA
Global Environment
The fiscal and banking crisis continued to affect the
economy in 2011. Unemployment increased to 14.2%.
GDP is expected to be revised down to 1% with
inflation coming in at 2.5%. In 2012 the forecast is for
a small reduction in the unemployment rate to 14%.
GDP in 2012 is anticipated to be 0.5% whilst an
inflation rate forecast of 1.7% is predicted.
of which non
recurring
(360)
(360)
extracted from shrimps. The product is packaged in sachets
and capsules and distributed to different markets and
customers worldwide.
The Company also produces and sells Bromelain related
products (anti inflammatory), in blistered tablet form, to
both Italy and France. In addition to this, the Company
purchases and sells a number of other products in the forms
of patches, syringes and tablets.
Company’s activities
The principal activity of the Company is the production and
sale of drugs used in the treatment of osteo-arthritis, on
behalf of its parent Group. The major active ingredient of
these drugs is Glucosamine Sulphate, a natural component
The headcount at the end of 2011 was 151. The
corresponding figure for the end of 2010 was 188.
Page
18
Net Revenue at December 31st, 2012 amounted to Euro 21.1 million in comparison with Euro 17.1 million at
December 31st, 2011 and are detailed by customers’ locations as follows:
%
Var.
2012vs2011
383
838
-54%
Malaysia
Hong-Kong
Vietnam
Singapore
Japan
Total Asia
Brasil
Total BRIC
Romania
Serbia
Bulgaria
Others
Total East Europe and CIS
Italy
Spain
France
Finland
Others
Total Europe
Turkey
Israel
South Africa
Others
Total Middle East and Africa
Mexico
USA
Venezuela
Argentina
Others
Total Americas and Australia
325
131
91
61
48
656
6,961
6,961
1,787
215
198
253
2,453
4,388
1,493
1,293
1,127
245
8,546
533
218
217
968
501
209
153
46
164
1,074
30%
-15%
-25%
5%
250
155
121
45
572
2,607
2,607
1,676
502
199
225
2,602
2,187
2,199
1,116
1,603
725
7,829
628
161
136
94
1,019
350
130
936
50
140
1,607
TOTAL EXPORT
20,658
100%
16,236
TOTAL DOMESTIC & EXPORT
21,041
3%
100%
12%
41%
5%
17,074
4%
100%
16%
48%
7%
15%
167%
167%
7%
-57%
12%
-6%
101%
-32%
16%
-30%
-66%
9%
-15%
36%
10%
-100%
-5%
43%
61%
-84%
-7%
17%
-33%
100%
27%
6%
MANAGEMENT
REPORT
2011
/000 Euro
23%
19
Domestic sales
%
Page
2012
/000 Euro
/000 EURO
of which
of which non
2012
non
2011
recurring
recurring
16.688
6
16.694
13.289
466
13.755
Costs for personnel
Costs for services
Other costs
EBITDA
(7.656)
(1.336)
(5.945)
(60)
1.697
(5.598)
(1.557)
(4.343)
(18)
2.239
Net Revenue
Other income
Global Environment
The Thai economy rebounded in 2012 from the
effects of the severe flooding occurred in the second
half of 2011 but continues to be affected by the
slowdown in the world economy.
Real GDP in 2012 is estimated to grow by 4.7 percent
(+5% expected for 2013) supported by the rebound
in household consumption and greater investments
by both the private and public sectors as part of flood
rehabilitation and the government’s consumptionstimulating measures.
MANAGEMENT
REPORT
Rottapharm Thailand - Thailand
The OTC market is growing up 9-10% comparing with
2011.
Thai Government has entered on October 2012 new
measures to control the health expenditure:
- Government hospitals have to use drugs approved in the
National Drug List or generics;
- price of drugs approved in the National Drug List will be
reduced;
- High cost drugs can be prescribed under guideline from
medical council;
- price of imported product from multinational
pharmaceutical companies are reduced by at least 15%.
The Thai pharmaceutical market amounts to some Euro
2.90-3.0 billion, and has remained stable in 2012 due to the
strong containment measures put in place by the Thai
government.
Total Net Revenue at December 31, 2012 amount to Euro 16.7 million with an increase of some 25.6% as
compared with the prior year.
After a very difficult year 2011, Rottapharm Thailand
has started the diversification of its portfolio in order
to reduce its dependence towards glucosamine,
developing sales of pharmaceuticals and OTC
products. Also, starting from 2012, the company
started distributing the “Madaus” products which
were priorly distributed by a third party distributor.
Rottapharm Thailand (89 in 2011).
Page
20
Please find below the detail of the Net Revenue by products:
Viartril
Reparil
Legalon
Artrofortil
Uralyt
Spasmolyt
Biothymus
Go-On
Saugella
Mucoflux
Agiolax
Others
Total
MANAGEMENT
REPORT
2012
/000 Euro
2011
%
8.654
2.226
1.741
769
596
565
440
438
456
250
154
399
52%
13%
10%
5%
4%
3%
3%
3%
3%
1%
1%
2%
16.688
100%
/000 Euro
8,418
2,414
53
608
254
345
468
78
154
497
%
2012 vs
2011 (%)
63%
18%
0%
5%
0%
0%
2%
3%
4%
1%
1%
4%
3%
-8%
3209%
27%
13,289 100%
26%
73%
27%
-3%
219%
0%
-20%
Madaus GmbH - Austria
Costs for personnel
Costs for services
Other costs
EBITDA
Global Environment
The economic environment in Austria during the year
2012 was stable compared to 2011. Inflation rate stayed
at about 2,8 % and unemployment rate remained at the
low level of app. 4,5 %. State deficit was rising because
of spenditure to fight against the crisis.
The effect of the economic environment on the health
care system can be summarized as follows: on the one
hand purchasing power of the population remained
constant and allowed people to continuously buy OTCproducts and on the other hand state funded health
insurances still put high pressure on the pharmaceutical
industry to reduce prices and on doctors to prescribe less.
16,013
209
16,222
15,874
30
15,904
(7,883)
(2,197)
(2,845)
(79)
3,217
(7,674)
(2,250)
(2,888)
(94)
2,997
The growth of the Austrian pharmaceutical market was
rather slow in 2012. Most recent data show a cumulated
increase of the market of about 1,3 %.
For reimbursed products all pharmaceutical companies in
Austria have to pay a special rebate to the Austrian Sick
Fund, which amounts to app. 0,6% of turnover in 2012.
21
Net Revenue
Other income
of which
of which non
2012
non
2011
recurring
recurring
Madaus GmbH (33 in 2011).
Page
/000 EURO
MANAGEMENT
REPORT
Madaus Pharma SA - Belgium
of which
of which non
2012
non
2011
recurring
recurring
Net Revenue
Other income
12,614
186
12,800
13,857
169
14,027
Costs for personnel
Costs for services
Other costs
EBITDA
(5,826)
(2,385)
(2,094)
(161)
2,334
(6,249)
(2,180)
(2,430)
(212)
2,956
The BMI-report October 2012 remains less than
optimistic about the growth of the Belgian
pharmaceutical market. Despite the well-developed
nature of the market, including high consumption of
patented medicines, through to 2016, the market’s
value is expected to post a negative annual growth
rate (GAGR) of -1% local currency value; largely on
account of cost containment measures and patent
expirations.
Above this all, a negative environment for consumer
health affects sales. Nevertheless Belgium has one of
the highest per capita spending rates on drugs in the
world. (Per capita drug expenditure in Belgium
reached € 593).
The OTC product group continues to drive the
growth of the OTC segment with 2,7% (PPG) thanks
to price changes and new introductions.
Personal care products maintained a relatively good
performance considering the economic situation,
nevertheless personal hygiene decreased by -1.1%.
The positive growth of general patient care +2.2% is
linked to the development of the home care concept
during the last years.
Personal care segment contains several interesting
categories but OTC remains by far the largest
segment: OTC 68,4% , Personal care 16,9%.
Madaus Pharma SA (27 in 2011).
22
Global Environment
The Belgian economy hasslowed down in 2012. GDP
decreased by some 0.2% with a further small decline
forecast also for 2013. Unemployment rate is
expected to rise further on in 2013.
Total unemployment rate amounts 7.6% of the working
population.
Page
/000 EURO
MANAGEMENT
REPORT
During the year ended December 31, 2012, the
Group incurred some Euro 4.2 million of non
recurring expenses in relation to the restructuring
of organizational structure and not recurring
service costs.
The operating costs have remained stable over the
year to Euro 398,7 million and represent some
73.9% of the total net revenue and other income
(73.5% at December 31, 2011).
The EBITDA before non recurring expenses
amount to Euro 145.2 million (Euro 148.9 million
at December 31st, 2011) and represent some 26.9%
of the total net revenue and other income (27.5% in
2011). The EBITDA pertaining to minority
interests is Euro 1 million negative at December
31st, 2012, in comparison with Euro 0.5 million
negative at December 31st, 2011).
Depreciation and amortization amount to Euro
35.7 million at December 31, 2012 (Euro 27.,6
million at December 31, 2011), after having
recorded an impairment loss of Euro 15.6 million
and Euro 0.4 million of the goodwill of the Spanish
and Portuguese business units, respectively, and
having recorded a provision for doubtful accounts
of Euro 3.,7 million (Euro 0.5 million at December
31st, 2011).
The operating result, before non recurring
expenses and after amortization and depreciation
is 20.3% of total net revenue and other income (22.4%
at December 31, 2011) and is totaling Euro 109.6
million against Euro 121.2 million in 2011.
The net financial expenses in the period are
totaling Euro 16 million after having recorded a
gain on the sale of the investment portfolio of some
11 million Euro.
23
Euromed plant at Mollet de Vallès - Spain
Page
The net profit for the year ended December 31, 2012
is totaling Euro 71.2 million of which Euro 72.2
million pertaining to the Group.
MANAGEMENT
REPORT
Selected balance-sheet and financial data
The reclassified balance sheet of the Group compared to that for the previous year is as follows:
December 31,
2012
566,423
93,503
13,108
368
40,755
714,157
December 31,
2011
580,898
90,262
13,190
120
25,916
710,386
89,592
155,294
31,712
4,413
281,010
89,975
120,700
22,332
4,611
237,617
50,323
33,386
51,413
35,321
83,709
86,734
Total Invested and Net working capital
911,458
861,269
Termination indemities
Other medium/long term liabilities
Medium/long term liabilities
86,607
19,012
105,619
70,206
23,767
93,973
Invested capital - net
805,840
767,296
586,875
524,495
(305,530)
555,642
332,350
(120,696)
805,840
767,296
Intangible fixed assets - net
Tangible fixed assets - net
Investment property
Equity investments and other investments
Other long term receivables
Deferred tax assets
Invested capital
Inventory
Trade receivables
Other current receivables
Assets held for sales
Current short-term assets
Trade payables
Other current liabilities
Liabilities related to assets held for sale
Current short-term liabilities
Capital and reserves
Medium/long term financial position - net
Short-term financial position - net
Equity and debt to equity ratio
Page
24
The increase in the current short term assets is due to the increase in inventories and in trade receivables. As
explained above, the lack of liquidity on some of the markets in which the Group operates has lead the Group to
allow longer payment terms to its customers. The Group exercise a constant monitoring of its receivables in order
to ensure their recoverability. In addition, Group has factorized without recourse selected receivables.
Description
As of December 31, 2012
Non-current financial liabilities
Senior unsecured notes
Loans from banks
Financial liabilities to Leasing companies
Financial liabilities for hedging instruments
391,387
129,310
5
5,728
Total non current financial liabilities
526,431
333,977
10
89
334,076
Current financial liabilities
Loans from banks
Senior notes interest accruals
Financial liabilities to other lenders
Financial liabilities to Leasing companies
Other financial liabilities
59,917
3,199
12,765
38
3,296
733
299,094
Total current financial liabilities
79,948
309,649
606,378
643,724
Total gross financial debt
9,500
47
233
775
Non-current financial assets
Other financial assets
(1,936)
(1,725)
Total non current financial assets
(1,936)
(1,725)
(3,855)
(237,395)
(144,228)
(103,211)
(215,616)
(111,517)
Total current financial assets
(385,478)
(430,344)
Total financial assets
(387,414)
(432,070)
218,964
211,655
Current financial assets
Securities and other current financial assets
Financial receivables
Cash and cash equivalents
Net financial debt
MANAGEMENT
REPORT
The following tables and comments provide a better understanding of the financial structure position of the Group.
Also, reference is made to the cash flow statement included in the explanatory notes for a more detailed analysis of
cash flows provided and used during the year ended December 31, 2012.
Page
On November 13th and 14th, 2012, the Group has carried on an important restructuring of its financial debt:
- Rottapharm Ltd (Ireland) has issued some 6.125% unsecured senior notes for a total amount of Euro
400 million due on November 15th, 2019, maturing interests semi-annually on each May 15th and
November 15th. The Notes have been listed on the Official List of the Irish Stock Exchange and admitted
to trading on the Global Exchange Market of the Irish Stock Exchange in December 3, 2012.
The notes are guaranteed on a senior unsecured basis by Rottapharm S.p.A. (Italy), Rottapharm|Madaus
Gmbh (Germany), Madaus Holding Gmbh (Germany), Pharmazeutische Union Gmbh (Germany),
Madaus Gmbh (Germany), Madaus Gmbh (Austria), Euromed SA. (Spain)
- Rottapharm S.p.A. (Italy) has subscribed a loan agreement with Mediobanca – Banca di Credito
Finanziario S.p.A. for a total amount of Euro 100 million, reimbursable in 5 yearly instalments on each
November 14th, maturing interests semi-annually at Euribor 6m plus 350bips;
- Rottapharm S.p.A. has subscribed an amendment to the existing loan with Banca Intesa San Poalo S.p.A.
postponing on December 31st, 2015 the Euro 17.5 million instalment initially due on December 31st,
25
The net debt position of the Group arise from the significant acquisition of the German Group Madaus that took
place in August 2007, that was funded by a loan granted by Mediobanca of Euro 630 million.
MANAGEMENT
REPORT
2012, maturing interests at Euribor6m plus 350 bips;
The proceeds of the above facilities have been used to:
- Fully repay the Euro 275 million existing loan with Mediobanca – Banca di Credito Finanziario S.p.A.
including interests due;
- Fully repay the Euro 90 million existing loan with Banca Nazionale del Lavoro S.p.A. including interests
due;
- Fully repay the Euro 42 million revolving facilities drawn from Banca Intesa San Poalo S.p.A. and Banca
Popolare Commercio Industria S.p.A.;
- Pay a dividend of Euro 20 million to the Parent Company;
- Pay the Euro 10 million accessory fees and expenses realting to the restructuring of the loans and
placement of the notes;
The financial liabilities to other lenders (Euro 12.8 million at December 31, 2012) include the factoring with
recourse.
The financial liability for hedging instrument includes the fair value of the IRS subscribed on 14 November 2012
by Rottapharm S.p.A.:
• Interest Rate Swap - Mediobanca – Banca di Credito Finanziario S.p.A.
• Type: Cash Flow Hedge;
• Notional amount: EUR 100 million amortized (€ 20 million maturing on November 14 of each year up to 2017)
• Conditions: 3.50% fixed rate payments, collections floating rate Euribor6m
• Risk covered: interest rate
• Fair value at 31 December 2012: Euro 8.9 million (Euro 5.7 million non current and Euro 3.2 million current);
• Liabilities covered: Mediobanca loan at a floating rate with a spread Euribor6m 350bps;
• Fair value of liabilities covered: Euro 99.652.277.
The decrease in current financial securities is due to the sale of some securities realized during the first semester
2012 as commented in the explanatory notes.
Financial receivables are based on the interest-bearing financial receivables from parent company (Fidim S,r.l.),
mainly for the purpose of funding a portion of Fidim S.r.l.’s investments in renewable energy businesses, including
GWM Renewable Energy I S.p.A.. The increase of the outstanding receivables with respect to the previous year is
related to a new loan granted to the parent and to the accrual of the interests for the year.
More details on debts to the banking system and respective due dates and covenants are reported in the
explanatory notes.
Page
26
On October 17, 2012, pursuant to a Development facilities Agreement, Rottapharm S.p.A., Cassa Depositi e
Prestiti and Mediocredito, as lenders, and CentroBanca – Banca di Credito Finanziario e Mobiliare S.p.A., as agent,
the lenders have undertook to make available to Rottapharm two facilities for an aggregate amount of 9.2
million to finance the research and development activities related to Itriglumide. Up to 90% of the facilities will
be granted after completion of an inspection to be carried on by Mediocredito whilst the remaining 10% will be
granted after inspection from the Minister of Development. The inspection is expected to be carried out in Q2
2013.
MANAGEMENT
REPORT
-
-
Euro 34,9 million were spent in the year ended
December 31, 2012 on research and development (Euro
28 million during the year ended December 31, 2011).
Even in 2012, the RottapharmMadaus Group went on
steadily with its R&D activities, thanks to a strong inhouse R&D unit rich in technical and managerial
resources of strategic importance to the development of
the Company.
The main objectives of the R&D division are:
-
- To discover and possibly develop novel drugs, targeted
at medical needs that are important and/or not
adequately fulfilled by current therapeutic options.
Advanced development programs can be carried out
independently or in partnership with organizations
ensuring a global acceleration of product development
processes (including R&D activities in USA and Japan);
- To confirm the therapeutic properties of drugs
commercialized by RottapharmMadaus, broaden their
safety/efficacy profile, and thus strengthen their market;
- To attract organizations interested in strategic
partnerships for early drug development (e.g.
small/medium pharmaceutical companies, biotech
companies), advanced drug development (e.g. big
companies lacking R&D and marketing resources in
Europe), or even pre-marketing development (e.g. global
pharmaceutical companies wishing to increase their
market together with Rottapharm, a partner that
guarantees high scientific standards). Traditionally, this
effort focused on the original drugs of the Group.
However, because RottapharmMadaus wants to
broaden its pipeline, some of the activities in the last
accounting periods were dedicated to evaluating
investigational drugs from other companies;
- To make the most of the scientific know-how in the
pharmaceutical field to rapidly develop dietary
supplements (nutraceuticals) or personal care products
(dermo-cosmetics). Because of such know-how,
Rottapharm’s products in this area have an added value,
in terms of both efficacy and tolerability, compared with
similar products on the market. This last activity was
given an additional, significant boost in 2012.
27
-
Page
Research and development
MANAGEMENT
REPORT
Also in 2012, the R&D Division in Monza Headquarters was well supported by the Development Departments
located in Cologne (Germany) and Barcelona (Spain). These are mainly involved in focused development
programs for which a strong expertise has been implemented locally. Additional support was provided by the
Medical Directions in the Group’s Subsidiaries.
As in previous years, R&D activities for the year 2012 can be divided into those carried out in support of
marketed products and those related to the discovery and development of new original molecules. Among these
latter activities, the programs run by the subsidiary companies Rottapharm Biotech and Foldless are discussed in
a separate section. Lastly, the main accomplishments in the nutraceutical and dermo-cosmetic areas are briefly
summarized.
R&D activities in support of, and further development of, marketed products
It is well known that Rottapharm, thanks to its product Dona® (glucosamine sulfate), is a market leader in the
field of osteoarthritis (OA). Dona® is the original prescription formulation of glucosamine sulfate and has
recently been shown, in repeated and prestigious clinical trials, to control OA symptoms in the long term and to
be the first putative disease-modifying agent in OA—i.e. a drug that delays OA progression. The product has been
registered in more than 60 countries worldwide under various brand names and trademarks. Even so, regulatory
approvals and launches are ongoing in additional countries, and this is possible on account of the R&D effort put
in place by the Company. Steady scientific support is indeed required for regulatory purposes, especially in
countries where the product has been introduced as a novel therapeutic option.
In 2012, scientists from the Company’s research units summarized in a review article published in a prestigious
international journal (Rovati et al, Therapeutic Advances in Musculoskeletal Diseases 2012) the whole scientific
evidence supporting the use of glucosamine sulfate in OA. The manuscript focuses mainly on clinical efficacy,
safety/tolerability, and pharmacokinetics.
With regard to the ongoing studies, the Company continued to collaborate with a Dutch academic group on a
large trial aimed at assessing potential preventive effects of glucosamine sulfate in female patients who are
overweight and for this reason are at high risk of developing knee OA. The objective of this investigation is
extremely ambitious in that it goes beyond the indications currently approved for the drug. Treatment of
patients (more than 400) had already been completed in 2011; activities in 2012 focused on the complex data
analysis. Preliminary results show a marked trend towards a reduced incidence of OA (-41%) after 2 and a half
years of glucosamine sulfate administration. In an additional study group, in which patients were assigned to a
program involving diet and exercise, the incidence of OA was reduced by 31%. These remarkable findings,
however, were not statistically significant because the size of the sample available for preliminary analysis was
limited and because the benefit was apparently lost in patients assigned to both glucosamine sulfate and
diet/exercise. While additional analyses are ongoing to better understand the impact of these findings, the
preliminary results have been presented at different international conferences.
In 2012, the results of a large clinical trial conducted by the Company in collaboration with a team of French and
German Orthopedists and Rheumatologists were published. They confirmed the efficacy of the proprietary
product Go-On® (hyaluronic acid; intra-articular) in the treatment of knee OA. The study included more than
Page
Partnership with a leading Australian academic group was instead discontinued in 2012. The goal of this
collaboration was the setup of a large international clinical trial designed to test the efficacy of glucosamine
sulfate in the prevention and/or treatment of aromatase inhibitor-induced arthralgia in breast cancer patients.
Aromatase inhibitor-induced arthralgia is a frequent and clinically relevant condition for which no adequate
therapeutic options are available. Actually, the study proved to be rather complicated and expensive, and the
Australian health authority could not afford to co-finance trial implementation together with Rottapharm. The
Company is now considering whether or not to implement the study in Europe.
28
During the previous reporting periods, Rottapharm had been one of the financial and scientific sponsors of the
Osteoarthritis Research Society International (OARSI) initiative, in response to a federal register notice by the
Food and Drug Administration (FDA), to implement new guidelines on the development of OA drugs, which were
published in 2010. During 2011 Rottapharm joined another important initiative: it became scientific and
financial partner of NIH (in collaboration with OARSI) in a consortium established to assess the value of different
biochemical and imaging biomarkers in the evaluation of OA progression. Such biomarkers would be employed
in the development of new drugs. These activities (and thus the sponsorship) continued throughout 2012.
MANAGEMENT
REPORT
400 patients, was requested by the French Health Authority to grant reimbursement, and was conducted in
France and Germany. Notably, all the countries in which the drug is marketed have benefited from reexamination of the product’s clinical effects. Viscosupplementation with hyaluronic acid is an excellent option for
controlling OA symptoms in the medium term, after a few administrations. The aim of the study was to assess the
effects of Go-On® up to 6 months, after 3 weekly administrations, in comparison with those of a reference
hyaluronic acid preparation. Compared with such preparation, Go-On® has a higher molecular weight, which is
expected to provide some advantages for patients. The results of the study have indeed confirmed not only that
Go-On® is not inferior to the comparator in controlling OA symptoms (mainly pain), but also that it is superior to
the reference product, both statistically and clinically. The article was published in the leading journal in the field
of Rheumatology (i.e. Annals of the Rheumatic Diseases, the official journal of the European League Against
Rheumatism—EULAR). Additional analyses, including those concerned with the predictors of clinical benefit,
were conducted in 2012; their outcomes will provide the basis for other presentations/publications during the
forthcoming accounting periods.
Traditionally, gastroenterology represents another major area of expertise at Rottapharm.
The acquisition of the German Group Madaus, in 2007, enabled the Company to broaden its portfolio of marketed
products in this area and to begin a series of investigations aimed at (1)-improving the therapeutic profile of its
proprietary medicines and (2)-expanding their use and market share.
In particular, an ambitious plan has been implemented for Legalon® (silymarin), the international market leader
in the area of liver diseases. Firstly, Rottapharm sped up the research program undertaken jointly by Madaus
and the American National Institute of Health (NIH). The program comprises two clinical trials that were carried
out in some of the most important US Hepatology Centers and that started after preliminary studies in humans
had established the safety and pharmacokinetics of silymarin at doses higher than those commonly used in the
clinical practice. The first study tested the efficacy of Legalon® as supportive care for patients infected with
hepatitis C virus (HCV) who were non-responders to standard antiviral treatments. Perhaps this objective was
too ambitious. The study was published in 2012, but unfortunately there was no evidence of clinical benefit,
probably because the original design by NIH was flawed and Rottapharm had no possibility to amend it. The 6month treatment period was probably too short, and the biochemical assessments were not appropriate
(histological analysis following liver biopsy should have been performed instead). Finally, the trials conducted by
the Company with Legalon® SIL (the formulation for intravenous infusion; see below) have shown that systemic
concentrations about 100-fold higher than those reached after oral administration of the dose/dosage form used
in this study are needed for the drug to exert its antiviral activity against HCV (such activity is probably essential
for supportive care, too). All the above issues and considerations are well described in published correspondence
articles reporting a critical assessment of the study. In order to avoid similar mistakes, Rottapharm took the
place of NIH in the leadership of the second study, the objective of which is to offer a therapeutic option to
patients with non-alcoholic steatohepatitis (NASH), a common condition resulting from hepatic steatosis
progression and for which no effective treatments exist. Even this study is complicated and rather ambitious, and
there are worries about the initial design by NIH, especially with regard to the small sample size. For these
reasons, in 2012 Rottapharm set up a complex interim analysis which pointed out a series of methodological
flaws in the study, thus confirming what was previously suspected. In order to complete the analysis of the study,
during the second part of the accounting period the Company engaged in collecting all the available data,
including records from patients who had completed the trial in the meanwhile. The analysis is still underway.
Page
But the new developments regarding the injectable form of Legalon® (i.e. Legalon® SIL-silibinin) have mainly
attracted the interest of the scientific community. Preliminary studies, published in 2008 by Prof. Ferenci’s
(Vienna) and RottapharmMadaus’ groups, have shown unexpected properties of this drug, never seen before
with any other product. Indeed, Legalon® SIL lowered or even zeroed-out the viral load in patients with hepatitis
C who were non-responders to the standard of care (SOC; i.e. a combination of the immunomodulatory agent
pegylated interferon and the antiviral ribavirin). Unfortunately, up to 50% of HCV patients do not respond to
current SOC treatments (please note that such therapies are long-term, costly, and poorly tolerated), with their
disease progressing to hepatic cirrhosis and eventually to hepatocellular carcinoma. The most recently approved
29
In parallel, a study of Legalon® in the exacerbation of different types of hepatitis was ongoing in Egypt in
collaboration with some USA Universities. The study was ended because of the difficulties encountered in the
enrollment of these complex patients. Data analysis is currently underway.
MANAGEMENT
REPORT
therapies (i.e. HCV protease inhibitors, to be used in combination with SOC) have slightly improved the cure rate,
but in selected groups of patients only and with poor tolerability. Together with other novel drugs which are
currently under investigation, the findings with Legalon® SIL may anticipate the advent of a new, more effective
therapy, thus representing one of the most promising recent advances in hepatology. These results have already
been confirmed internationally, and the putative mode of action of silibinin has been reported in a number of
publications. Remarkably, theoretical models developed in collaboration with American scientists have shown
that Legalon® SIL may be the most effective investigational drug for the eradication of HCV. During the last few
years, Rottapharm launched a research program in an attempt to develop an oral formulation of silibinin that
could provide the same efficacy as that of the injectable form. A prototype formulation was obtained in 2012, and
a clinical study was designed to test its clinical efficacy. The trial is scheduled to begin in 2013.
In parallel, the Company began the clinical development of Legalon® SIL, which was granted Orphan Drug
Designation by the European Medicines Agency (EMA) for the following indication: prevention of recurrent
hepatitis C in liver transplant recipients. Notably, liver transplantation is the only treatment option left for HCV
patients who are non-responders to SOC and have developed cirrhosis and hepatic insufficiency (with or without
carcinoma). But the newly transplanted liver is invariably re-infected by the virus within a few days or weeks,
and currently available treatments are not suitable for the early post-transplant period because they are poorly
tolerated and may increase the risk of graft rejection. Moreover, such therapies are marginally effective when
administered after HCV recurrence, and to make things worse recurrent hepatitis C following transplantation
progresses faster than hepatitis C before transplantation. Orphan Drug Designation is particularly important, in
that it establishes the potential value of a drug in the prevention/treatment of rare diseases for which there is
currently no cure. Positive results were obtained in individual cases of liver transplant recipients treated with
Legalon® SIL in Germany and Austria, and the case studies were published in prestigious international journals.
A Phase II clinical investigation was therefore conducted by the Company and published in 2012, providing key
insight into the strategy for further clinical development. This was discussed with the European Medicines
Agency (EMA) in London, as part of a “Scientific Advice” on the whole development plan required for marketing
approval of Legalon® SIL. According to EMA’s recommendations, Rottapharm immediately designed an
additional Phase II study but decided to delay its implementation, having in the meantime submitted an
application for Orphan Drug Designation by the Food and Drug Administration (FDA), and having contacted a
number of American hepatologists for the conduct of more studies in the USA. Orphan Drug status in the USA
was granted at the beginning of 2012, and the Company started straight away the process for requesting a preIND meeting with the FDA. The meeting, held in September 2012, allowed Rottapharm to complete the array of
recommendations needed to set up the Phase II trial. There was a first meeting with the Investigators towards
the end of the accounting period. The study protocol will be finalized shortly, and the trial will start in 2013.
In the meanwhile Rottapharm also completed an additional Phase II Italian trial in liver transplant recipients
who had recurrent HCV infection and had not responded to standard treatments: the antiviral activity of
Legalon® SIL was confirmed also in this patient population. In addition, the design of another study was
completed in 2012: the setup phase is ongoing in Egypt, where a particular HCV genotype not adequately
responding to both conventional therapies and newly approved drugs is widespread. According to preliminary
evidence, Legalon® SIL may turn up to be the optimal drug in this kind of patients.
Page
30
Agiolax® is one of the leading laxative products on the international market. Several clinical studies conducted
by the Madaus Group have shown that it is effective and well-tolerated. During the previous reporting periods,
the development of a new formulation (micronized granulated powder) was finalized. In 2012, a comparative
trial against the most effective laxative according to the scientific literature (i.e. polyethylene glycol) was
completed. Recent analyses have shown that Agiolax® was superior to the reference drug. The clinical study
report, too, was finalized in 2012. The results of this study should translate into an increased market share for
Agiolax®.
During 2012, these activities were consolidated after rearrangement of the R&D objectives and resources, while
progress was made with research programs on candidate drugs in discovery or development phases.
MANAGEMENT
REPORT
Activities associated with the discovery, research, and development of new chemical entities
The following table presents a list of new chemical entities under active development or in the drug discovery
phase.
Dexloxiglumide CCK-1 receptor
(CR2017)
antagonist
Andolast
(CR2039)
Itriglumide
(CR2945)
Airway specific antiinflammatory agent
with calciumactivated potassium
channel opener
properties
CCK-2 receptor
antagonist
THERAPEUTIC INDICATIONS
DEVELOPMENT
PHASE






Irritable Bowel Syndrome (IBS)
Functional dyspepsia (FD)
Gastro-Esophageal Reflux Disease (GERD)
Phase III
Bronchial asthma
Allergic rhinitis
Chronic Obstructive Pulmonary Disease (COPD)
Phase III

Anxiety disorders:
- Generalized anxiety
- Panic attacks
Acid-related gastrointestinal disorders:
- Gastro-Esophageal Reflux Disease (GERD)
- Peptic ulcer
- Dyspepsia
- Gastrointestinal neoplasms
Phase II
Phase II

Schizophrenia
(antipsychotic specifically effective on negative, cognitive and mood
symptoms)
Drug abuse



Chemotherapy/Radiotherapy-Induced Mucositis
Chemotherapy-Induced Diarrhea (CID)
Inflammatory Bowel Diseases (IBD)
Phase II

Functional positive
modulator of NMDA
receptors with potent
and selective
inhibition of NE
reuptake
Inhibitor of proinflammatory gene
expression with
potent ROSgeneration
preventing effect
Imidazoline I2 binding
site ligand
NaV 1.8 blocker




Neuropathic pain
Acute Nonspecific Pain
Pain
Phase I
CR5542
(series)
Orexin receptor
antagonist(s)
Drug addiction
Insomnia and sleep disorders
Anxiety disorders
Exploratory
Development
CR6086
EP4 receptor
antagonist




Pre-Clinical
development
CR6970
(series)
Selective kinase
inhibition
(undisclosed)
Osteoarthritis: Symptom Modifying Drug with potential Disease
Modifying properties
Rheumatoid Arthritis: early NSAID and/or DMARD
Osteoarthritis: Disease Modifying Drug with potent symptom activity
CR3663
(series)
Peripheral NMDA
receptor antagonist

Osteoarthritis Symptom Modifying Drug with potential Disease
Modifying properties
Discovery
CRB089
(monoclonal
antibody)
Nerve Growth Factor
(NGF) receptor
(trKA) inhibitor


Osteoarthritis pain
Chronic pain
Exploratory
Development
CRB017
(monoclonal
antibody)
Aggrecanase
(ADAMTS5) inhibitor

Osteoarthritis: Disease Modifying Drug
Exploratory
Development
VA964
COX-2 inhibitor NO
donor (CINOD)
Osteoarthritis: Symptom Modifying Drug
Non-Steroidal Antiinflammatory Drug (NSAID)
Exploratory
Development
BRU 83-92
HIV-1 protease
inhibitor



AIDS
Exploratory
Development
BRU HCV
HCV protease
inhibitor

Hepatitis C
Exploratory
Development
Neboglamine
(CR2249)
CR3294
CR4056
CR4892
(series)


Discovery
Discovery
31
PHARMACOLOGICAL
CLASS
Page
INN and/or
CODE
MANAGEMENT
REPORT
Traditionally, RottapharmMadaus’ activities for the research and development of candidate prescription drugs
were focused on Gastroenterology, Rheumatology, Gynecology and Women’s Health. Notwithstanding this,
various projects were undertaken in different areas such as Central Nervous System (CNS) and
Bronchopneumology. A number of investigational products were developed until they were ready for outlicensing; their in-house development has now been frozen in order to reorganize R&D objectives/activities for a
better use of R&D resources.
Mature products candidate for out-licensing
The most advanced investigational product is dexloxiglumide (CR2017), an antagonist of cholecystokinin CCK1 receptors under development for the treatment of irritable bowel syndrome (IBS). Mild to severe IBS affects
about 10% of the general population, with a huge impact on QoL. Because of its high prevalence among young
adults, IBS also causes a considerable loss of working days. After completing a large Phase III European trial (the
DARWIN study) with favorable results, Rottapharm held a formal discussion with the European Regulatory
Authority (EMA) to arrange the next steps towards possible product approval. Additional Phase III studies have
been designed, as requested by the Authority. In parallel, Rottapharm is actively searching for a suitable
industrial partner with which to complete the last, yet very complex phase of clinical development for this
product.
Itriglumide (CR2945) is a selective antagonist of cholecystokinin CCK-2 receptors under development as a
potential anxiolytic and, in parallel, for the treatment of functional gastrointestinal (GI) disorders, including
those with an acid-related component. Prospectively, both therapeutic areas have high economic potential.
However, when the first trials in healthy subjects had been completed, new pharmacology studies had not fully
confirmed the expected activity profile on the target receptor. More investigations are therefore needed before
proceeding further with development. Alternatively, the product is ready for out-licensing.
As already noted, there was no progress in the main activities for the two CCK antagonists above described,
essentially because Rottapharm is seeking a suitable partner with which to tackle the final phases of these
complex development programs. On the other hand, towards the end of 2012 Rottapharm received a proposal
from the University of Illinois at Chicago (UIC), for collaboration on the possible development of CCK antagonists
in a specific yet frequent sleep disorder known as sleep apnea. A thorough analysis was conducted, and the
collaboration will probably begin, with appropriate studies, in 2013.
Andolast (CR2039) is a novel, airway-specific anti-inflammatory agent under development for the treatment of
bronchial asthma. The asthma market is unquestionably large, but the development plan for an anti-asthmatic is
onerous. A large Phase II trial, which was completed during the previous reporting periods, showed the efficacy
and safety of andolast in mild/moderate asthma. Additional pharmaceutical feasibility studies meant to ensure
investigational drug supply for Phase III studies have recently been conducted. However, the development of
andolast is so burdensome that the Company is still actively looking for a suitable partner with which to engage
in the final co-development of this molecule.
Page
The whole R&D pipeline, including small molecules and biopharmaceuticals (e.g. monoclonal antibodies) can be
divided into the following categories:
 Products under active clinical development
 Products in discovery and preclinical development
32
Among the products originating from previous discovery programs, only the most recent ones are currently
under active development, and join those originating from the R&D reorganization finalized during the last
accounting periods. As a result, R&D efforts have been targeted to, and will focus on, the following therapeutic
areas:
 Rheumatology (particularly osteoarthritis [OA] and rheumatoid arthritis [RA])
 Pain and analgesia
 Gastroenterology/hepatology (opportunistic approach, mainly based on the pipeline of products already
on the market, in indications of clinical or regulatory interest in Europe)
MANAGEMENT
REPORT
Products under active clinical development
Neboglamine (CR2249) is a functional positive modulator of the glutamatergic system, which is thought to play
a central role in the pathogenesis of schizophrenia and, in particular, to be responsible for the negative and
cognitive symptoms of the disease. Currently available antipsychotics (including the newer atypical
antipsychotics) are reasonably good in controlling positive symptoms but have poor effects on cognitive deficits
and negative symptoms. There is, therefore, a significant market opportunity for drugs with favorable effects on
these latter symptoms. During the previous reporting periods, Rottapharm had bought back from its former
American partner all the rights related to the proprietary molecule neboglamine. Then Rottapharm carried out
the costly production of the active product ingredient (API) and pharmaceutical form to be used in a large Phase
II, placebo- and active-controlled dose-response study designed to monitor the full range of schizophrenic
symptoms. In preparation for such trial, an additional Phase I study in healthy volunteers had to be done in 2010
to better define the safety/tolerability profile of the drug and to determine the doses and dosing regimens to be
used in Phase II. But the additional investigation in healthy volunteers made it clear that the original clinical
development plan required some adjustments. A careful discussion about the changes needed is ongoing and
involves external consultants including expert Psychiatrists. No activities were therefore carried out throughout
2012, although further developments are expected.
CR3294 is an inhibitor of pro-inflammatory gene expression with potent reactive oxygen species (ROS)generation preventing activity. Elegant studies in animal models have demonstrated that CR3294 exerts a strong
preventive effect against chemotherapy- and/or radiotherapy-induced GI mucositis. The onset of mucositis, a
common event in patients undergoing chemotherapy or radiotherapy, may lead to a decline in general health
status (mucosal injury, diarrhea, etc.) requiring dose reductions or even treatment interruption. After
completing Phase I studies, which allowed the characterization of the pharmacokinetic and tolerability profile of
CR3294 in humans, the Company started with Phase II therapeutic trials in patients undergoing radiotherapy
and/or chemotherapy. With the help of an Italian group of experts, Rottapharm did a first Phase II study. The
experimental design was complex and ambitious, with the objective to test the efficacy of CR3294 for the
prevention of mucositis in patients with hematologic malignancies who receive high-dose chemotherapy before
hematopoietic stem cell transplantation. Unfortunately, an interim analysis performed after completion of the
first 60 randomized patients (as planned in the protocol) did not show favorable effects of the drug, at any dose
tested. Conversely there were signs of uncertain tolerability, although they were limited to the population and
procedures of the study. The trial was therefore terminated prematurely. No activities were carried out in 2012,
except for those related to study closure through formal reporting. An assessment of whether the clinical
development plan needs to be changed is ongoing. More indications, including the prevention of mucositis in
different cancer patient populations (e.g. those treated with other chemotherapy/radiotherapy regimens) and
additional gastroenterology indications (e.g. inflammatory bowel diseases or celiac disease) are under scrutiny.
Page
Products in discovery and preclinical development
Different potential backups of CR4056 had been identified during the previous accounting periods, in addition to
a series of molecules (CR4892 series) that are supposed to selectively block NaV1.8 sodium channels. Because
33
CR4056 belongs to a series of anti-inflammatory agents synthesized in the Medicinal Chemistry Department at
Rottapharm. CR4056 has indeed a moderate anti-inflammatory action, but animal models have mainly revealed
its potent analgesic activity. The compound has a novel mechanism of action, which appears to involve I2imidazoline binding sites and, in all probability, inhibition of some ionic channels. Experimental data have shown
that CR4056 is one of the most potent non-opioid analgesics ever described, particularly against neuropathic
pain. Neuropathic pain represents an absolute medical need, because of its prevalence and because effective
drugs are lacking. In particular, CR4056 is endowed with potent analgesic activity in experimental models of
neuropathic pain induced by neurotoxic chemotherapeutic agents. Phase I clinical development began in 2011
with a first-in-human study. A second Phase I study, conducted in 2012, assessed the tolerability and
pharmacokinetics of single and repeated doses of CR4056 in healthy volunteers (single doses were higher than
in the first study). Completed in the summer of 2012, the study showed some pharmacokinetic issues for
CR4056, which were partly overcome by increasing the doses administered. And in fact, as required by the study
procedures, toxic dose levels following repeated administration were reached. In the second half of 2012, some
mechanisms associated with putative toxicity were investigated before proceeding further with therapeutic
Phase II trials, which are scheduled to begin during 2013.
MANAGEMENT
REPORT
pain (and thus the development of new analgesics) is regarded as a strategic area for the Company, in-house
resources on this program had been increased during 2011 in order to reach a go/no go decision based on the
results achieved by the end of the year. Although results were promising, additional evaluations carried out in
2012 indicated that it was better to stop this program and concentrate on other ongoing projects.
One of the most recent discovery project is the “orexin receptor antagonists” program. Orexins (OX) are
neuropeptide hormones involved, among other functions, in the mechanisms controlling the sleep-wake cycle.
Orexin receptor antagonists are in active phase of exploratory development for use in sleep disorders and/or as
novel drugs for the treatment of anxiety disorders and compulsivity/addiction. Given the relevance of the
pathologies targeted, the market outlook for this program is definitely appealing.
During 2011, Rottapharm’s attention had focused on two molecules that act as selective OX1 antagonists but
have a dual mechanism in that they also inhibit NK1 receptors. Thanks to this novel mode of action, which could
be crucial in the treatment of drug abuse and addiction, the two molecules are particularly appealing. Both of
them have indeed shown a marked pharmacological activity in animal models of cocaine addiction. On the basis
of these findings, the Company entered into collaboration with the American NIH—in particular with the
National Institute on Drug Abuse (NIDA). Among its institutional functions, one key NIDA’s duty is to study in
depth the pharmacological profile of potential treatments for drug abuse, thus favoring their possible
development through fast market approval. In 2012 NIDA began to study Rottapharm’s OX1/NK1 antagonists
with experimental models in rats and then in monkeys (which can be used only in highly specialized centers of
excellence). Preliminary data confirmed most of the premises above stated, but additional investigations are
needed and have already been planned. Rottapharm started in the meantime its own studies in other
experimental animal models of drug abuse, in particular those used for the study of nicotine abuse. These
activities will continue throughout 2013.
Additional work was done to better characterize mixed OX1/2 antagonists, which represent an important class
of agents in the Company’s pipeline. Potential candidates were identified in 2012, and a decision about their
further development will be taken during 2013. Discovery activities on OX1 selective inhibitors remain instead
frozen, at least temporarily, so that more resources can be allocated to the OX1/NK1 dual inhibitor program.
Page
Many of the activities carried out in 2012 were allocated to the preclinical development of CR6086, a selective
EP4 antagonist that exerts marked anti-inflammatory and analgesic effects in animal models of arthritis. EP4 is
one of the prostaglandin E2 receptors; its activation promotes joint inflammation and in all probability cartilage
degradation in OA/RA. Interestingly, recent studies have revealed that EP4 receptors may have a role in the
altered immune response observed in autoimmune diseases such as rheumatoid arthritis. This evidence
provides a rationale for the striking preventive and therapeutic activity of CR6086 in animal models of
rheumatoid arthritis. In these experimental models, CR6086 performs better than nonsteroidal antiinflammatory drugs (NSAIDs; inhibitors of prostaglandin biosynthesis), and better than first-line
immunosuppressive agents such as methotrexate. It is not therefore excluded that CR6086 will be developed for
use as a first-line therapy in newly diagnosed RA patients. In this instance it would take the place of NSAIDs and
would be administered before immunosuppressive therapies, including the new generation products recently
approved. In 2012, activities with CR6086 concentrated first on carefully examining its efficacy profile in animal
models, with a search for the minimum effective dose in experimental models of RA and with the full
characterization of its analgesic activity, which is greater than that initially presumed. Secondly, we studied the
tolerability profile of CR6086 and found a certain degree of gastric toxicity which is under investigation, while
the better cardiovascular safety profile compared with classical nonsteroidal anti-inflammatory drugs seems to
be confirmed. In this regard, repeated dose toxicity studies (4 weeks) were undertaken in rats and dogs. A
relevant effort in the manufacturing, characterization, and analysis of the drug substance was required to
conduct toxicity studies and to set the stage for clinical development. Studies will continue as fast as possible
throughout 2013.
34
On the basis of the experience gathered in the area of rheumatic diseases, particularly in the treatment of
osteoarthritis (OA), a few years ago Rottapharm decided to devote a substantial part of its R&D resources to
studying new mechanisms and molecules with the ability to: 1-effectively counteract anatomic damage and
disease progression in OA (e.g. cartilage erosion and joint space narrowing); 2-control OA symptoms. In other
words, Rottapharm is searching for novel drugs that could possibly, with time, take the place of the proprietary
glucosamine sulfate and meet the ever growing medical need and market demand. As in the previous reporting
period, many activities in discovery and preclinical development concentrated on this area, because
Rheumatology (especially with regard to osteoarthritis/rheumatoid arthritis) is the top R&D priority.
MANAGEMENT
REPORT
While CR6086 represents an anti-inflammatory (and probably immunological) approach to rheumatic diseases,
during 2012 Rottapharm directed the drug discovery effort towards the degenerative changes underlying
osteoarthritis, and more specifically towards a particular kinase, the inhibition of which could be a valuable
target for the treatment of osteoarthritis symptoms and progression. Various series of small molecule inhibitors
were identified using high-throughput screening assays as well as preliminary pharmacokinetic evaluations. The
most interesting lead compounds were progressed to long-term studies aimed at assessing their effects on
articular cartilage degradation in sophisticated animal models. Results from these studies, which are expected in
the first half of 2013, will guide the project’s direction.
In the light of the brilliant achievements described above, the studies on peripheral NMDA receptor modulation
slowed down. This particular glutamate receptor seems to be involved in controlling chondrocyte responses
following mechanical stimulation, and thus in a possible role of such responses in the pathogenesis of OA.
Moreover, new targets were evaluated to renew the discovery endeavor in this therapeutic area. A thorough
analysis was conducted to decide whether a specific series of proteases could turn into a target of choice during
2013.
Rottapharm Biotech and Foldless
Also in 2012, R&D activities at Rottapharm Biotech were entirely dedicated to osteoarthritis and pain relief. In
vivo studies with monoclonal antibodies against aggrecanase went on steadily, with results definitely better than
those obtained with small molecule inhibitors in a project discontinued during the previous reporting periods.
Aggrecanase is thought to be the key enzyme responsible for cartilage degradation in OA. In particular, results
with CRB0017 continued to be very exciting, so antibody engineering was undertaken for the setup of
manufacturing development processes. In addition, studies were carried out to test the immunogenic potential of
CRB0017 and to select a series of fully human antibodies as a back-up in case the chimeric CRB0017 is unsuitable
for development due to whatever reason.
A second noteworthy activity to which Rottapharm Biotech’s resources were allocated in the previous reporting
periods was the discovery of antibodies against Nerve Growth Factor (NGF) binding sites. Anti-NGF antibodies
are characterized by potent analgesic activity, as observed with a number of molecules developed by other
companies. However, they were placed on hold by Regulatory Authorities because of their potential toxicity.
Since Rottapharm Biotech’s pre-candidates (series CRB0089) target a receptor for NGF instead of NGF itself, they
may have a better safety profile than that of anti-NGF molecules. In 2012, Regulatory Authorities lifted the
clinical hold on clinical trials of potential drugs acting through this mechanism. Many activities at Rottapharm
Biotech were dedicated to setting up the manufacturing of CRB0089, but they were decelerated towards the end
of 2012 so that the Company could focus its resources on CRB0017, as above reported. It is worth noting that
Rottapharm Biotech uses a proprietary technology platform (SPLINT) for the development of recombinant
monoclonal antibodies, with a strong basis for intellectual property protection.
Page
There were issues also with the second Foldless’ project, the goal of which was to block the hepatitis C virus
protease with inhibitors that have a mode of action similar to that of BRU 83-92. These molecules may have the
potential to bypass the mechanisms of viral resistance and thus to provide a revolutionary therapy for hepatitis
C. In fact, the virus is often resistant to the most advanced treatments. Even in this second program, as implied
above, the results obtained in 2012 with the first molecules did not meet the expectations.
35
Rottapharm is co-founder, with a group of academic scientist and the University of Milan (Italy), of a university
spin-off named Foldless: 2012 was the fourth year of life for the spin-off. Rottapharm holds the majority of the
Company and, in the future, 100% of the shares and full rights. Foldless owns a revolutionary proprietary
technology platform based on protein dynamic pharmacology, able to discover potential new drugs of peptidic or
peptidomimetic nature for diseases in which targeted proteins have a pathogenetic role. During the previous
accounting periods, Foldless had started to investigate different viral diseases. In particular, the first candidate
(laboratory code: BRU 83-92) had shown a striking activity in vitro against human immunodeficiency virus
(HIV), far superior to that of any other known antiviral agent. For instance, the novel mechanism whereby BRU
83-92 was shown to inhibit HIV protease does not seem to be susceptible to pharmacological resistance.
Unfortunately, the studies performed in 2012 did not confirm the premises on the basis of which the program
had progressed, both with the lead compound and with the new analogues synthesized and tested within the
network of national and international collaborations implemented by Foldless to meet its objectives.
With regard to nutraceuticals, Rottapharm continued in 2012 with a series of clinical investigations aimed at
better characterizing the safety and efficacy of its top-selling products for dyslipidemias, i.e. Armolipid line.
Remarkably, the Spanish Subsidiary concluded a very positive study at the end of 2012, and now there will be
additional analyses of the data gathered.
MANAGEMENT
REPORT
Nutraceuticals and dermo-cosmetic area
Several new products, including line extensions and products acquired from third parties, were implemented to
expand the pipeline of nutraceuticals marketed by the Company.
The R&D units have become more and more efficient with their work in the area of nutraceuticals. What follows
is a summary of the most relevant and innovative activities carried out during this reporting period.
A first, exploratory investigation of the effects of a proprietary product (based on a combination of chromium,
berberine, and banaba) in subjects with dysglycemia and at risk of developing diabetes was completed. Results
are very good, so a large clinical trial is being designed to confirm the activity of the product and to try and get a
positive opinion from the European Food Safety Authority (EFSA) for approval of a health claim.
The second project deals with the assignment of developing a revolutionary cocoa extract, in collaboration with
the Spanish associate company Euromed. A prototype of the extract has already been prepared at Euromed: it is
particularly rich in flavanols, the active ingredients which are thought to be responsible for the favorable effects
of cocoa powder on the maintenance of normal endothelial function, microcirculation, and blood pressure. In
addition, cocoa extracts seem to exert a beneficial activity on cognitive function and muscle endurance. Some of
these effects were already studied at the Company’s laboratories in 2012 and will be thoroughly investigated
throughout 2013. In parallel, there will be a final characterization of the active ingredient and its development in
a formulation suitable for use in clinical trials.
Finally, a pharmaceutical technology plan was devised to add a new substance to the formulation of Armolipid
Plus, which should result in improved lipoprotein antioxidant activity.
Page
36
The Dermo-Cosmetic R&D unit was very active in the “healthcare” area and went on steadily and successfully
with the activities undertaken during the previous accounting periods.
MANAGEMENT
REPORT
Transactions with associated and parent and sister companies
During the year ended December 31, 2012, the Group had the following relations with parent (Fidim S.r.l. – Italy)
and associated (RRL Immobiliare S.p.A. – Italy) companies.
For the year ended December 31, 2012
Costs for
materials
Revenues
Fidim S.r.l.
Parent compagnie
RRL Immobiliare S,p,A,
Associated Companies
Costs for
services
Financial
income
(expense)
Financial
assets
Accounts
and tax
receivable
Financial
liabilities
Accounts
payable
0
0
0
0
0
0
5.779
5.779
237.395
237.395
1.692
1.692
0
0
1.040
1.040
12
12
0
4.308
4.308
0
565
565
18
18
0
0
355
355
All transactions with parent, associated and subsidiary companies are separately indicated in the explanatory notes.
All the above transactions were carried out on market conditions.
No significant relations with related parties need to be reported.
Treasury shares and parent companies’ shares/quotas
It should be noted that Rottapharm S.p.A., as a result of the reverse mergers in 2007 by takeover of Landinvest
S.r.l. and Pharma Ventures S.r.l., holds 372 treasury shares with a nominal value of Euro 516.46 each, representing
2.62% of its share capital. Also, it should be noted that during the year Rottapharm S.p.A. did not dispose of shares
or quotas of parent companies and that none of the consolidated companies holds shares or quotas of parent
companies.
Financial instruments
The Group does not hold investments recorded in the financial statements at a value higher than the so-called fair
value.
Rottapharm S.p.A. (Italy) got recourse to a derivative instrument (IRS) described above.
Significant events during year ended December 31, 2012
Other than the events described in the paragraph “Selected balance-sheet and financial data “, we outline that with
effect from June 12, 2012, the Dutch sub-holding Rotta Research International BV has been merged into
Rottapharm S.p.A.. This cross border merger is part of the Group Corporate restructuring programme which aims
is to simplify and shorten the shareholding structure of the Group and had no effect on the consolidation area of
the Group.
Page
On January 14th, 2013, Rottapharm S.p.A. subscribed No. 11,850 newly issued shares of the MTP & Co S.p.A. , for a
unit value of Euro 1,585.00 each, plus a share premium of Euro 16,929,265,50 for a total value of Euro
35,711,515.50. The investment thus made is designed to support and develop industrial initiatives in the field of
trading comodities and raw materials, with particular interest in the initiative already started by MTP with a
Chinese partner in the pharmaceutical sector in relation to all the raw materials and active ingredients utilized by
Rottapharm for its core activities.
37
Significant events after the balance sheet date
MANAGEMENT
REPORT
On March 1st, 2013, the Group has acquired from Novartis Consumer Health the Zyma® Brands for Euro 24.75
million.
Zyma® Brands are leading products in the Vit D and Fluoride supplement segments and is sold in in 19 countries
including France, Germany, Italy. The Brands are primarily targeted for use in pediatric patients for the prevention
of dental caries (Zymafluor®), the prevention and treatment of rickets (ZymaD®) or for preventing both
conditions simultaneously (Zymaduo®/Zymafluor®D), but they have increasing relevance to the adult and
geriatric markets thanks to Vit D. The products occupy leading shares in their categories in the major markets.
Total net sales of the Zyma® Brands in 2012 amount to Euro 16.6 million, with over 90% of sales generated in the
three major European markets of France, Italy and Germany. In France, where Zyma sales total over Euro 10
million, Rottapharm S.a.s. has taken over some 50 people from Novartis Santé Familiale to run the business Zyma
and strengthten its position and whole portfolio’s promotion to the doctors.
No other significant events or transactions have occurred since the balance sheet date that may have a significant
impact the future performance of the group, or that are of such significance in relation to the Group affairs to
require mention in a note to the consolidated interim financial statements.
Operations outlook
In 2013, the Group will continue in its effort aimed at developing new products and penetrating new markets, by
enhancing at best its resources and ability to anticipate market and consumer needs thus supporting its growth of
sales and increasingly rise the Group profitability, confirming the strategic decision, taken in the last years, of
focusing on few key products and reducing dependence over reimbursed products by increasing the semi-ethical
products with strong development and innovation, supporting potential acquisition and replacing third-party
distributors with in-house structures.
In the light of the initiatives underway and of the ability of the Group to cope with the risks connected to market
and business as indicated above, we believe that the 2013 objectives should be overall reached.
Page
38
Chairman of the Board of Directors
Consolidated financial statements
as of and for the year ended
December 31, 2012
Company details
The Company
Rottapharm SpA
Via Valosa di Sopra, 9 - 20900 Monza
Tel ++39.0397390.1 | Fax ++49.2261.700467
email: [email protected]
PI 04472830159
Ireland
Damastown Industrial Park
Mulhuddart Dublin 15 IRELAND
Germany
Colonia Allee 15
51067 Köln
Website: www.rottapharm.com
Board of Directors
Luigi Rovati, Chairman
Luca Rovati, Deputy Chairman Lucio
Rovati, Deputy Chairman and Chief
Scientific Officer
Vincenzo Maglione, CEO
Sigieri Diaz della Vittoria Pallavicini,
Portugal
Av. D. João II, 1.02.2.1-D
Parque das Nações
1990-090 Lisboa
www: www.delta.pt
Spain
Avda. Diagonal 67-69
08019 Barcelona
Chief Executive Officier
Giovanni Rutigliani, Chief Executive
Officier
Auditors
Reconta Ernst & Young S.p.A. ,
Via della Chiusa 2,
20123 Milano
International offices
EUROPE
Austria
Prinz-Eugen-Str. 8
A-1040 Wien
Belgium
Rue des Trois Arbres 16 Drie Bomenstraat
B-1180 Brussel
France
83/85 Blvd Vincent Auriol
75013 Paris FRANCE
Spain
Polígono Can Magarola c/del Rec de Dalt, 21-23
E-08100 Mollet del Vallés
Barcelona
email: [email protected]
ASIA
India
C/o. Cadila Healthcare Limited
Agiolax Plant
Kundaim Industrial Estate
Kundaim - Ponda
Goa 403 115
Thailand
Panjathani Tower, Floor 18th Zone A, No.127/23
Nonsee Road, Sub-District Chongnonsee,
District Yannawa, Bangkok, 10120
CONSOLIDATED FINANCIAL STATEMENT
Contents
F-1 Auditors’ report
F-2 Consolidated statement of financial position as
of December 31, 2012 and December 31, 2011
F-3 Consolidated statement of income for the years
ended December 31, 2012 and 2011
F-4 Consolidated statement of comprehensive
income for the year ended December 31, 2012
and 2011
F-5 Consolidated statement of changes in equity for
the year ended December 31, 2012 and 2011
F-6 Consolidated statement of cash flows for the
year ended December 31, 2012 and 2011
F-7 Notes to the consolidated financial statements
for the year ended December 31, 2012 and
2011
Financial Statements
Consolidated Statement of financial
position
Note
As of December 31,
2012
As of December 31,
2011
5
6-8
7
9
10
93,503
503,179
63,244
13,108
1,936
368
40,755
716,093
89,592
155,294
3,688
28,024
237,395
3,855
144,228
662,076
4,413
1,382,582
90,262
519,198
61,701
13,190
1,725
120
25,916
712,112
89,975
120,700
2,699
19,632
215,616
103,211
111,517
663,350
4,611
1,380,073
In thousand of Euro
Property, plant and equipment
Goodwill
Intangible assets
Investment in associates
Other non-current financial assets
Other non-current assets
Deferred tax assets
Non current assets
Inventories
Trade receivables
Current tax receivables
Other current assets
Financial receivables from parent company
Other current financial assets
Current assets
Assets classified as held for sale
Total assets
Issued capital
Treasury shares
Other reserves and retained earnings
Profit (loss) of the year
Shareholders’ equity attributable to equity holders of the parent
Non-controlling interests
Shareholder’s equity
Provisions for risks and charges
Termination indemnities
Deferred tax liabilities
Other non-current liabilities
Non current liabilities
Trade payables
Current tax payables
Current financial liabilities
Current liabilities
Total liabilities and equity
23
11
12
13
14
15
16
17
18
19
19
19
19
20
21
22
23
24
25
26
20
7,333
7,333
(12,739)
521,135
72,487
588,216
(1,341)
586,875
526,431
(12,739)
499,972
61,508
556,074
(432)
555,642
12,573
86,607
5,860
579
632,050
50,323
25,624
7,762
79,948
163,657
1,382,582
334,076
13,818
70,206
9,965
574
428,639
51,413
26,650
8,080
309,649
395,792
1,380,073
Page
F-2
The accompanying note are an integral part of these consolidated financial statement
Consolidated statement of income
Note
In thousand of Euro
Net Revenue
Other income
Costs of raw materials, supplies, consumables and goods
Costs of personnel
Costs of services
Other costs
Operating profit
Financial income
Financial expenses
Share of profit (loss) of associates
Revaluation (Write-down) of other financial assets
Profit before taxes from continuing operations
Income tax expense
Net profit from continuing operations
Net profit
Attributable to:
Non -controlling interests
2012
27
28
522,716
17,036
539,752
29
30
31
32
5-7
(112,711)
(114,965)
(155,184)
(15,831)
(35,681)
105,380
22,487
(38,520)
19
6
89,372
(17,911)
71,461
33
33
34
For the years ended
of which
not
2011
recurring
of which
not
recurring
527,886
14,350
542,236
(3,105)
(1,071)
(4,177)
11,331
7,446
1,244
8,398
(115,056)
(117,064)
(153,003)
(13,417)
(27,644)
116,052
10,981
(34,787)
(57)
(483)
91,706
(30,823)
60,883
71,461
60,883
72,488
(1,027)
61,508
(625)
(2,516)
(2,670)
(5,187)
(5,187)
(5,187)
Page
F-3
Consolidated statement of
comprehensive income
In thousand of Euro
Note
Net profit
For the years ended December 31,
2012
2011
71,461
60,883
(11,651)
(76)
(7,896)
(80)
3,788
(1,480)
(3,416)
(181)
Other comprehensive income, net of taxes
(19,703)
(1,289)
Total comprehensive income, net of taxes
Attributable to:
Non -controlling interests
51,758
59,594
52,773
(1,015)
60,233
(639)
Net actuarial Gain (Loss) on termination indemnities
Exchange differences on foreign currency translation
Net (loss)/gain on financial assets available-for-sale
Change in cash flow hedges
19
19
19
20
Page
F-4
Consolidated statement of changes in
equity
In thousand of Euro
Note
Cash
Foreign
Other
Availableflow
currency reservesand
for-sale
hedge
translation
retained
reserve
reserve
reserve
earnings
20
19
19
19
Issued Treasury
Capital shares
19
19
Total
NonTotal
controlling Shareholders’
Interest
equity
As of January 1, 2012
Net profit
Other comprehensive income
7,333
-
(12,739)
-
(80)
8,134
(7,896)
(458)
(88)
553,804 556,074
72,487
72,487
(11,651) (19,715)
(432)
(1,027)
12
555,642
71,460
(19,703)
Total comprehensive income
Dividends
Other movements
7,333
(12,739)
(80)
(80)
(7,896)
238
(88)
(546)
60,836
52,772
(20,006) (20,006)
(624)
(624)
594,010 588,216
(1,015)
106
(1,341)
51,757
(20,006)
(518)
586,875
Cash
AvailableIssued Treasury
flow
for-sale
Capital
shares
hedge
reserve
reserve
Note
19
19
Foreign
currency
translation
reserve
20
19
19
7,333
-
(12,739)
-
182
(182)
11,550
(3,416)
1,038
(1,466)
Total comprehensive income
Dividends
Other movements
-
-
(182)
-
(3,416)
-
(1,466)
(30)
7,333
(12,739)
-
8,134
(458)
Net profit
Other comprehensive income
Other
reserves
and
retained
earnings
19
Noncontrolling
Interest
Total
Shareholders’
equity
284
(625)
(14)
503,051
60,883
(1,290)
60,232
(6,000)
(925)
(639)
(77)
59,593
(6,000)
(1,002)
553,804 556,074
(432)
555,642
Total
495,403 502,767
61,508
61,508
3,788
(1,276)
65,296
(6,000)
(895)
Page
F-5
Consolidated statement of cash flows
71,461
60,883
11,300
8,047
16,019
315
506
3,669
7,789
(10,945)
(2,754)
365
34,311
10,811
8,151
6,814
1,883
957
488
(587)
482
(331)
(776)
27,892
547
(38,313)
(10,920)
(1,089)
(12,055)
43,942
4,132
(37,303)
6,334
3,813
(5,853)
59,898
Cash flow from investing activities:
Purchase of intangible assets
Purchase of property, plant and equipment
(Purchase)/disposal of investments
Financial receivables from parent company
Purchase/ disposal) of financial assets available for sale
Net cash flow from investing activities
(9,913)
(15,055)
223
(16,000)
101,167
60,422
(3,586)
(11,119)
(17)
(45,701)
768
(59,655)
Cash flow from financing activities:
Change in net financial liabilities
Change in other financial receivables
Dividends paid
Net cash flow from financing activities
(51,150)
151
(20,006)
(71,005)
(46,937)
(551)
(6,000)
(53,488)
Cash and cash equivalents at the beginning of the year
Change in Cash and cash equivalents
Net effect of foreign currencies exchange rate variation
Cash and cash equivalents at the end of the year
111,517
33,359
(648)
144,228
164,370
(53,245)
392
111,517
Non-monetary adjustments
Depreciation of Property, plant and equipment
Amortization of intangible assets
Impairment of goodwill
Impairment (reversal of impairment) of intangible assets
Unrealized exchange (gains)/losses
Allowance for doubtful accounts
Interest (income)/expense not collected/paid
Gains/(losses) on financial assets available for sale
Change in termination indemnities and provision for risks and charges
Others
Total
Changes in operating working capital:
Inventories
Trade receivables
Trade payables
Other current and non-current assets and liabilities
Net cash flow from operating activities
F-6
Net profit
2012
2011
Page
In thousand of Euro
Notes
1.
Organization
The consolidated financial statements include the financial statements of Rottapharm S.p.A (“the Company” or
“Rottapharm”) and all of its domestic and foreign subsidiaries, consolidated on a line-by-line basis (together with
the Company, “the Group” or “Rottapharm Group”). The Group is incorporated and domiciled in Italy and
controlled by Fidim S.r.l. (97,38%). These financial statements represent the consolidated financial statements of
the Rottapharm Group and have been approved for issuance by the Board of Directors on March 5,2013.
2.
Basis of preparation and changes to the Group’s accounting policies
Basis of preparation
The consolidated financial statements as of and for the year ended December 31, 2012 have been prepared in
accordance with the International Financial Reporting Standards (”IFRS”) adopted by the European Union, as
provided by article 6 of the European Regulation No. 1606/2002, issued by European Parliament and
Commission on July 19, 2002, and in accordance with article 3 comma 2 of the Legislative Decree No. 38 of
February 28, 2005.
The term IFRS refers to all revised International Accounting Standards (IAS) and all IFRS Interpretations by the
International Financial Reporting Interpretations Committee (IFRIC), including the interpretations previously
issued by the Standing Interpretation Committee (SIC) adopted by the European Union as of December 31, 2012.
The consolidated financial statement are prepared in Euro, rounded off to the nearest thousand, unless
otherwise stated.
The significant accounting policies adopted in the preparation of the consolidated financial statements for the
years ended December 31, 2012 are described below.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to use their judgment in the process of applying the Group’
accounting policies. The areas that are complex or require a higher level of judgment, or areas where
assumptions and estimates are significant in the preparation of the financial statements are disclosed in Note 3.
Page
The significant principles of consolidation are as follows:
- the consolidated financial statements include the financial statements of the Company and the companies in
which it holds a controlling interest, from the date control over such subsidiaries begins until the date that
control ceases. Control exists when the Group has the majority of voting rights or has the power, directly or
indirectly, to govern, also through contractual agreements, the financial and operating policies of an enterprise
so as to obtain benefits from its activities;
- the consolidated financial statements are prepared based on the financial statements of the individual Group
companies prepared for the same reporting period using consistent accounting policies. The consolidated
financial statements have been prepared on a historical cost basis, except for derivative financial instruments
and financial assets available-for-sale that have been measured at fair value, as described in the notes. The
reporting date of each standalone financial statements participating in the consolidation corresponds to the
reporting date of the consolidated financial statements. Such standalone financial statements are adjusted,
where necessary, to comply with the Group’s accounting policies;
- all intra-Group balances and transactions, including unrealized profits and losses arising from intra-Group
transactions, are eliminated in full. Unrealized profits and losses resulting from transactions with associates are
eliminated for the amount attributable to the Group;
- the acquisition of majority investments from third parties are accounted for by the acquisition method of
accounting and the excess of the aggregate of the consideration transferred and the amount recognised for noncontrolling interest over the fair value of the identifiable assets acquired, less liabilities assumed, is allocated to
goodwill. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the
difference is recognised in the statement of income. A change in the ownership interest of a subsidiary, without
a loss of control, is accounted for as an equity transaction;
F-7.3
Consolidation method
Notes
- the assets, liabilities, revenue and expense of the consolidated companies have been consolidated on a line-byline basis; the non-controlling interests in the statement of financial position are disclosed separately,
indifferently n the statement of income the result attributable to non-controlling interests is included in the
result of the period. Losses related to a subsidiary are attributed to the non-controlling interest even if that
results in a deficit balance;
- When control of the Group over a subsidiary ceases, the Group:
 derecognizes the assets (including goodwill) and liabilities of the subsidiary;
 derecognizes the carrying amount of any non-controlling interest;
 derecognizes the cumulative translation differences, recognized in the shareholders’ equity;
 recognizes the fair value of the consideration received;
 recognizes the fair value of any investment retained;
 recognizes any gain or loss in the statement of income;
 reclassifies the parent’s share of components previously recognized in other comprehensive income to the
statement of income or retained earnings, as appropriate;
- the assets and liabilities of foreign consolidated subsidiaries are translated into Euro at the exchange rate
prevailing at the reporting date. Income and expenses are translated at the average exchange rate for the year;
any translation differences arising are recognized in other comprehensive income. On disposal of a foreign
operation, the component of other comprehensive income relating to that particular foreign operation is
recognized in statement of income.
The following table summarizes the exchange rates applied by the Group for the translation of the financial
statements of its subsidiaries that are prepared using a functional currency other than Euro:
39.924
1.286
625.073
1.205
7.444
68.629
4.184
39.944
41.765
1.294
671.997
1.216
7.434
68.713
4.458
40.991
2012
2011
40.330
1.319
631.729
1.207
7.461
72.560
4.074
40.347
41.765
1.294
671.997
1.216
7.434
68.713
4.458
40.991
F-7.4
RUB Russian Ruble
USD US Dollar
CLP Chile Peso
CHF Swiss Franc
DKK Danish Crone
INR Indian Rupee
PLN Poland Zloty
THB Thailand Bath
Exchange
rates as of
December 31,
Page
Average exchange rates years ended
December 31,
2012
2011
Notes
Group structure
The following tables summarize the names of the subsidiaries, joint ventures and associates as of December 31,
2012 along with their locations and the % owned directly or indirectly by the Group:
SUBSIDIARIES
(consolidated on a line-by-line basis)
Location
Currency
Share
Capital
Italy
Italy
Italy
Italy
Italy
Austria
Austria
Belgium
Chile
France
France
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Greece
India
Ireland
Luxembourg
Luxembourg
Poland
Portugal
Portugal
Portugal
Russia
Spain
Spain
Spain
Switzerland
Thailand
USA
USA
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
CLP
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
INR
EUR
EUR
EUR
PLN
EUR
EUR
EUR
RUB
EUR
EUR
EUR
FRS
THB
US$
USD
10
50
52
100
10
35
182
300
1,652
100
1,000
2,600
1,000
26
11,600
16,601
27
51
25
60
330,000
318
1,288
236
50
500
50
1,496
202
56,727
5,400
3
200
26,500
100
0
Name
Dermogroup S.r.l.
Rottapharm Biotech S.r.l. (già Laboratori Guieu S.r.l.)
Madaus S.r.l.
Foldless S.r.l.
Hetterich S.r.l.
Rottapharm GmbH
Madaus Austria GmbH
Madaus Pharma S.A.
Rottapharm Cile S.A.
Laboratoires Madaus S.A.S.
Rottapharm S.a.s.
Rottapharm-Madaus Gmbh
Erste Madaus Beteiligung GmbH
Zweite Madaus Beteiligung GmbH
Madaus Holding GmbH
Madaus GmbH
Pharmazeutische Union GmbH
Galmeda GmbH
MWB PHARMA Gmbh
Rottapharm Hellas
Madaus Pharmaceuticals Priv. Ltd
Rottapharm Ltd.
SIM S.A.
Integral S.A.
Madaus Sp Zoo
Laboratorios Delta Lda
Rotta Farmaceutica Lda
Neo Farmaceutica Lda
Madaus OOO
Rottapharm S.L.
Euromed S.A.
Hetterich Spagna
Rottapharm S.A.
Rottapharm Thailand Ltd.
Euromed Inc.
Madaus Inc
1) Non operating company
% owned by the
Group
Directly
Indirectly
Notes
100%
100%
100%
60%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1
100%
100%
100%
100%
100%
100%
1
1
Location
Currency
Share Capital
Directly
RRL Immobiliare S.p.A.
Italy
EUR
1,000
47.86%
Indirectly
Page
% owned by the Group
Name
F-7.5
ASSOCIATES
(accounted for under the equity method)
Notes
With respect to the subsidiaries, joint ventures and associates included in the consolidation area as of December
31, 2011, the following changes occurred:
Mergers
1)
2)
3)
4)
On June 8, 2012, Rottapharm B.V. has been merged into Rotta Research International B.V..
On June 12, 2012, Rotta Research International B.V. has been merged into Rottapharm S,p.A..
On August 6, 2012 DIHA Biotech Gmbh has been merged into Rottapharm Madaus Gmbh.
On December 18, 2012 Farmasan – Productor Farmaceuticos Unipessoal Lda and Madaus Farma Portugal
Unipessoal Lda have been merged into Neo Farmaceutica S.A.
Liquidation
1) On September 13, 2012 Hetterich Portugal Lda has been liquidated.
These operations are part of the Group restructuring program which aims to simplify and shorten the
shareholding structure of the Group.
3.
Significant accounting policies
Investment in associates
The Group’s investment in its associate is accounted for under the equity method. An associate is an entity in
which the Group has significant influence.
Under the equity method, the investment in the associate is carried in the statement of financial position at cost
plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate
is included in the carrying amount of the investment and is neither amortized nor individually tested for
impairment.
The statement of income reflects the share of the results of operations of the associate. Where there has been a
change recognized directly in the equity of the associate, the Group recognizes its share of any changes and
discloses this, when applicable, in the statement of changes in shareholders’ equity. Unrealized gains and losses
resulting from transactions between the Group and the associate are eliminated to the extent of the interest in
the associate.
The share of profit or loss of associates is disclosed separately in the face of the statement of income. This
represents the profit attributable to equity holders of the associate and therefore net of taxes and of noncontrolling interests.
The annual reporting date for the associates corresponds to the annual reporting date of the parent company.
Where necessary, adjustments are made to align their accounting policies with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognize an additional
impairment loss on the Group’s investment in its associates. The Group determines at each reporting date
whether there is any objective evidence that the investment in the associate is impaired. If this is the case the
Group calculates the amount of impairment as the difference between the recoverable amount of the associate
and its carrying value and recognizes the amount in the statement of income.
Upon loss of significant influence over the associate, the Group measures and recognizes any retaining
investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant
influence and the fair value of the retaining investment and proceeds from disposal is recognized in the
statement of income.
Page
Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount
and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their
carrying amounts will be recovered through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for
immediate sale in its present condition. Management must be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year from the date of classification.
F-7.4
Non-current assets held for sale and discontinued operations
Notes
In the consolidated statement of income of the reporting period, and of the comparable period of the previous
year, income and expense from discontinued operations are reported separate from income and expense from
continuing activities, down to the level of profit after taxes, even when the Group retains a non-controlling
interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the
Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or
amortized.
Foreign currency translation
The Group’s consolidated financial statements are presented in euros, which is also the parent company’s
functional currency. Each entity in the Group determines its own functional currency and items included in the
financial statements of each entity are measured using that functional currency. The Group has elected to recycle
the gain or loss that arises from the direct method of consolidation, which is the method the Group uses to
complete its consolidation.
 Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional
currency rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency
spot rate of exchange ruling at the reporting date.
All differences are taken to the statement of income with the exception of all monetary items that provide an
effective hedge for a net investment in a foreign operation. These are recognized in other comprehensive income
until the disposal of the net investment, at which time they are recognized in the statement of income. Tax
charges and credits attributable to exchange differences on those monetary items are also recognized in the
shareholders’ equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined.
 Group companies
The assets and liabilities of foreign operations are translated into euros at the rate of exchange prevailing at the
reporting date and their statements of income are translated at exchange rates prevailing at the date of the
transactions. The exchange differences arising on the translation are recognized in other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive income relating to that particular
foreign operation is recognized in the statement of income.
Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding
discounts, rebates, and sales taxes or duty. The Group assesses its revenue arrangements against specific criteria
in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal
in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is
recognized.
Page
Revenue from sales is recognized upon transfer of ownership, which normally takes place at the time goods are
delivered or shipped.
Revenue comprises the sale of licenses and is recognized when the Group assigns the rights of ownership to the
customer, and collectability of the related receivables is reasonably assured.
F-7.5
 Sale of goods
Notes
 Rendering of services
Revenue from services rendered are recognized in the statement of income according to the stage of completion
of the service and only when the outcome of the service rendered can be estimated reliably.
 Interest income
For all financial instruments measured at amortized cost and interest bearing financial assets classified as
available-for-sale, interest income or expense is recognised using the effective interest rate (EIR), which is the
rate that exactly discounts the estimated future cash payments or receipts through the expected life of the
financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or
liability. Interest income is included in financial income in the statement of income.
 Dividends
Revenue is recognized when the Group’s right to receive the payment is established.
 Rental income
Rental income arising from operating leases on investment properties is accounted for on a straight line basis
over the lease terms.
Taxes
 Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, by the reporting date, in the countries where the Group
operates and generates taxable income.
Current income tax relating to items recognized directly in shareholders’ equity is recognized in the
shareholders’ equity and not in the statement of income.
 Deferred tax assets and liabilities
Page
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be
utilized except:
− where the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
− in respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilized.
F-7.6
Deferred tax assets is provided using the liability method on temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
− where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss;
− in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseeable future.
Notes
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to
be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities relating to items recognized outside the statement of income is recognized
outside the statement of income. Deferred tax items are recognized in correlation to the underlying transaction
either in other comprehensive income or directly in shareholders’ equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax
assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income
over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate.
Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the Group receives non-monetary grants, the asset and the grant are recorded at nominal amounts and
released to the statement of income over the expected useful life of the relevant asset by equal annual
instalments.
Termination indemnities
The line item “Termination indemnities” in the consolidated statement of financial position includes provisions
accrued by Italian companies for employee benefits upon retirement, pension funds provided by the foreign
subsidiaries in Germania and Austria, other employees’ benefits and non employees’ termination indemnities
(i.e. agents’ termination indemnities). The related accounting policies are the followings:
Page
Italian legislation (Article 2120 of the Italian Civil Code) stipulates that when an employee terminates their
employment contract with a company, the employee receives a termination indemnity referred to as
“Trattamento di Fine Rapporto” (TFR). This indemnity is calculated based on several items, including the annual
wages of the employee for each employment year and the length of employment. According to the Italian Civil
Code, this indemnity should be reflected in the accounting records using a calculation method based on the
indemnity matured by each employee at a date of the financial statements, as if all employees would
hypothetically terminate their employment on that date.
IFRIC of the IASB investigated TFR accounting in Italy and concluded that IAS 19 Employee Benefits should be
applied. IAS 19 was applied using the projected unit credit actuarial valuation method in which the benefit
liabilities are determined reflecting the expected date of the employees’ resignation and are discounted. The
actuarial gains and losses related to the TFR accounting, accumulated up to the previous year and reflecting the
effects arising from changes in the actuarial projections used, are taken fully in other comprehensive income.
The actuarial valuation of the termination indemnity is performed by an independent actuary. TFR liability is
unfunded.
An Italian law passed on December 27, 2006 and effective on January 1, 2007 introduced a number of changes to
the national social security system, including TFR. As a consequence of the new laws, the accounting for TFR
accrued after January 1, 2007 is similar to a defined contribution plan accounting under IFRS, while the
accounting for TFR accrued before January 1, 2007 will not change. However, due to the change in the law, the
actuarial calculation of the TFR liability existing at December 31, 2006 is adjusted prospectively in order to
exclude the component related to the future salary increases.
F-7.7
 Employees’ termination indemnities
Notes
 Pension plans
Pension obligations of the Rottapharm Group comprise defined benefit pension plans and severance indemnities
in Germany and Austria. The obligations of the German and Austrian entities are recognized according to the
projected unit credit method under IAS 19 (“Employee Benefits”). This method takes into account both the
pensions and benefit entitlements acquired as of the reporting date and the increases in pensions, salaries and
turnover to be expected in the future. The calculation is based on actuarial reports taking biometric bases of
calculation into account. Actuarial gains and losses are taken fully in other comprehensive income. The interest
portion contained in the expense from the creation of pension provisions is recognized as financial expenses.
 Other employee benefits
Other employee benefits of the Rottapharm Group include also jubilee or other long-service benefits for the
German, Austrian and Indian entities. These obligations are calculated in accordance with the simplified method
under IAS 19.127 (“Other long-term employee benefits”).
 Non employee termination indemnities
The non employee termination indemnities include the agents’ termination indemnities, calculated on actuarial
basis: the estimated amount of the indemnities earned by the agents, to be paid at the termination according to
certain conditions, is recognized within cost for services.
Financial instruments – initial recognition and subsequent measurement
 Financial assets
Initial recognition and measurement:
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss,
loans and receivables, financial assets held-to-maturity, financial assets available-for-sale, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification
of its financial assets at initial recognition.
All financial assets are recognized initially at fair value plus directly attributable transaction costs, in case of
investments not at fair value through profit or loss,.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation
or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the
Group commits to purchase or sell the asset.
The Group’s financial assets include cash and short-term deposits, trade and other receivables, loan and other
receivables, quoted and unquoted financial instruments, and derivative financial instruments.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Page
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets
designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for
trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes
derivative financial instruments entered into by the Group that are not designated as hedging instruments in
hedge relationships as defined by IAS 39. Derivatives, including separated embedded derivatives are also
classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair
value through profit and loss are carried in the statement of financial position at fair value with changes in fair
value recognized in financial income or financial expense in the statement of income.
The Group has not designated any financial assets upon initial recognition as at fair value through profit or loss.
The Group evaluated its financial assets at fair value through profit and loss (held for trading) whether the intent
to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to
F-7.8
Financial assets at fair value through profit or loss
Notes
inactive markets and management’s intent to sell them in the foreseeable future significantly changes, the Group
may elect to reclassify these financial assets in rare circumstances. The reclassification to loans and receivables,
available-for-sale or held to maturity depends on the nature of the financial asset. This evaluation does not affect
any financial assets designated at fair value through profit or loss using the fair value option at designation.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if
their economic characteristics and risks are not closely related to those of the host contracts and the host
contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives
are measured at fair value with changes in fair value recognized in the statement of income. Reassessment only
occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would
otherwise be required.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial measurement, such financial assets are subsequently measured at
amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR.
The EIR amortization is included in financial income in the statement of income. The losses arising from
impairment are recognized in the statement of income in financial expenses.
Financial assets held-to-maturity
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as heldto-maturity when the Group has the positive intention and ability to hold it to maturity. After initial
measurement, financial assets held-to-maturity are measured at amortized cost using the effective interest
method, less impairment. Amortized cost is calculated by taking into account any discount or premium on
acquisition and fee or costs that are an integral part of the EIR. The EIR amortization is included in financial
income in the statement of income. The losses arising from impairment are recognized in the statement of
income in financial expenses.
Financial assets available-for-sale
Financial assets available-for-sale include equity and debt securities. Equity securities classified as available-for
sale are those which are neither classified as held for trading nor designated at fair value through profit or loss.
Debt securities in this category are those which are intended to be held for an indefinite period of time and
which may be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial measurement, financial assets available-for-sale are subsequently measured at fair value with
unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the
investment is derecognized, at which time the cumulative gain or loss is reclassified from the available-for-sale
reserve to the statement of income as financial income or expenses.
Page
For a financial asset reclassified from the available-for-sale category, any previous gain or loss on that asset that
has been recognized in shareholders’ equity is amortized to the statement of income over the remaining life of
the investment using the EIR. Any difference between the new amortized cost and the expected cash flows is also
amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be
impaired then the amount recorded in shareholders’ equity is reclassified to the statement of income.
F-7.9
The Group evaluated its financial assets available-for-sale whether the ability and intention to sell them in the
near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets
and management intent significantly changes to do so in the foreseeable future, the Group may elect to reclassify
these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the
financial asset meets the definition of loans and receivables and has the intent and ability to hold these assets for
the foreseeable future or maturity. The reclassification to held to maturity is permitted only when the entity has
the ability and intent to hold until the financial asset accordingly.
Notes
 Trade receivables
Trade receivables are recognized at fair value, being the nominal amount net of any allowance for doubtful
accounts or sales returns. All trade receivables denominated in a foreign currency are translated into Euro using
the exchange rates in effect at the transaction’s date and, subsequently, converted using the year-end exchange
rate. Any exchange gain or loss arising from the translation is recognized in the in the statement of income of the
relative year. Trade receivables and other current assets for which the average collection period exceed twelve
months in the normal course of business are accounted for at present value.
 Cash and cash equivalents
Cash and cash equivalents consist of cash at banks and on hand and short-term deposits with an original
maturity of three months or less.
 Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or
loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as
appropriate. The Group determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value and in the case of loans and borrowings, plus directly
attributable transaction costs.
The Group’s financial liabilities include trade and other payables, bank overdraft, loans and borrowings, financial
guarantee contracts, and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near
term. This category includes derivative financial instruments entered into by the Group that are not designated
as hedging instruments in hedge relationships as defined by IAS 39. Separate embedded derivatives are also
classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of income.
The Group has not designated any financial liabilities upon initial recognition as at fair value through profit or
loss.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost
using the effective interest rate method. Gains and losses are recognized in the statement of income when the
liabilities are derecognized as well as through the effective interest rate method (EIR) amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that
are an integral part of the EIR. The EIR amortization is included in financial expenses in the statement of income.
Page
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to
reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in
accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a
liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the
present obligation at the reporting date and the amount recognized less cumulative amortization.
F-7.10
Financial guarantee contracts
Notes
Financial instruments – Derecognition of financial instruments
 Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognized when:
− The rights to receive cash flows from the asset have expired
− The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement;
and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group
has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the
asset.
In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability
are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of
the original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.
 Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognized in the statement of income.
Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if,
and only if, there is objective evidence of impairment as a result of one or more events that has occurred after
the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated
future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of
impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganization and where observable data indicate that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate
with defaults.
Page
For financial assets carried at amortized cost the Group first assesses individually whether objective evidence of
impairment exists individually for financial assets that are individually significant, or collectively for financial
assets that are not individually significant. If the Group determines that no objective evidence of impairment
exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that
are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are
not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding
future expected credit losses that have not yet been incurred). The present value of the estimated future cash
F-7.11
 Financial assets carried at amortized cost
Notes
flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss
is recognized in the statement of income. Interest income continues to be accrued on the reduced carrying
amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss. The interest income is recorded as part of financial income in the statement of
income. Loans together with the associated allowance are written off when there is no realistic prospect of future
recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the
amount of the estimated impairment loss increases or decreases because of an event occurring after the
impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the
allowance account. If a future write-off is later recovered, the recovery is credited to financial expenses in the
The present value of the estimated future cash flows is discounted at the financial asset’s original effective
interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate.
 Financial assets available-for-sale
For financial assets available-for-sale, the Group assesses at each reporting date whether there is objective
evidence that an investment or a group of investments is impaired.
In the case of equity instruments classified as available-for-sale, objective evidence would include a significant or
prolonged decline in the fair value of the instrument below its cost. ‘Significant’ is to be evaluated against the
original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its
original cost.
The Rottapharm Group's policy considers a significant decline to be one in which the fair value is below the
weighted-average cost by more than 20% and a prolonged decline to be one in which fair value is below the
weighted-average cost for a period longer than twelve months.
Where there is evidence of impairment, the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that instrument previously recognized in
the statement of income – is removed from other comprehensive income and recognized in the statement of
income. Impairment losses on equity investments are not reversed through the statement of income; increases in
their fair value after impairment are recognized directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria
as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative
loss measured as the difference between the amortized cost and the current fair value, less any impairment loss
on that investment previously recognized in the statement of income.
Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued
using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment
loss. The interest income is recorded as part of financial income. If, in a subsequent year, the fair value of a debt
instrument increases and the increase can be objectively related to an event occurring after the impairment loss
was recognized in the statement of income, the impairment loss is reversed through the statement of income.
Derivative financial instruments and hedge accounting
Page
The Group uses as derivative financial instruments only interest rate swaps. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into and
are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as a financial liabilities when the fair value is negative.
At the inception of the hedge relationship, the Group formally designates and documents the hedge relationship
to which the Group would apply hedge accounting and the risk management objective and strategy for
undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the
F-7.12
Initial recognition and subsequent measurement
Notes
hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows
attributable to the hedge risk. Such hedges are expected to be highly effective in achieving offsetting changes in
fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly
effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging derivative is recognised in the statement of income as financial
expenses. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of
the carrying value of the hedged item and is also recognised in the statement of income as financial expenses.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in the statement of
income.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised directly in the statement of
comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in
the statement of income as other operating expense.
Amounts recognised as other comprehensive income are transferred to the statement of income when the
hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is
recognised.
If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss
previously recognised in shareholders’ equity is transferred to the statement of income. If the hedging
instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a
hedge is revoked, any cumulative unrealized gain or loss previously recognised in the other comprehensive
income remains in other comprehensive income until the forecast transaction occurs.
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated
impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing
costs for long-term construction projects if the recognition criteria are met. When significant parts of property,
plant and equipment are required to be replaced in intervals, the Group recognizes such parts as individual
assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed,
its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition
criteria are satisfied. All other repair and maintenance costs are recognized in the statement of income as
incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in
the cost of the respective asset if the recognition criteria for a provision are met.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Plants and machineries
Equipment
Other assets
Leasehold improvement
2%-5%
5% - 15%
7.5% - 15%
12% - 33%
On the basis of the residual life of the leasing or renting contract
An item of property, plant and equipment and any significant part initially recognized is derecognized upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the statement of income when the asset is derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and
adjusted prospectively, if appropriate.
F-7.13
Buildings
Useful life
Page
Category
Notes
Leases
Assets held under finance lease, which provide the Group with substantially all the risks and rewards of
ownership, are recognized as assets and liabilities at their fair value or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between the finance expense and the reduction of
the outstanding liability; the finance expense is allocated to periods during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. Assets held under
finance lease are depreciated over the shorter period represented by their useful lives or the duration of the
relevant contracts.
Leases where the lessor retains substantially all the risks and rewards of ownership of the assets are classified as
operating leases. Operating lease expenditures are charged to the statement of income over the lease term.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the
respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the borrowing of funds.
The Group capitalizes borrowing costs for all eligible assets where construction was commenced on or after
January 1st, 2010. The Rottapharm Group's policy considers a significant decline to be one in which the fair value
is below the weighted-average cost by more than 20% and a prolonged decline to be one in which fair value is
below the weighted-average cost for a period longer than twelve months.
Intangible assets
An intangible asset is recognized if it is probable that the expected future economic benefits attributable to the
asset will flow to the entity and the cost of the asset can be measured reliably. Intangible assets are measured at
cost, including all direct attributable costs relating to their acquisition or their utilization. Intangible assets
acquired in a business combination are measured at fair value at the acquisition date. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated
impairment losses.
All intangible assets have either definite or indefinite useful lives. Intangible assets with definite useful lives are
amortized on a systematic basis reflecting the pattern of use over their estimated useful life; where the patter of
use cannot be determined reliably, a straight line basis is used. The amortization period and method is reviewed
at least once at each financial year end, or more frequently if necessary. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are accounted for by
changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
The carrying value of assets with definite useful lives is reviewed for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable. Impairment losses are reversed in case of
changes in circumstances that determined the initial impairment.
 Research and development costs
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
its intention to complete and its ability to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the asset; and
the ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the
asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization
of the asset begins when development is complete and the asset is available for use. It is amortized over the
period of expected future benefit. Amortization is recorded in cost of sales. During the period of development,
the asset is tested for impairment annually.
Page
−
−
−
−
−
F-7.14
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as
an intangible asset when the Group can demonstrate:
Notes
 Other intangible assets
A summary of the policies applied to the main Group’s other intangible assets is as follows:
Licenses


Useful life of 4-15 years;
Depreciated on a straight line basis, the shortest of:
o
life of the contract;
o
expected period of utilization.

Acquired.

Tested for impairment if indicators of impairment exist.

The license refers to the approval granted by the relevant authority in a country allowing the Group to sell the product in that
particular country.
Trademarks

Useful life of 5-20 years, except certain trade marks in the Spanish entities with indefinite life;

Depreciated on a straight line basis, the shortest of:
o
life of the contract;
o
expected period of utilization.

Acquired.

Definite-live trademarks tested for impairment if indicators of impairment exist; indefinite-live trademarks tested annually for
impairment or more frequently if indicators of impairment exist

The trademark refers to the legal name of the product which is registered with the relevant authority in a country in which the
licensed product is sold.
Page
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. Impairment testing involves comparing the carrying amount of each cash-generating unit
or item of intangible assets, property, plant or equipment to the recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use
and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair
value indicators.
If a CGU is found to be impaired, an impairment loss is first recognized on any goodwill allocated to it. Any
remaining impairment amount is then allocated among the other assets of the CGU and pro-rated impairment
losses are recognized on the carrying amounts of these assets.
Impairment losses of continuing operations are recognized in the statement of income in those expense
categories consistent with the function of the impaired asset, except for property previously revalued where the
revaluation was taken to other comprehensive income. In this case, the impairment is also recognized in other
comprehensive income up to the amount of any previous revaluation.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication
that previously recognized impairment losses may no longer exist or may have decreased. If such indication
exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized
impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s
recoverable amount since the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in the statement of income unless the asset is
carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
The following criteria are also applied in assessing impairment of specific assets:
F-7.15
Impairment of non-financial assets
Notes
Business combination and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any
non-controlling interest in the acquiree. For each business combination, the acquirer measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable
net assets. Acquisition costs incurred are expensed.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by
the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit and loss.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or
liability, will be recognized in accordance with IAS 39 either in the statement of income or as change to other
comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured until it is
finally settled within shareholders’ equity.
Goodwill is initially measured at cost being the excess of the consideration transferred over the Group’s net
identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net
assets of the subsidiary acquired, the difference is recognized in the statement of income. After initial
recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured
based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
Intangible assets with indefinite useful lives
Intangible assets with indefinite useful lives are tested for impairment annually as of December, 31 either
individually or at the cash generating unit level, as appropriate and when circumstances indicate that the
carrying value may be impaired.
Inventories
Inventories are valued at the lower of the purchase or manufacturing cost and net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business, less costs of completion and estimated
selling costs. The cost model used for inventories is the weighted average cost method. Inventories include
estimated manufacturing costs of sales returns expected to be received in future years, calculated by deducting
the average profit from the original sale price.
Page
Provisions for risks and charges are recognized when the Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract,
the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision for risks and charges is presented in the statement of income net of any
reimbursement.
If the effect of the time value of money is material, provisions for risks and charges are discounted using a
current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognized as a borrowing cost.
F-7.16
Provisions for risks and charges
Notes
Treasury shares
Own equity instruments which are reacquired (treasury shares) are recognised at cost and deducted from
shareholders’ equity. No gain or loss is recognised in the statement of income on the purchase, sale, issue or
cancellation of the Group’s treasury shares. Any difference between the carrying amount and the consideration,
if reissued, is recognised in share premium. Voting rights related to treasury shares are nullified for the Group
and no dividends are allocated to them respectively. Share options exercised during the reporting period, if any,
are satisfied with treasury shares.
Estimates and assumptions
The preparation of consolidated financial statements and related notes in accordance with IFRS requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ
from those estimates. Estimates are used in the following areas:
 Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell
calculation is based on available data from binding sales transactions in an arm’s length transaction of similar
assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation
is based on a discounted cash flow model, which implies to estimate future cash flows.
Estimating the future net cash flows involves making assumptions, especially regarding sales and costs. The
forecast of these items have been based for each CGU on the 2013 budget and on the projections for the two or
four following years of the plan (2014- 2015 or 2014-2017 depending on the cases as described above). These
forecasts have been determined using a bottom-up approach from local managements to senior management
and on the basis of the expected efficiency improvements in such CGUs which have started these processes. The
approach used by management in determining the value assigned to these assumptions reflects the past
experience and, in relation to the estimated sales, considers also some external sources of information coming
from independent market analysts. In approving at the final stage these forecasts, the senior management has
ensured that the cash flow projections are consistent with past and actual outcomes by examining the causes of
differences between past cash flow projections and actual cash flows. The cash flows do not include
restructuring activities that the Group is not yet committed to or significant future investments that will enhance
the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the
discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth
rate used for extrapolation purposes.
 Current and Deferred tax assets
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the
amount and timing of future taxable income. Differences arising between the actual results and the assumptions
made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense
already recorded. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilised. Significant management judgment is
required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and
the level of future taxable profits together with future tax planning strategies.
Page
Development costs are recognized if it is probable that the expected future economic benefits attributable to the
asset will flow to the entity and the cost of the asset can be measured reliably. Initial capitalisation of costs is
based on management’s judgment that technological and economic feasibility is confirmed, usually when a
product development project has reached a defined milestone according to an established project management
model. In determining the amounts to be capitalised, management makes assumptions regarding the expected
future asset’s cash flows, the discount rate to apply and the timing of the expected benefits.
F-7.17
 Development costs
Notes
 Termination indemnities
The cost of termination indemnities, defined benefit pension plans and other post employment benefits are
determined using actuarial valuations. An actuarial valuation involves making various assumptions. These
include the determination of the discount rate, future salary increases, mortality rates and future pension
increases. Due to the complexity of the valuation, the underlying assumptions and its long term nature, a defined
benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date.
 Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in the statement of financial position
cannot be derived from active markets, their fair value is determined using valuation techniques including the
discounted cash flow model. The inputs to these models are taken from observable markets where possible, but
where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include
considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these
factors could affect the reported fair value of financial instruments.
 Other areas
Estimates are also used to measure accounting for allowances of doubtful account receivables, obsolete and
slow-moving inventories and depreciation, amortization and asset impairment of property, plant and equipment
assets.
Estimates and assumptions are reviewed periodically and the effects of any changes are reflected immediately in
the statement of income.
4.
Changes in accounting policies disclosures and reclassifications
New standards, interpretations and amendments thereof, adopted by the Group
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with
those followed in the preparation of the previous Group’s annual financial statements for the year ended
December 31, 2011, except for the following amendments to IFRS effective as of 1 January 2012, and
summarized below. However these amendment to IFRS did not impact on the accounting policies, financial
position or performance of the Group:
As of January 1st, 2011
No adjustment to shareholders’ equity
Page
- IAS 19 Employee Benefits (Revised)
The IASB issued several amendments to IAS 19, whose some changes are significant such as removing the
corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording.
The amendment would have become effective for annual periods beginning on or after 1 January 2013, but the
Group decided to early adopt the IAS 19 Employee Benefits (Revised). The main effect of this early adoption was
to recognize actuarial gains and losses in other comprehensive income, instead of being fully recognized in the
statement of income, in the line item “Costs for personnel”, as previously done.
As a result of this early adoption, the following effects were represented to the financial statements:
F-7.18
- IFRS 7 Financial Instruments: Disclosures — Enhanced Derecognition Disclosure Requirements
The amendment requires additional disclosure about financial assets that have been transferred but not
derecognized to enable the user of the Group’s financial statements to understand the relationship with those
assets that have not been derecognized and their associated liabilities. In addition, the amendment requires
disclosures about the entity’s continuing involvement in derecognized assets to enable the users to evaluate the
nature of, and risks associated with, such involvement. The amendment is effective for annual periods beginning
on or after 1 July 2011. The Group does not have any assets with these characteristics so there has
been no effect on the presentation of its financial statements.
Notes
As of and for the year ended December 31, 2011:
Net income recognized in “Other comprehensive income for the year, net of taxes”:
 Euro 3,788 thousands (of which Euro 1,785 thousand of deferred taxation)
 net increase in “Costs of personnel”: Euro 5,573 thousands
 net increase in “Income taxes”: Euro 1,785 thousands
 net decrease in “Net profit”: Euro 3,788 thousands
As of and for the year ended December 31, 2012:
Net losses recognized in “Other comprehensive income for the year, net of tax”:
 Euro 11,651 thousands (of which Euro 5,577 thousands deferred taxation)
 net decrease in “Costs of personnel”: Euro 17,228 thousands
 net decrease in “Income taxes”: Euro 5,577 thousands
 net increase in “Net profit”: Euro 11,651 thousands
As presented above, the Group didn’t present a statement of financial position as at the beginning of the earliest
comparative period (i.e. January 1st, 2011) since this early adoption only affects the comparative amounts within
the statement of comprehensive income, and as a consequence there are no changes in the amounts included in
the comparative statement of financial position, or the notes thereto.
Standards issued but not yet effective
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements are disclosed below.
IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1
The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items
that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, net gain on hedge
of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges
and net loss or gain on available-for-sale financial assets) would be presented separately from items that will
never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and
buildings). The amendment affects presentation only and has no impact on the Group’s financial position or
performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012, and will
therefore be applied in the Group’s first annual report after becoming effective.
IAS 12 Income Taxes (Amendment) – Deferred Taxes: Recovery of Underlying Assets
The amendment clarified the determination of deferred tax on investment property measured at fair value and
introduces a rebuttable presumption that deferred tax on investment property measured using the fair value
model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. It
includes the requirement that deferred tax on non-depreciable assets that are measured using the revaluation
model in IAS 16 should always be measured on a sale basis. The amendment is effective for annual periods
beginning on or after 1 January 2012 and has been no effect on the Group’s financial position, performance or its
disclosures.
Page
IAS 32 Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32
These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments
also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house
systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not
expected to impact the Group’s financial position or performance and become effective for annual periods
beginning on or after 1 January 2014.
F-7.19
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS
28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes
the application of the equity method to investments in joint ventures in addition to associates. The revised
standard becomes effective for annual periods beginning on or after 1 January 2014.
Notes
IFRS 1 Government Loans – Amendments to IFRS 1
These amendments require first-time adopters to apply the requirements of IAS 20 Accounting for Government
Grants and Disclosure of Government Assistance, prospectively to government loans existing at the date of
transition to IFRS. Entities may choose to apply the requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20
to government loans retrospectively if the information needed to do so had been obtained at the time of initially
accounting for that loan. The exception would give first-time adopters relief from retrospective measurement of
government loans with a below-market rate of interest. The amendment is effective for annual periods on or
after 1 January 2013. The amendment has no impact on the Group.
IFRS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) – Severe
Hyperinflation and Removal of Fixed Dates for First-Time Adopters
The IASB provided guidance on how an entity should resume presenting IFRS financial statements when its
functional currency ceases to be subject to hyperinflation. The amendment is effective for annual periods
beginning on or after 1 July 2011. The amendment had no impact to the Group.
IFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities — Amendments to IFRS 7
These amendments require an entity to disclose information about rights to set-off and related arrangements
(e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating
the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all
recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation.
The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting
arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These
amendments will not impact the Group’s financial position or performance and become effective for annual
periods beginning on or after 1 January 2013.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to
classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was
initially effective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9
Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory
effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment
of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and
measurement of the Group’s financial assets, but will not have an impact on classification and measurements of
financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final
standard including all phases is issued.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial
Page
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary
Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using
proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for
under the equity method. . This standard becomes effective for annual periods beginning on or after 1 January
2014.The application of this new standard will not impact the financial position of the Group since there’s no
joint ventures held by the Group.
F-7.20
IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the
accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation —
Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The
changes introduced by IFRS 10 will require management to exercise significant judgement to determine which
entities are controlled and therefore are required to be consolidated by a parent, compared with the
requirements that were in IAS 27. Based on the preliminary analyses performed, IFRS 10 is not expected to have
any impact on the currently held investments of the Group. This standard becomes effective for annual periods
beginning on or after 1 January 2014.
Notes
statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures
relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of
new disclosures are also required, but has no impact on the Group’s financial position or performance. This
standard becomes effective for annual periods beginning on or after 1 January 2014.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not
change when an entity is required to use fair value, but rather provides guidance on how to measure fair value
under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this
standard will have on the financial position and performance, but based on the preliminary analyses, no material
impact is expected. This standard becomes effective for annual periods beginning on or after 1 January 2013.
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the
production phase of the mine. The interpretation addresses the accounting for the benefit from the stripping
activity. The interpretation is effective for annual periods beginning on or after 1 January 2013. The new
interpretation will not have an impact on the Group.
Annual Improvements May 2012
These improvements will not have an impact on the Group, but include:
IFRS 1 First-time Adoption of International Financial Reporting Standards
This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required, to
apply IFRS, has the option to re-apply IFRS 1. If IFRS 1 is not re-applied, an entity must retrospectively restate its
financial statements as if it had never stopped applying IFRS.
IAS 1 Presentation of Financial Statements
This improvement clarifies the difference between voluntary additional comparative information and the
minimum required comparative information. Generally, the minimum required comparative information is the
previous period.
IAS 16 Property Plant and Equipment
This improvement clarifies that major spare parts and servicing equipment that meet the definition of property,
plant and equipment are not inventory.
IAS 32 Financial Instruments, Presentation
This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in
accordance with IAS 12 Income Taxes.
IAS 34 Interim Financial Reporting
The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in
interim financial statements. This clarification also ensures that interim disclosures are aligned with annual
disclosures. These improvements are effective for annual periods beginning on or after 1 January 2013.
Except for those described below, the Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective..
Such reclassifications have been booked to better reflect the presentation of the statement of financial position
according to IFRS. The Group has not presented a statement of financial position as at the beginning of the
earliest comparative period since considered this information as not material.
Page
The statement of financial position of the consolidated financial statements as of December 31, 2012 includes
reclassification on prior year audited financial statements. The main effects on the comparative figures as of
December 31, 2011 are represented below:
- Reclassification from other liabilities to long term provision for taxation, for interest due on the tax
assessment carried on Madaus holding Gmbh (Germany) of Euro 591;
F-7.21
Change in accounting policies
Page
F-7.22
Notes
Notes
5.
The following table shows the historical cost, the accumulated depreciation and the carrying amount value of
property, plant and equipment as of December 31, 2012 and 2011:
Carryin
Historical
Accumulated
g
Cost
Depreciation amount
Lands
Buildings
Plants & machineries
Equipment
Other assets
Working in progress and Advance payments
Total
5,970
30,421
125,287
11,654
42,002
2,938
218,272
(12,040)
(79,327)
(10,168)
(23,234)
(124,769)
5,970
18,381
45,960
1,486
18,768
2,938
93,503
Carryin
Historical
Accumulated
g
Cost
Depreciation amount
5,970
30,171
122,260
11,856
32,474
5,393
208,123
(10,935)
(76,113)
(10,226)
(20,588)
(117,862)
5,970
19,236
46,147
1,630
11,886
5,393
90,262
The following table shows the movements in property, plant and equipment during the year ended December 31,
2012:
Translation difference
Additions
Disposals
Depreciation
Reclassifications
Plants and
Other
Lands
Buildings
machineries
Equipment
assets
5,970
19,236
46,147
1,630
11,886
(4)
(100)
(17)
258
4,089
361
2,909
(154)
(7)
70
(1,056)
(6,445)
(477)
(3,188)
(53)
2,423
(21)
7,108
5,970
18,381
45,960
1,486
18,768
Work in
progress
and
Advance
payments Total
5,393
90,262
(121)
7,067
14,684
(10)
(101)
(11,166)
(9,512)
(55)
2,938
93,503
Page
F-7.23
The main changes incurred during the year are related to:
- additions in Plant and machineries for Euro 4.1 million, mainly related to (i) the improvement on the
Italian plant of Confienza and on the new laboratories in Monza for Euro 1.4 million, (ii) the improvement
on the Euromed plant for Euro 0.6 thousands and (iii) the improvement to the plant in Germany for Euro 1
million (mainly related to the fluid granulator Euro 0.6 million);
- additions in Other assets for Euro 2.9 million, mainly referred to (i) the improvement of third party
building related to the investment in Confienza factory and new laboratories in Monza for a total amount of
Euro 1.8 million; and (ii) the IT investments of the Irish subsidiary Rottapharm Ltd for Euro 0.4 million;
- Reclassification from Work in Progress to Plants and machineries for Euro 2.4 million related mainly to the
completion of the new dryer and the new atomizer of Euromed Spain (Euro 1.9 million) and for Euro 0.5
million to the the fluid bed Granulator of the German subsidiary Madaus Gmbh;
- Reclassification from Work in Progress to Other assets for Euro 7.1 million for the completion of the new
R&D laboratories in Monza; and
- Additions in Work in Progress for Euro 7.1 million, mainly related to the improvement on the Italian plant
and laboratories, whose the most part has been reclassified during the year in the related category due to
the completion of the installation.
Notes
The following table shows the movements in property, plant and equipment during the year ended December 31,
2011:
Additions
Disposals
Depreciation
IFRS 5
Others
6.
Plants and
Other
Lands
Buildings
machineries Equipment assets
6,276
23,784
48,349
1,797
11,082
7
(376)
(51)
266
4,372
320
3,650
(1,088)
(6,766)
(470)
(2,795)
(306)
(3,733)
568
17
5,970
19,236
46,147
1,630
11,886
Work in
progress
and
Advance
payments Totale
3,261
94,549
(3)
(423)
3,867
12,475
(1,145)
(1,145)
(11,119)
(4,039)
(587)
(36)
5,393
90,262
Goodwill
The following table sets forth the carrying amount of Goodwill and its allocation to the respective cash
generating units (“CGU”) as of December 31, 2012 and 2011:
As of
December 31,
2011
102,460
185,008
12,967
137,821
24,799
18,083
24,910
5,933
3,701
226
1,700
1,500
90
519,198
F-7.24
CGU Italy
CGU Germany
CGU Portugal
CGU Spain
CGU Euromed
CGU Austria
CGU Belgium
CGU France
CGU Poland
CGU Luxembourg
CGU Grecia
CGU Thailandia
Other minor CGus
Total
As of
December 31,
2012
102,460
185,008
12,563
122,206
24,799
18,083
24,910
5,933
3,701
226
1,700
1,500
90
503,179
Page
Book value of consolidated goodwill
Notes
Considering the definition of cash-generating unit, which is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets,
Rottapharm Group regards its legal entities within the same country as cash-generating units (except for Spain)
and subjects them to global impairment testing.
The criterion followed for the allocation of goodwill considers the lowest level at which goodwill is monitored for
internal management purposes and is consistent with the reportable operating segments disclosed.
Goodwill mainly refers to the amount in excess of the cost of acquisition over the Group’s interest in the fair
value of the assets and liabilities acquired through various acquisitions occurred in the previous years. In
particular:

related to the acquisition of Laboratori Guieu in 1999 (starting from 2000 merged in Rottapharm S.p.A.), a
goodwill of Euro 9.5 millions is booked;

related to the acquisition of Biochimici PSN in 2005 (starting from 2006 merged in Rottapharm S.p.A.), a
goodwill of Euro 9.9 millions is booked;

related to the acquisition of Madaus Group in 2007, a goodwill of Euro 452.9 millions, net of current and
previous year’s impairment loss for Euro 22.8 million, is booked; and

a goodwill for euro 25.9 million has been recognized in 2007 in relation to the merger of Landinvest S.r.l. in
Rottapharm S.p.A..
IAS 36 requires assessing goodwill to an annual impairment test to determine its carrying amount,
comparing the latter to its recoverable amount.
The recoverable amount is the higher of the fair value less cost to sell and the value in use.
by
The impairment test of the recoverable amount of the goodwill performed required to recognize impairment of
the carrying amount of the CGU Rottapharm Spain for Euro 15.6 million and of the CGU Portugal for Euro 0.4
million. As of December 31, 2011, the CGU Portugal was already impaired for Euro 6.8 million. For additional
disclosure on the impairment test performed refer to note 8.
7.
Intangible assets
The following table shows the historical cost, the accumulated depreciation and the carrying amount of
intangible assets with definite useful lives as of December 31, 2012 and 2011:
13,163
(13,163)
-
-
14,676
(14,191)
-
485
125,095
8,039
(62,847)
(7,644)
(2,931)
(102)
59,317
293
115,576
8,121
(55,407)
(7,718)
(2,931)
-
57,238
403
496
-
-
496
224
-
-
224
146,793
(83,654)
(3,033)
60,106
138,595
(77,315)
(2,931)
58,349
28,123
174,916
(16,504)
(100,158)
(8,481)
(11,514)
3,138
63,244
28,124
166,721
(16,504)
(93,819)
(8,269)
(11,200)
3,351
61,701
Page
Development costs
Licenses and Trademarks with
definite useful life
Other intangible assets
Work in progress and
Advance payments
Total intangible assets with
definite useful life
Licenses and Trademarks with
indefinite useful life
Total intangible assets
F-7.25
Historical Accumulated Accumulat. Carrying Historical Accumulated
Accumul. Carrying
Cost depreciation Impairment amount
Cost depreciation Impairment amount
Notes
The following table shows the movements in Intangible assets with a definite useful life during the year ended
December 31, 2012:
Additions
Disposals
Depreciation
Impairment (release of
impairment)
Others
As of December 31,
2012
Development costs
485
(485)
Licenses
and
Trademarks
with
Other
definite
intangible
useful life
assets
57,238
403
(7)
9,341
199
(7,355)
(207)
Work in
progress
and
Advance
payments
224
452
(80)
-
Total
intangible
assets with
definite
useful life
58,349
(7)
9,992
(80)
(8,047)
Trademarks
with
indefinite
useful lives Total
3,351
61,701
(7)
9,992
(80)
(8,047)
-
100
(102)
-
(100)
(102)
-
(213)
-
(315)
-
-
59,317
293
496
60,106
3,138
63,244
As of December 31, 2012 the main addition is related to the trademark with definite useful life due to the
purchase in Italy of the products Antalfebal (Euro 3.4 million), Ditreol (Euro 2.2 million), Terafluss (Euro 1.6
million) and to the down-payment for the rights of the use of Ialumar product (Euro 0.2 million). In addition the
Portuguese subsidiary increased the value of Alipza (Pitavastatine) due to a down-payment for Euro 0.5 million.
The following table shows the movements in Intangible assets during the year ended December 31, 2011:
Additions
Disposals
Depreciation
Impairment
Other
Development
costs
787
(302)
485
Licenses and
Trademarks
with definite
useful life
63,653
2,998
(7,429)
(1,048)
(936)
57,238
Other
intangible
assets
469
151
(220)
3
403
Work in
progress
and
Advance
payments
200
224
(200)
224
Total
intangible
assets with
definite
useful life
65,109
3,373
(8,151)
(1,048)
(933)
58,350
Trademarks
with
indefinite
useful life
3,414
(836)
773
3,351
Total
68,523
3,373
(8,151)
(1,884)
(160)
61,701
Commercial licences
Trademarks purchased
Other
Licenses and Trademarks with definite useful
life
59,317
57,238
The item mainly includes:
 the trademarks owned by Rottapharm S.p.A., amounting to Euro 52.5 million as of December 31, 2012 (Euro
50.3 million as of December 31, 2011), mainly referred to Biomineral, Aftir, Carovit and Biothymus;

the licenses in Germany amounting to Euro 1.9 million, mainly related to the products Salviagalen and
Salviathymol, (2.6 million as of December 31, 2011); and

the licenses in Portugal amounting to Euro 2.3 million, mainly related to Alipza and Oliflox.
At year end, the Group has assessed whether any indications of impairment of the intangible assets with a
definite useful life existed, considering whether occurred significant changes in the use of the asset and in the
Page
2,141
56,876
300
As of
December 31,
2011
2,843
54,092
302
As of
December 31, 2012
F-7.26
As of December 31, 2012 and 2011, Licenses and Trademarks with definite useful life amounting respectively to
Euro 59,317 thousands and Euro 57,238 thousands, included the followings:
Notes
economic performance of the asset compared to estimated performance. From this analysis no impairment is
required.
Nonetheless, considering that the research activities carried on by Foldless S.r.l. have not reached the forecasted
results, management recognized an impairment on the patents owned by the company for a total amount of Euro
102 thousands.
In addition, the Group performed, as required by IFRS, an impairment test on the carrying amount of the
intangible assets with indefinite useful life, using the method described in the following paragraph. Due to this
test, the Group recorded in 2012 an impairment for Euro 213 thousands related to the trademarks Monocid and
Borea owned by Rottapharm S.L. (Spain). The net carrying amount as of December 31, 2012 is consequently
Euro 3.1 million.
8.
Impairment testing of Goodwill and intangibles with indefinite lives
Impairment tests are performed not only on individual items of intangible assets, property, plant and equipment,
but also at the level of cash-generating units.
For impairment testing purposes, goodwill acquired through business combinations and trademarks with
indefinite lives have been allocated to the cash-generating units detailed in Note 6, which are not at a level higher
than the operating segment determined in accordance with IFRS 8. In particular the trademarks with indefinite
lives have been allocated to the CGU Rottapharm Spain.
The recoverable amount of the CGUs has been determined based on a value in use calculation that considers the
present value of the future net cash flows. These are forecasted on the basis of the Rottapharm Group's current
business plans and approved by senior management. The business plan used by the group forecasts the cash
flows for three years, with the exception of Spain and Portugal (five years) since a longer period (in any case,
within the maximum period generally allowed by IAS 36) has been considered by the senior management as the
best estimate of economic conditions that will exist in these CGUs over the remaining period beyond that
covered by the budgets and plans. As a result of the analysis comparing the carrying amounts of the CGUs with
their recoverable amounts, management has recognized an impairment charge on Goodwill relating to CGUs
Spain and Portugal, recorded within the item “Depreciation, amortization and write down (reversal) of noncurrent assets” in the statement of income, for the amounts of Euro 15.6 and 0.4 million respectively. These CGUs
are included in the relevant segment reporting, identified on the basis of the geographical area.
As described above, an additional impairment charge of Euro 0.2 million has been recognized against the value of
the intangible assets with definitive and with indefinite lives, which is recorded within the item “Depreciation,
amortization and write down (reversal) of non-current assets” in the statement of income. Please refer to note 7
for further details.
Key assumptions used in value-in-use calculations
Discount rate – The net cash inflows are discounted at a rate equivalent to the weighted average cost of equity
and debt capital (WACC), which reflects the current market assessment of the risks specific to the Group
considered as a whole. The WACC calculation is based on the specific circumstances and business model of the
Page
Operating profit before the amortization and write-downs/reversal of intangible assets – Please refer to
note 3 for further details.
F-7.27
The calculation of the value in use for the CGU is sensitive to the following assumptions:
Notes
Group and is derived from the average of the WACC calculations for each CGUs, weighted considering the
incidence of the CGUs’ margins over the group margin. This calculation leads to a WACC of 7.7% for the current
analysis. The WACC calculation takes into account both debt and equity, determined on a group basis. The cost of
equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on
the interest bearing borrowings the Group is obliged to service. The capital structure is defined by benchmarking
against comparable companies in the same industry sector. Segment-specific risk is incorporated by applying
individual beta factors. The beta factors are evaluated annually based on publicly available marked data.
Growth rate estimate – Net cash flows beyond the planning period are determined on the basis of long-term
business expectations, considering the business maturity of the CGUs and their incidence on the results of the
group. The senior management has defined a group basis growth rate derived from market information, whose
determination is consistent with the assumptions used in the business planning. Rate is 1.5% in line with the
previous impairment test since below both long-term European average inflation rate and industry growth rate
expectations.
Sensitivity to changes in assumptions
Although the estimates of the assumptions concerning the macroeconomic environment and developments in
the industries in which the Group operates and the estimates of the discounted future cash flows are believed to
be appropriate, changes in assumptions or circumstances could require changes in the analysis. This could lead
to additional impairment losses in the future or – except in the case of goodwill – to reversals of previously
recognized impairment losses if developments are contrary to expectations.
With regard to the assessment of value-in-use of the cash generating units, management verified that the
changes that could possibly occur are in the operating profit before the amortization and write-downs/reversal
of intangible assets (that could be negatively impacted by additional price-cuts from the governments or by
missing completion of the efficiency improvements), in the calculation of the WACC and in the growth rate
estimate (depending on general economic trend). A sensitivity analysis of the results considering changes of
these key assumptions was carried out for the individual cash-generating units, in order to verify if the carrying
value of the units could exceed its recoverable amount.
The sensitivity analysis for cash generating units to which goodwill is allocated was based on a increase in the
weighted average cost of capital for 100 basis points (up to 8,7%), on a reduction of the growth rate estimate up
to 0,75% and on a reduction of the incidence of the operating profit before the amortization and writedowns/reversal of intangible assets over the net revenue for 1%/2% in all the other CGUs. These changes up to
this magnitude have been considered by the senior management as reasonably possible, especially in the long
term, in case of adverse conditions.
Rottapharm Spain
Portugal
WACC
8,7%
Operating profit before the
amortization and writedowns/reversal of
intangible assets-2%
(34.3)
(26.4)
(19.9)
(26.2)
(4.1)
(2.4)
(1.5)
(7.3)
Page
CGUs
Amount in Euro million
Operating profit before the
amortization and writedowns/reversal of intangible
g rate 0,75%
assets-1%
F-7.28
Based on this sensitivity analysis, for all the CGUs different from Spain and Portugal, the value in use remains
higher than the carrying amounts even assuming the above increases. For CGU Spain and Portugal, in case of
sensitivities the additional impairment losses with respect to those already booked for in the consolidated
financial statements are detailed below::
Notes
9.
Investments in associates
The following table shows the details of Investments in associates as of December 31, 2012 and 2011:
13,108
13,108
RRL Immobiliare S.p.A.
Investments in Associates
13,190
13,190
Investments in associates are accounted for under the equity method.
The associate operates in the real estate industry and its main assets are:

the buildings in Confienza where the production activities of Rottapharm S.p.A. are located;

the buildings in Monza where Rottapharm S.p.A. has its headquarter and R&D activities;

the buildings in Monza where Rottapharm S.p.A. has its headquarter and R&D activities; and

certain buildings in the city centre of Monza, in Paris and in London held as investment properties.
The following table summarizes the financial information of the Group’s investment in RRL Immobiliare S.p.A.:
As of
December 31,
2012
47.86%
4,783
344
64,732
35,568
29,164
13,108
165
(in thousand of Euro)
% owned by the Group
Revenue
Net result
Assets
Liabilities
Equity
Carrying amount in Consolidated Financial Statements
Share of profit
As of
December 31,
2011
47.86%
4,357
339
62,751
33,930
28,820
13,190
162
10. Other non-current financial assets
The following table shows the details of other non-current financial assets as of December 31, 2012 and 2011:
Deposits for cautions
Derivative instruments
Other financial assets
Other non-current financial assets
815
367
754
1,936
839
886
1,725
Deposit for cautions include Euro 565 thousands related to deposits given by Rottapharm S.p.A. to RRL
immobiliare S.p.A. for the rental agreements.
Derivative instruments are related to the carrying values of the embedded derivative amounted to Euro 367
thousands described in the Note 20.
Page
F-7.29
Other financial assets are related to long term government bond owned by Madaus Gmbh (Austria).
Notes
11. Inventories
The following table shows the breakdown of inventories as of December 31, 2012 and December 31, 2011:
Raw materials
Work in progress
Finished products
Goods
Advance payments to material suppliers
Inventories
35,682
6,574
37,165
9,960
211
89,592
32,220
9,131
34,517
12,237
1,870
89,975
Inventories are stated net of the allowance for obsolescence, calculated for those materials that cannot be
utilized anymore in the manufacturing or sold anymore and for slow moving inventories. The obsolescence
allowance, as of December 31, 2012 and 2011 amounted to Euro 5.3 million and Euro 4.8 million, respectively.
The advance payments to material suppliers represent the payments made in advance by the subsidiary
Euromed S.A. to suppliers for the purchase of the raw material Cardo Mariano.
The following table sets forth the changes in obsolescence reserve during the year December 31, 2012 and 2011:
Raw
materials,
supplies and
consumables
Utilization
Releases
Accrual
As of December 31,
2011
Utilizations
Releases
Accrual
As of December 31,
2012
1,574
Work-inprogress
and
unfinished
products
1,092
(1,223)
Finished
product
and
goods
Total
Obsole
scence
2,880
5,546
(1,616)
(2,839)
(1,182)
(1,057)
(125)
832
543
1,892
3,267
1,183
578
3,031
4,792
(144)
(76)
(949)
(1,169)
(549)
(130)
(158)
(837)
28
22
2,477
2,527
518
394
4,401
5,313
12. Trade receivable
The following table shows the details of trade receivables as of December 31, 2012 and 2011:
Trade receivables
Invoices to be issued
Credit notes to be issued
Trade receivables
155,430
87
(223)
155,294
120,684
20
(4)
120,700
Page
F-7.30
The trade receivables are reported net of Euro 4.2 million allowance for doubtful accounts.
Notes
The following table shows the changes in allowance for doubtful accounts during the years ended December 31,
2012 and December 31, 2011:
2,373
Utilization
Releases
Accrual
(823)
(527)
488
1,511
Utilization
Releases
Accrual
(950)
(2)
3,670
4,229
Accruals are made for specific identified credit positions with particular risks. Amounts accrued in respect of
other receivables are made on the basis of the average estimated un-collectability. The accrual for doubtful
accounts of the year ended December 31, 2012 takes into account both the assessments of credit risks on
customers as a result of the recent change in the macroeconomic scenario and the recovery actions undertaken
to collect receivables. . In particular, in certain countries the Group sold trade receivables to factoring companies,
and the related accounting treatment is in accordance with the requirements of IAS 39.
13. Current tax receivables
The following table shows the details of income tax receivables as of December 31, 2012 and 2011:
Tax receivables
Tax receivables to be reimbursed
As ofDecember 31, 2011
3,528
160
3,688
2,201
498
2,699
Tax receivables to be reimbursed include Euro 1.2 million related to the tax reimbursement disclosed at Note 34.
14. Other current assets
As of
December 31,
2011
2,424
21,754
3,846
28,024
1,681
14,799
3,152
19,632
The item “Other receivables” mainly includes:
- advance payments to suppliers (Euro 1.9 million);
- receivables from Far-East distributors of Rottapharm S.p.A. for Euro 12.6 million;
- receivables from MEF (Ministry of Economy and Finance) for AIFA agreement of Euro 1.3 million;
- advances to distributors in Russia and Cina for promotional expense (Euro 0.7 million)
- royalties to be received by German companies for Euro 2.0 million.
The increase is related mainly to the outstanding amounts receivables at the end of the year from Far-East
distributors.
Page
VAT and other tax receivables
Other receivables
Other assets
Other current assets
As of December 31,
2012
F-7.31
The following table shows the details of other current assets as of December 31, 2012 and 2011:
Notes
Other receivables are mainly related to non financial accrued income and prepaid expense.
15. Financial receivables from parent company
Financial receivables from parent company (Fidim S,r.l.) amounts to Euro 237.4 million (Euro 215.6 million as of
December 31, 2011). ). These receivables are mainly for the purpose of funding a portion of Fidim S.r.l.’s
investments in renewable energy businesses, including GWM Renewable Energy I S.p.A..
The increase of the outstanding receivable with respect to the previous year is related to a new loan granted to
the parent and to the accrual of the interests for the year.
These financial receivables are interest-bearing (see note 34).
16. Other current financial assets
The following table shows the details of financial receivables as of December 31, 2012 and 2011:
Financial assets available for sale
Financial assets held to maturity
Accrued income and other receivables
Cash flow hedging instrument
Other current financial assets
As of December 31,
2012
As of December 31,
2011
3,333
366
145
11
3,855
102,669
265
181
96
103,211
The table below sets forth the movement of the financial assets available for sale for the year ended December
31, 2013 and 2012:
Beginning of the year
Net investment (disposal)
Unrealized gains (losses) recognized in the OCI
Realized gains (losses) recognized in the statement of income
End of the year
As of December 31,
2012
As of December 31,
2011
102,669
(101,546)
2,210
3,333
107,322
(1,392)
(3,891)
630
102,669
During the year ended December 31, 2012 the Group sold most of its financial assets available-for-sale,
recognizing in the statement of income of the year a gain of Euro 11.3 million, as reversal of the available for sale
reserve classified in the group shareholders’ equity (see also note 19).
Page
As of December 31, 2012, the Group holds two Greek-State Bonds Zero for a total amount of Euro 0.8 million,
collected against trade accounts receivables towards local hospitals. These financial assets, classified as Held-tomaturity investments, have been impaired for 0.4 million in the previous year due to the difficult outlook of the
Greek economy.
F-7.32
The Group assesses at each year end whether there is objective evidence that an investment or a group of
investments accounted for as financial assets available for sale have to be impaired. The objective evidence
would include a significant or prolonged decline in the fair value of the investment below its cost. In the current
year, no impairment has been booked by the Group.
Notes
17. Cash and cash equivalents
The following table shows the details of cash and cash equivalents as of December 31, 2012 and 2011:
Bank and postal deposits
Cash on hand
144,158
70
144,228
111,456
61
111,517
Bank deposits earn interest at floating rates based on daily bank deposit rates. The increase in cash is due to the
net effect of the net cash provided by operating activities for Euro 43.9 million, of the net cash provided by the
investing activities for Euro 60 million, mainly related to the sale of financial assets available for sale as
described above, and of the net cash used in the financing activities for Euro 71 million, including dividends paid
to the parent company Fidim S.r.l. for Euro 20 million.
18. Assets and liabilities classified as held for sale and discontinued operations
Due to the closing in the previous years of the Rottapharm S.L.’s facilities in Valencia (Spain) and the moving to
Barcelona, the Group decided to sell the own land and building in Valencia, where the Company’s offices were
located before the moving. The net carrying amount of these assets (euro 572) were not written-off since their
fair value were higher than their carrying amount. According to the current situation of the real estate market in
Spain, these assets are still pending to be sold, but the local management is continuing to perform an active
research in order to sell these properties, marketed at a price that is reasonable given the changes occurred in
the market conditions and whose criteria regarding their highly probable availability for immediate sale are
therefore met. Based also on the analysis of the independent external advisor who are following the selling
process, their fair value, that is their market value to be realized through the sale, is considered higher than their
carrying amount also as of December 31, 2012.
The following is the detail of the net carrying amounts of the Portuguese and German buildings as of December
31, 2012:
Lands
Buildings
Massamà (Portugal)
Lands
Buildings
Wiehl (Germany)
Historical Cost
26
2,702
2,728
279
7,734
8,013
Accumulated Depreciation
(1,651)
(1,651)
(5,051)
(5,051)
Carrying amount
26
1,051
1,077
279
2,683
2,962
Action and negotiation are currently carried on in order to sell those buildings. Based on the evaluations or
appraisals obtained by the management, their fair value results higher than their carrying amount as of
December 31, 2012.
Page
Issued capital consists of 14,198 shares at nominal value of euro 516.46 each, for a total of euro 7,333 thousands
fully paid up. The Group is directly controlled by Fidim S.r.l.. The numbers and the category of the shares are
unchanged during the year ended at December 31, 2012 and 2011.
F-7.33
19. Issued Capital and reserves
Notes
As a result of the reverse merger of Pharma Ventures S.r.l. and Landinvest S.r.l. into Rottapharm S.p.A. and on the
basis of the share swap ratio determined by Directors, Rottapharm S.p.A. owns 372 shares for a value of Euro
12,739 thousand.
The details of the other reserves in shareholders’ equity are as follows:
As of December 31,
2012
2011
Legal reserve
Foreign currency translation reserve
Available-for-sale reserve
Cash flow hedge reserve
Other reserves and retained earnings
1,467
(546)
238
(80)
520,056
1,467
(458)
8,134
490,829
Total
521,135
499,972
During the year, in connection with the issuance of the Senior Notes described at note 20, the Group paid
dividends to the parent company Fidim S.r.l. for an amount of Euro 20 million.
The “Available-for-sale reserve” includes the unrealized gains from the fair value adjustment relating to the
investments in investment portfolio. The movements of such reserve are as follows:
2012
Gains/(losses) arising during the year
Reclassification adjustments for
(gains)/losses included in the statement of income
Tax effects
Total net movement of available-for-sale reserve
2011
2,210
(3,891)
(11,331)
1,225
(11)
486
(7,896)
(3,416)
The Total net movement of available-for-sale reserve represents the line item “Net (loss)/gain on available-forsale financial assets” included in the Consolidated Statement of Comprehensive Income.
The foreign currency translation reserve is used to record exchange differences arising from the translation of
the financial statements of foreign subsidiaries.
Page
F-7.34
The “Other reserves and retained earnings” include the cumulative actuarial losses for Euro 16.1 million, gross of
tax effect (cumulative actuarial gains for Euro 1.1 million, gross of tax effect, as of December 31, 2011) related to
the defined benefit plans disclosed in Note 22. The cumulative tax effect on such amounts was for Euro 5.2
million positive as of December 31, 2012 (Euro 0.3 million negative as of December 31, 2011). The actuarial
losses of the year for Euro 17,2 million and the related positive tax effect of Euro 5,6 million have been booked in
the consolidated “Total comprehensive income, net of taxes” (respectively, actuarial gains for Euro 5.6 million
and negative tax effect of Euro 1.8 million in 2011).
Notes
20. Non-current and current financial liabilities
The following table shows the details of the current and non-current financial liabilities as of December 31, 2012
and 2011:
As of December 31,
of which
current portion
394,586
3,199
As of December 31,
of which
2011
current
portion
-
189,227
12,765
43
9,024
733
606,378
633,071
9,500
57
322
775
643,725
2012
Senior Notes
Loans from banks
Financial lease
Total financial liabilities
59,917
12,765
38
3,296
733
79,948
Less current portion
(79,948)
(309,649)
526,430
334,076
299,094
9,500
47
233
775
309,649
On November 14th, 2012, the Group has concluded an important restructuring of its indebtedness, which is
described below.
New revolving loan with Mediobanca
Rottapharm S.p.A. (Italy) entered into a revolving loan facility of Euro 100 million with Mediobanca – Banca di
credito finanziario S.p.A., to be repaid starting November 2013 in five yearly installments of 20 million. This loan
has semi-annual interests based on Euribor 6-month plus margin of 350 bps. The detail of the due date is as
follows:
Loan from MEDIOBANCA
As of December 31, 2012 (Unaudited)
Principal
2013
2014
2015
2016
Amount
100,000
20,000
20,000
20,000
20,000
2017
20,000
The carrying amount of the loan includes the impact of the amortization of the subscription costs paid for a total
amount of Euro 884 thousands.
The Covenants securing such loan relate to the group consolidated financial statements (EBITDA/net financial
expense) and have been met as of 31 December 2012.
The Group Management decided to hedge the interest rate risk and the variable cash flows of the loan,
converting them into fixed rate cash flows, subscribing an Interest Rate Swap agreement with the following
conditions:
The derivative entered into by the Group is classified as hedge accounting (cash flow hedge) and as such is
recorded at fair value in the consolidated financial statement and its change of fair value is recorded in the
consolidated Other comprehensive income as Cash flow hedge reserve for the effective part and in the
consolidated statement of income if there is an ineffective component. The fair value of this derivatives at the
inception date was negative for approximately Euro 8.7 million, while as of December 31, 2012 the negative fair
value was for Euro 8.9 million and has been recognized in the current and non current financial liabilities (as
F-7.35



Type of hedge: Cash Flow Hedge
Nominal amount: Euro 100 million amortizing (Euro 20 million/year with due date on November 14 of
each year till to 2017)
Fixed rate payer: 352bps act/360
Floating rate receive: Euribor six months act/360
Risk covered: Interest rate fluctuation
Page


Notes
disclosed in the table above). The increase in the negative fair value of the interest rate swap of Euro 110
thousand has been recognized in “Total comprehensive income”, net of tax effect for Euro 30 thousand.
Issue of Senior Notes
Rottapharm Ltd., the Irish subsidiary of the Group, issued Euro 400 million Senior Notes (here-in-after “the
Notes”) due November 15, 2019 bearing fixed interests at 6.125% payable semi-annually. The Notes have been
listed on the Official List of the Irish Stock Exchange and admitted to trading on the Global Exchange Market of
the Irish Stock Exchange in December 3, 2012.
The Group will pay interest on the Notes semiannually on each of May 15, and November 15, starting from May
15, 2013. The Bond is rated as Ba3 by Moody’s as of December 31, 2012.
In addition, the Notes are subjected to certain optional redemption from the Group, disclosed below.
A) Prior to November 15, 2015, the Group may redeem at its option up to 35% of the Notes with the net
proceeds from certain equity offerings at the redemption price equal to 106.125% of the principal amount of
the Notes redeemed, plus accrued and unpaid interest and additional amounts, if any, to the date of
redemption with the net cash proceeds of an equity offering; provided that:
a) at least 65% of the aggregate principal amount of the each of the Notes originally issued under the
Indenture (excluding Notes held by the parent undertaking Guarantor and its Subsidiaries) remains
outstanding immediately after the occurrence of such redemption; and
b) the redemption occurs within 90 days of the date of the closing of such Equity Offering.
B) At any time prior to November 15, 2015, the Group may on any one or more occasions redeem all or a part of
the Notes upon not less than 30 days nor more than 60 days’ notice, at a redemption price equal to 100% of
the principal amount of the Notes redeemed, plus the applicable premium as of, and accrued and unpaid
interest and additional amounts, if any, to the date of redemption, subject to the rights of holders of the Notes
on the relevant record date to receive interest due on the relevant interest payment date.
C) At any time on or after November 15, 2015, the Group may redeem all or part of the Notes at the following
redemption prices:
 in 2015, 104.594%
 in 2016, 103.063%
 in 2017, 101.531%
 in 2018 and thereafter, 100.000%
Page
As of December 31, 2012 the carrying amount of the Notes was for Euro 394.6 million, determined as follows:
 including Euro 3.2 million of accrued interest payable
 net of Euro 9.1 million of transaction costs amortized along the period of the notes. The transaction costs
amortized during the year amounted to Euro 88 thousands;
 increased for the accounting of the optional redemption described above, which, according to IAS 39, is an
embedded derivative that require bifurcation, since its economic characteristics and risks are not closely
related to those of the host contract (the Notes). This embedded derivative, that is a financial asset for the
Group, has been separated from the Notes for an amount at the inception date of Euro 395 thousands.
F-7.36
The Group has to comply with certain covenants in relation to the issue of the Notes. The covenants include
restrictions on the ability of the parent undertaking and the Group to incur or guarantee additional indebtedness
and issue certain preferred stock; pay dividends or make other distributions on, redeem or repurchase capital
stock; make certain restricted investments; prepay or redeem subordinated debt; create or incur certain liens;
create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to
and on the transfer of assets to the parent undertaking or any of restricted fellow subsidiaries; sell, lease or
transfer certain assets including stock of restricted fellow subsidiaries; merge or consolidate with other entities;
and enter into certain transactions with affiliates. The Group Management believe that the Group has complied
with all of the covenants as of December 31, 2012.
Notes
After the initial recognition, the embedded derivative described above is carried at fair value through profit or
loss, with changes in fair value recognized in the statement of income. As of December 31, 2012 the carrying
values of the embedded derivative amounted to Euro 367 thousands. The effect on the statement of income of
the variation of the fair value (Euro 28 thousands negative) is reflected in line item “Financial expense”.
Use of the proceeds of the Notes and of the new revolving loan
The Group has used the proceeds received from the Notes and the new revolving loan with Mediobanca have
been used as follows:
- to fully repay the existing previous facilities with Mediobanca, due by Rottapharm S.p.A. (Italy), Rottapharm
Ltd (Ireland) and Opfermann Arzneimittel GmbH (Germany), for Euro 275 million plus interests up to
November 14, 2012 for Euro 4 million;
- to fully repay the loan from Banca Nazionale del Lavoro, due by Rottapharm S.p.A. (Italy), for Euro 90
million plus interests up to November 15, 2012 for Euro 0.5 million;
- to repay borrowings under short term credit facilities from IntesaSanPaolo and Banca Popolare Commercio
e Industria, due by Rottapharm S.p.A. (Italy), amounting to Euro 42.3 million at the date of the transaction;
- to pay dividend to Fidim S.r.l., the shareholder of Rottapharm S.p.A., for Euro 20 million, and;
- to pay fees and expense relating to the issuance of the Notes for approximately Euro 9 million.
The following table sets forth the details of the loans from bank institutes as of December 31, 2012 and 2011
(balances include interest accrued to year end, if any):
-
-
95,967
-
99,652
20,515
90,315
-
90,315
-
52,500
17,500
70,000
35,000
24,617
24,617
30,309
15,309
35,000
10,000
37
37
5,575
9,577
5,575
9,577
-
-
150,299
44,554
-
-
102,711
30,447
6,729
189,227
(59,917)
129,310
6,556
59,917
41,189
7,820
633,070
(299,094)
333,976
41,189
7,820
299,094
The average interest rate paid on the above borrowings in 2012 was 3.10% (3% in 2011).
As detailed above, other than the loan from Mediobanca described above, Rottapharm S.p.A. (Italy) has medium
term loans from Banca Popolare Commercio Industria and Banca IntesaSanPaolo.
F-7.37
Granted to Rottapharm Italia S.p.A.
Loan from Mediobanca refundable in 3 installments.
Loan from Banca Nazionale del Lavoro refundable
in 1 instalment in November 2011
Loan from Mediobanca refundable in 5 installments.
Loan from Banca IntesaSanPaolo refundable in 4
instalment in December 2015
Short term loan from Banca IntesaSanPaolo with
quarterly renewals.
Loan from Banca Popolare Commercio Industria
refundable in 7 instalment As of December 2015
Short term loan from Banca Popolare Commercio
Industria with monthly renewals.
Bank overdraft
Granted to other Companies of RottapharmMadaus Group
Loan from Mediobanca to Opfermann Arzneimittel
GmbH (Germany) refundable in 3 installments.
Loan from Mediobanca to Rottapharm Ltd (Ireland)
refundable in 3 installments.
Short term loan from Credit Suisse to Rottapharm
Ltd (Ireland)
Other bank loans to group companies and overdraft
Bank loans
Less current portion
Long-term bank loans
As of December 31,
of which
2011
current portion
Page
As of December 31,
of which
2012
current portion
Notes
Principal
Amount
Loan from
Banca Popolare
Commercio
Industria
30,000
Banca
IntesaSanPaolo
52,500
(*) Paid on January 2nd, 2013
2012
2013
2014
5,000 (*) 10,000 10,000
2015
5,000
- 17,500 17,500 17,500
At the date of the transaction described above, Rottapharm SpA (Italy) and Banca IntesaSanPaolo decided to
postpone the maturity of the installment due in December 31, 2012 to December 31, 2015, without additional
costs. For this last installment has been agreed an interest rate of Euribor 6-month plus a margin of 350 bps
(instead of Euribor 6-month plus a margin of 120 bps for the other installments). The original transaction costs
amounted to € 70 thousand and were considered for calculating the amortized cost of the credit along the new
period.
The loan from Banca Popolare Commercio Industria matures interest of Euribor 6-month plus a margin of 110
bps.
The Covenants securing such loans relate to the group consolidated financial statements (Net financial
position/EBITDA and Net financial position/Shareholders’ equity ratio) and have been met as of December 31,
2012.
The loan of Euro 41.2 million granted by Credit Suisse to Rottapharm Ltd (Ireland), as a loan in Swiss Francs
(CHF) subscribed in December 2011 for CHF 50 million, has been reimbursed during the year following the
aforementioned partial sale of the available for sale investments.
The other loans refer mainly to short term loans granted by local bank institutes to Laboratorios Delta L.t.d.a.
and Rottapharm S.L.
Financial liabilities to other lenders include Euro 12.7 million of liabilities to factoring company relating to the
receivables transferred with recourse.
Other financial liabilities include Euro 733 thousands for prior years dividend payable by Rottapharm Hellas
(Greece) to its minority shareholders.
21. Provisions for risks and charges
Total
Of which
current
portion
7,173
Other provisions
for risks
and
charges
8,530
15,703
1,885
Allowances
-
1,544
1,544
193
Utilizations
(1,580)
(2,356)
(3,936)
(1,368)
Releases
-
(583)
(583)
(414)
Reclassifications
-
(166)
(166)
(73)
Other movements
As of
December 31, 2012
-
234
234
-
5,593
7,203
12,796
223
Page
Provisions
for
taxation
F-7.38
The following table sets forth the details and the movements in Provisions for risks and charges during the year
ended December 31, 2012 and 2011:
Notes
Provisions
for taxation
5,920
Other provisions
for risks
and
charges
10,022
Allowances
1,215
2,095
3,310
111
Utilization
(552)
(2,697)
(3,249)
(190)
(492)
Releases
Reclassification
As of
December 31, 2011
Total
Of which
current
portion
15,942
2,456
-
(890)
(890)
590
-
590-
7,173
8,530
15,703
1,885
The reclassification in 2011 is from other liabilities for interest due on the tax assessment carried on Madaus
holding Gmbh (Germany).
During the year Provision for taxation have been utilized for the closing of the tax assessment on tax trade and
corporate income taxes in Germany (Rottapharm Madaus Gmbh), which led the Group to pay Euro 1.5 million.
The main allowances of “Other provision for risks and charges” are related to provision for sales return (Euro
539 thousands), provision for jubilee (Euro 375 thousands), provision for restructuring (Euro 103 thousands)
and provision for legal claim and litigation (Euro 193 thousands).
In relation to these provision there have been utilization during the year mainly in relation to legal claim and
litigation in Germany (Rottapharm Madaus Gmbh and Madaus Gmbh) for Euro 1.2 million, to provision for
Jubilee (Euro 0.2 million) and to provision for sales return (Euro 0.2 million).
22. Termination indemnities
The following table shows the movements of termination indemnities for the years ended December 31, 2012
and 2011:
Total Termination
indemnities
70,504
Of which current
portion
298
Increase
5,698
141
5,839
100
Decrease
(6,789)
(92)
(6,881)
(70)
Actuarial Gain/Loss
17,228
-
17,228
-
(26)
28
2
(128)
Reclassification
Other movements
115
-
115
-
85,324
1,483
86,807
200
Employee benefits and pension plans
75,492
Other provisions for termination
indemnities
1,266
Increase
3,551
241
3,792
163
Decrease
(4,372)
(104)
(4,476)
(405)
Actuarial Gain/Loss
-
Total Termination indemnities
76,758
Of which current
portion
539
(5,573)
-
(5,573)
Reclassification
-
-
-
-
Other movements
-
3
3
0
69,098
1,406
70,504
298
Employee benefits and pension plans mainly refer to Rottapharm S.p.A. (Italy), the German subsidiaries and
Madaus GmbH (Austria).
Regarding the Italian companies, the employee termination indemnity reserve known as “Trattamento di Fine
Rapporto” (TFR) provided by Italian legislation (Article 2120 of the Italian Civil Code) is to be considered, from a
financial accounting point of view, as a defined benefit pension plan. Italian law states that when an employee
F-7.39
Other provisions for
severance pay
1,406
Page
Employee benefits and
pension plans
69,098
Notes
terminates an employment contract with a company, the employee receives a termination indemnity referred to
as “Trattamento di Fine Rapporto” (TFR). Under the regulations introduced by Legislative Decree 252/2005 and
Law 296/2006 (the State Budget Law 2007), for companies with at least 50 employees, the severance
indemnities accruing from 2007 are allocated, as elected by the employees, to either the INPS Treasury Fund or
to supplementary pension funds and take the form of a “Defined contribution plan”.
However, revaluations of the provision for employee severance indemnities existing at the election date, for all
companies, and also the amounts accrued and not assigned to supplementary pension plans, for companies with
less than 50 employees, remain recorded in the provision for employee severance indemnities. In accordance
with IAS 19, this provision has been recognized as a “Defined benefit plan”.
Regarding the German companies, pension provisions are recognized for obligations from benefit entitlements
and from current benefits paid to eligible current and former employees of the Rottapharm Group and their
surviving dependents in accordance with IAS 19. Under the defined benefit plans existing in the Rottapharm
Group, the Company is obliged to provide the agreed benefits to current and former employees, with a
distinction made between provision-funded and externally funded pension systems. Employees in Germany who
joined the Group before 1976 have been promised retirement benefits. As a rule, no retirement benefits were
promised after 1976. In Germany, most of the retirement benefits were promised by Hilfkasse and are funded by
the recognition of provisions.
The system for the Austrian subsidiary is similar to the German one.
The following table summarize the components of net benefit expense recognized in the statement of income and
the funded status and amounts recognized in the statement of financial position for the respective plans:
TFR
Pension plan
Italy
Germany
Austria
As of December 31,
2012
Present value at the beginning of the year
2011
2012
2011
2012
2011
4,549
4,594
62,947
68,633
1,150
1,229
-
-
335
427
16
26
Interest costs
97
139
3,369
3,167
59
54
Benefits paid
(250)
(348)
(3,903)
(3,848)
(873)
(70)
Current service cost
Actuarial loss / (profit)
Present value at the year end
(8)
164
17,164
(5,432)
73
(89)
4,388
4,549
79,912
62,947
425
1,150
The main assumptions used to determine the provisions accrued by Italian companies for TFR and the pension
plans provided by the foreign subsidiaries in Germania and Austria are shown in the following table:
Inflation rate
Death rate
Disability rate
Pension age
Advance payments frequency %
Turnover frequency %
2012
2011
2.85%
2.20%
2.00%
1.20%
Sim/f 2000 abbattuta al 75%
INPS (National Social Insurance Agency) tables split
by age and sex
Age requirements achievement (General Obligatory
Association)
INPS (National Social Insurance Agency) tables split
by age and sex
Age requirements achievement (General Obligatory
Association)
70%
70%
3% - 7%
3% - 7%
F-7.40
Annual discount rate
For the years ended December, 31
Page
Italy
Notes
Germany
2012
2011
3.50%
5.50%
Future benefit increases
2.00%
2.00%
Future salaries increases
2.50%
2.50%
Death rate
Pension age
Austria
63
63
Richttafel 2005G von Klaus Heubeck
Richttafel 2005G von Klaus Heubeck
0.90%
0.90%
2012
2011
3.50%
5.50%
Future benefit increases
2.00%
2.00%
Future salaries increases
2.85%
2.75%
Death rate
60/65
60/65
AVO 2008 - P angestellte
AVO 2008 - P angestellte
0.00%
0.00%
Pension age
The main assumptions used to determine the termination indemnity’s of the Italians’ agents present value are
shown in the following table:
Agents
Death rate
Disability rate
Pension age
2012
2011
1.92%
1.92%
4.00%
4.00%
92
86
INPS (National Social Insurance Agency) tables split INPS (National Social Insurance Agency) tables split
by age and sex
by age and sex
Age requirements achievement (General Obligatory Age requirements achievement (General Obligatory
Association)
Association)
23. Deferred tax assets and liabilities
40, 755
(5,860)
25, 916
(9,965)
Deferred tax
34, 895
15, 951
Deferred tax assets increased by Euro 14.8 million mainly due to the followings:
- for Euro 7.9 million to the recognition of the deferred taxation on the residual amount of the tax losses (Euro
63.5 million) incurred by Rottapharm Ltd (Ireland) in 2008, due to the net losses incurred on the investment
portfolio. Differently from the previous years, the Group has decided to recognize in the current year these
asset considering that based on the revised structure of the Irish subsidiary these tax losses (for which no
limitation exist on their carrying forward period) can now be used to offset future taxable profits coming
from the financial activity of the subsidiary.
- for Euro 3.1 million to the recognition of the deferred tax effect on the change in the carrying value of the
termination indemnities;
- for Euro 1.1 million to the recognition of deferred tax assets on the tax losses available for carry forward on
the Spanish subsidiary Rottapharm S.L.
Page
Deferred tax assets
Deferred tax liabilities
F-7.41
The net balance as of December 31, 2012 and 2011 is composed as follows:
Notes
Deferred tax liabilities decreased by Euro 4 million mainly due to the effect of the sale of the available for sale
investments (Euro 1.1 million) and utilization on the pension plan on Madaus Gmbh and Rottapharm Madaus
Gmbh (Euro 2.5 million) companies.
At December 31, 2012, the Group has unused tax losses available to carry forward for Euro 21.9 million,
referring to Rottapharm S.a.s (France), Laboratoires Madaus (France) and Rottapharm Greece (Greece). Below
are detailed the related date of expiration:
Year of expiration
2017
Without expiration
Total
December 31,
2012
2,055
19,918
21,972
Available carried-forwarded tax losses for which deferred tax assets have been recognized amounted to Euro
13.4 million as of December 31, 2012 and are referred to Rottapharm Ltd., Rottapharm SL and Laboratorios
Delta Lda.
Pension
Recognized tax losses
Elimination of unrealized profit from intra-group transactions
Recognitions (derec.) of
liabilitis (assets)
Cash flow hedge accounting
Provision for doubtful accounts
Depreciations, amortizations
and write downs
Adjustment on financial assets
Others
Reserve included in shareholders’ equity
Deferred tax
Consolidated
statement of
Consolidated statement of
financial position
income for the year ended
as of December 31,
December 31,
2012
2011
2012
8,737
8,463
(374)
13,350
4,867
8,483
2,995
3,188
(193)
1,220
1,430
(210)
2,306
582
(819)
(724)
2,306
582
(95)
1,445
(196)
5,175
(13)
(1,260)
1,445
(183)
-
34,895
15,951
12,509
Page
F-7.42
The net increase of Euro 18.9 million in the net deferred tax has been recognized for Euro 12.4 million in the
statement of income (line item “Income tax expense”) and for the residual amount in the Other comprehensive,
as tax effects of the movements related to the net (loss)/gain on financial assets available-for-sale and to the net
actuarial gain or losses.
Notes
24. Trade payables
The following table shows the details of trade payables as of December 31, 2012 and 2011:
Trade payables
Invoices to be received
Credit note to be received
As of December 31,
2012
40,489
9,550
(71)
As of December 31,
2011
41,808
9,351
23
49,968
51,182
Trade payables to third parties
Trade payables to associates and parent company
Trade payables
355
231
50,323
51,413
Trade payables are non interest-bearing and generally carry a 60-90 days term.
This figure includes the payables relating to the ordinary activity of the Group’s companies, in particular the
purchase of raw materials, components, services and external production.
25. Other current liabilities
The following table shows the details of other current liabilities as of December 31, 2012 and 2011:
As of December 31,
2012
As of December 31,
2011
2,144
9,247
4.083
8.201
4,355
4.703
3,924
200
223
4.141
298
1.884
5,531
3,340 (*)
Other tax liabilities
Liabilities to employees
Liabilities to social security agencies and welfare institutions
Accrued expense and deferred income
Severance payment - current portion
Current portion of provision for risks and charges
Other liabilities
25,624
26,650
(*) Reclassification to provision for taxation due on the tax assessment carried on Madaus holding Gmbh (Germany)
Other tax liabilities mainly refer to VAT payable.
As of December 31, 2012 employees liabilities include the salaries and wages of December if not yet paid and
payables to employees for the bonuses, the unused vacation, and the 13rd and 14th additional month salary.
Social security liabilities refer to the contribution costs related to the above.
Page
Other liabilities mainly refers to:
- the accrued expense of Rottapharm S.p.A. related to the costs for settlement of national health
expenditure (Euro 0.3 thousands) and accruals for bonuses to foreign customers (Euro 0.4);
- the accruals for promotional costs of German companies relating the Middle East market for Euro 0.6
million; and
- the discounts recognized by the German companies (Euro 2.7 million),
F-7.43
Accrued expense and deferred income refers primary to Rottapharm Thailand for promotional expense paid in
advance (Euro 3.4 million).
Notes
26. Current taxes payables
The following table shows the details of income taxes payable as of December 31, 2012 and 2011:
As of December 31,
2012
As ofDecember 31,
2011
Amounts payable from income taxes
Accounts payable for withholding taxes
5,325
2,437
5,661
2,419
Current taxes payables
7,762
8,080
This payable arises from the German Companies and from the Italian Companies.
27. Net revenue
The following table shows the details of Net revenue for the years ended December 31, 2012 and 2011:
For the years ended
December 31,
2012
2011
Revenue from sales , net
Revenue from services , net
Down payments and royalties
517,664
249
4,803
518,397
3,039
6,450
Total
522,716
527,886
Revenue from sales are net of:
- discounts for Euro 20.6 million,
- returns for Euro 4.5 million and
- financial discounts to customers for Euro 2.8 million.
Service rendered in 2012 included the services provided till now by Rottapharm S.L. (Spain) to local
pharmaceutical companies.
Royalties include the amount of Euro 4.6 million recognized by third parties for the use of some intellectual
rights and trademarks owned by the German subsidiaries.
28. Other income
The following table shows the details of other income for the years ended December 31, 2012 and 2011:
Total
58
2,957
16,978
17,036
11,393
14,350
Other income mainly includes contractual revenue from distributors, related to Rottapharm S.p.A. (Italy) for
Euro 11 million (Euro 7.5 million in the previous year) and for the R&D grant for Euro 1.4 million recognized to
Rottapharm Biotech S.r.l.
Page
Gain on disposal of property, plant and
Equipment/intangible assets
Other income
F-7.44
For the years ended
December 31,
2012
2011
Notes
29. Costs of raw materials, supplies, consumables and goods
The following table shows the details of costs of raw materials, supplies, consumables and goods costs for the
years ended December 31, 2012 and 2011:
For the years ended
December 31,
2012
2011
Raw materials
Goods and finished products
52,139
40,058
43,877
44,910
Packaging
15,954
15,676
Other costs
5,736
5,446
(1,230)
2,168
54
2,979
112,711
115,056
Changes in inventories of raw materials
Changes in invent. of work-in-progress
Total
30. Costs of personnel
The following table shows the breakdown of costs of personnel for the years ended December 31, 2012 and
2011:
For the years ended
December 31,
2012
2011
81,945
82,150
19,777
20,235
5,382
5,056
7,422
9,030
439
593
Salaries and wages
Social security contributions
Retirement benefits and severance payments
Other costs of personnel
Service cost on termination indemnities
Total
114,965
117,064
The item Retirement benefit and severance payments includes the indemnities related to employee benefits and
pension plans.
During 2012 the Group incurred in non-recurring personnel costs of Euro 3.1 million, mainly due to the
restructuring costs incurred following the reorganization of the commercial structures in Spain (Euro 1.4
million), in Germany (Euro 0.3 million) and Portugal (Euro 1.2 million) and France (Euro 0.2 million).
31. Costs of services
The following table sets forth the breakdown of costs for services for the years ended December 31, 2012 and
2011:
For the years ended
December 31,
Total
69,825
26,971
5,442
25,461
12,670
14,815
69,367
25,306
5,348
23,877
14,204
14,901
155,184
153,003
F-7.45
Operating expense
Marketing and advertising
Consultancy
General Expense
Research & Development
Rental expense
2011
Page
2012
Notes
The item operating expense mainly refers to transportation costs for Euro 7.1 million (euro 7.2 million in the
previous year), sub-contractor production costs and commission on deposits for Euro 27.6 million (Euro 27.8
million in the previous year). Furthermore, it includes promotional commercial expense and travel expense for a
total amount of Euro 29.7 (Euro 30 million in the previous year).
The item general expense mainly relates to utilities (Euro 4.4 million), maintenance (Euro 3.7 million), insurance
(Euro 2.6 million), cleaning and other general and administrative services.
Research & development costs refer to the services provided by external clinical studies on the projects followed
by the company, both for the pre-clinical and for the clinical phases of the process.
In 2012 this item includes also non-recurring costs for a total amount of Euro 1 million, due to some consulting
services incurred in the year in Italy and Portugal.
32. Other costs
The following table sets forth the breakdown of other costs for the years ended December 31, 2012 and 2011:
For the years ended
December 31,
2012
Losses on disposals of intangible assets/
property plant and equipment
Other expenses
Provision for risks and charges (net of reversal)
Accrual for doubtful accounts and write-off of accounts receivable
Total
2011
682
35
10,495
959
3,695
15,831
11,940
1,203
239
13,417
Page
F-7.46
The item Other expenses mainly includes consumables (Euro 1.2), duties and other taxes (Euro 2.2 million),
expense for gifts product (Euro 2.3 million), Social utility charges (Euro 1 million), membership fees (Euro 0.8
million), other operating expense and administrative expense (Euro 1.4 million).
Notes
33. Financial income and expenses
The following table shows the details of financial income and expenses for the years ended December 31, 2012
and 2011:
For the years ended
December 31,
2012
Financial income from parent company
2011
5,779
5,013
Financial income from current assets securities
867
-
Interest receivable on bank accounts
752
723
Other financial income
449
440
Exchange Gains
14,640
4,805
Interest receivable from bank accounts
22,487
10,981
(22,581)
(22,603)
Interest payable due to other lenders
(763)
(2,882)
Bank commissions and charges
(142)
(1,035)
Financial expense on Notes and on loans from banks and Senior note
Other financial expense
(9,152)
(841)
Interest cost on actuarial valuation
(3,525)
(1,213)
Exchange Losses
(2,357)
(6,213)
Financial Expense
(38,520)
(34,787)
Total net financial income (expense)
(16,033)
(23,806)
Financial income from parent companies refer to interest on loans granted to Fidim S.r.l. (Italy) by Rottapharm
S.p.A. (Italy), and by Rottapharm Ltd (Ireland) and by Madaus Holding Gmbh (Germany).
Exchange net gains of Euro 12.3 million are mainly related to the effect of the sale of the financial assets
available-for-sale.
Financial expense on loans from banks refer to the amortized cost accounted for the loan from bank institutes
and for the Notes, according to the effective interest rate method.
Page
F-7.47
Other financial charges of the year mainly refer to the effect of the cash flow hedge derivative on Mediobanca
loan described in Note 20.
Notes
34. Income taxes
The following table shows the details of financial results for the years ended December 31, 2012 and 2011:
2012
2011
Italy
Rest of Europe
Rest of World
(16,434)
(13,675)
(1,434)
(14,800)
(14,593)
(958)
Current income taxes
(31,543)
(30,351)
1,981
10,202
203
(1,650)
1,074
104
Italy
Rest of Europe
Rest of World
Deferred income taxes
Current and deferred income taxes
Tax reimbursement for previous years’ tax paid
Income taxes
12,386
(472)
(19,155)
(30,823)
1,246
0
(30,823)
(17,911)
The tax reimbursement for previous years’ tax paid refers to a partial amount of 2007-2011 current income
corporation tax (IRES) ask for reimbursement by Rottapharm S.p.A. (Italy) in accordance with an Italian tax rules
approved in December 2012.
The reconciliation between the Italian theoretical tax rate and the effective consolidated tax rate is as follows:
2012
2011
Total Profit (loss) before taxes
IRES tax rate
Theoretical taxes calculated at the tax rate in force
89,394
27.5%
24,583
104,09
3
104,09
3
27.5%
28,625
IRAP and other taxes calculated on a basis other than profit before taxes
Other deductible/undeductible costs
Gain/(Loss) on investment
Not deductible financial interests and gain/loss on exchange
Provision for risks and charges
Dividends
Other net differences
Unutilized tax losses of the current year
Recognition of deferred taxes on Irish fiscal losses
Utilization of prior year unrecognized fiscal losses
Effect of different tax rates in foreign jurisdictions
Effective taxes recognized in the statement of income
3,925
5.3%
- -1.3%
(129) -0.1%
(2,871) -3.2%
1,371
7.1%
1,232
1.4%
- -0.9%
(1,610) -0.5%
(6,615)
2.4%
4,976 -9.8%
(5,035) -5.6%
(672) -0.8%
19,155 21.4%
5,149
1,616
259
(71)
(1,318)
222
(666)
1,187
751
(1,082)
(3,850)
30,823
4.9%
1.6%
0.2%
-0.1%
-1.3%
0.2%
-0.6%
1.1%
0.7%
-1.0%
-3.7%
29.6%
The deferred taxation on tax losses of prior years refers to the booking in the current year of the deferred tax
assets on prior years not recognized tax losses of the Irish subsidiary (please refer to Note 23). The utilization of
prior year unrecognized fiscal losses refers to the prior years not recognized tax losses of the Irish subsidiary
which have been utilized in the current year due to the gain on the sale of the financial assets available for sale
(please refer to Note 16 and 19).
F-7.48
89,394
Page
Profit (loss) before taxes from Continuing operations
Notes
35.
Operating segment information
For management purposes, the segment reporting format is identified on the basis of the geographical area,
according to the country in which the business units generating the relevant sales are located. Their revenue are
used by management, together with those by customer location (according to the country in which our products
were sold), to understand financial performance of the Group.
Management monitors the operating results of the segments by geographical area separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is evaluated
based on Operating profit and is measured consistently with Operating profit in the consolidated financial
statements. However, Group financing (including financial expenses and financial income) and income taxes are
managed on a group basis and are not allocated to operating segments.
Certain operating segments have been aggregated to form the above reportable operating segments.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions
with third parties.
The following table shows the economic and financial segment information as of and for the year ended
December 31, 2012:
Consolidated statement of income for the year ended December 31, 2012
Italy
Third parties net revenue
Intercompany net revenue
Net revenue
Other income –
third parties
Other income –
Intercompany
Other income
Total net revenue and other
income
Changes in inventories
Costs of raw materials, supplies,
consumables and goods
Costs of personnel
Costs of services
Other costs
Depreciation, amortization &
write off
Operating Profit
I/C
Total
Elimination
16,013 40,552
- 522,716
- 13,637
(113,535)
16,013 54,189
(113,535) 522,716
Spain
France Portugal Ireland Germany Austria Others
208,207
13,179
221,386
67,192
9,981
77,173
25,823
25,823
24,646
24,646
21,103
46,771
67,874
119,181
29,967
149,148
13,370
1,800
296
390
85
517
209
349
-
17,017
1,085
6
147
1
73
315
-
17
(1,625)
19
14,455
1,806
443
391
158
832
209
366
(1,625)
17,036
235,841
78,979
26,266
25,037
68,032
149,980
16,222 54,555
1,913
(528)
659
753
615
(966)
431 (2,565)
55,657
38,788
11,427
12,328
22,241
49,008
7,452
39,240
64,041
7,200
16,695
14,905
2,467
6,809
7,123
1,234
6,626
6,634
1,485
7,595
12,208
1,241
30,794
33,750
1,359
2,197
2,845
79
9,276
18,621
168
864
2,678
3,206
38
830
58,514 (11,970) (1,154)
(3,653)
21,454
32,829
3,180
4,621
(115,160) 539,752
1,489
1,177
27,444
(110,458)
113,888
5,009
18,343
874
(4,665)
(107)
114,965
155,184
15,831
-
35,681
1,559 105,380
The item “Depreciation, amortization and write down (reversal) of non-current assets” for the segment Portugal
include the impairment of goodwill for Euro 16 million described in note 7.
The Inter-segment net revenue and other income are eliminated on consolidation.
Page
F-7.49
The profit for each operating segment does not include financial income (Euro 22,487 thousands; in 2011 Euro
10,981 thousands), financial expense (Euro 38,497 thousands; in 2011 Euro 34,787 thousands), share of loss of
associates (Euro 19 thousands; a loss in 2011 for Euro 57 thousands) and gain or losses on other financial assets
(Euro 6 thousands; in 2011 Euro 482 thousands negative), as these income and expense are managed on a group
basis.
Notes
Consolidated statement of financial position at December 31, 2012
Italy
Inventories
Trade receivables
Total
Trade payables
Total
Spain
France Portugal Ireland Germany Austria Others
14,519
23,289
5,227
89,162
19,790
7,281
17,746
1,742 11,041
121,427
44,821 23,549
41,119
10,921 13,184
161,960 139,833
1,754
203,079 150,754 14,938
22,821
17,172
147
2,511
10,780
7,188
20,479
7,573
2,769
10,342
14,579
37,487
38,627
90,693
5,210
1,072
6,282
25,379
26,940
18,110
70,429
10,452
115,288
125,740
5,258
28,045
17,247
2,279 14,759
688 15,546
5,212 44,562
8,179 74,867
1,041 12,666
1,220
7,083
2,261 19,750
135
I/C
Elimination
Total
(12,950)
89,592
(52,379) 155,294
- 144,228
(65,329) 389,114
(51,845)
50,323
(397,593)
33,386
(449,438)
83,709
2,678
-
93,503
Segment assets do not include non-current assets other than property, plant and equipment (Euro 622,224
thousands; in 2011 Euro 621,850 thousands), current tax receivables (Euro 3.688 thousands; in 2011 Euro 2,699
thousand), other receivables (Euro 28,024 thousands; in 2011 Euro 19,632 thousands) and other current
financial assets (Euro 241,250 thousands; in 2011 Euro 318,827 thousands) as these assets are managed on a
group basis.
Goodwill and intangible assets are allocated to the different CGUs or group of CGUs in respect to the relevant
operating segments for the purpose of the impairment test analysis made at group level.
Segment liabilities do not include shareholders’ equity (Euro 586,897 thousands, Euro 555,641 thousands in
2011), non-current liabilities (Euro 631,661 thousands, Euro 428,639 thousands in 2011) and current financial
liabilities (Euro 79,948 thousands, Euro 309,649 thousands in 2011) as these liabilities are managed on a group
basis.
The following table shows the economic and financial segment information as of and for the year ended
December 31, 2011, included as comparative:
Consolidated statement of income for the year ended December 31, 2011
France
201,950
11,549
76,444
10,361
22,929
35,827
17,085
56,411
119,779
28,304
15,874
213,499 86,805
22,929
35,827
73,496
148,083
15,874 49,427
374
3
377
218
68
286
415
415
404
104
508
986
428
1,414
225,877 87,182
23,215
36,242
74,004
149,497
15,904 50,186
1,354 (3,546)
(1,664)
3,919
1,351
6,351
(861) (1,189)
11,179
1,199
12,378
Portugal Ireland Germany Austria Others
30
30
726
33
759
Total
527,886
-
(118,054) 527,886
(1,817)
(1,817)
14,332
18
14,350
(119,871) 542,236
568
(5,147)
51,550
47,079
12,660
15,493
25,856
41,317
8,535
23,924
(116,505)
109,909
40,472
61,444
4,818
16,169
16,120
2,124
8,460
7,501
948
7,476
8,154
534
8,482
11,699
1,617
28,819
33,686
2,631
2,251
2,888
94
4,935
14,651
995
(3,140)
(344)
117,064
153,003
13,417
8,851
4,598
176
7,246
2,601
3,259
44
869
-
27,644
4,638 (4,866)
(6,580)
22,398
33,434
2,953
6,001
57,388
686 116,052
F-7.50
Other income – third parties
Other income – Intercompany
Other income
Total net revenue and other
income
Changes in inventories
Costs of raw materials,
supplies, consumables and goods
Costs of personnel
Costs of services
Other costs
Depreciation,
amortization & write off
Operating Profit
Spain
Page
Third parties net revenue
Intercompany net revenue
Net revenue
I/C
Elimination
37,998
11,429
(118,054)
Italy
Notes
Consolidated statement of financial position at December 31, 2011
Inventories
Trade
receivables
Cash and
cash equivalents
Franc
e
Portuga
l
Irelan
d
German
y
Austri
a
Others
24,473
5,886
3,263
15,195
24,413
2,710
12,043
I/C
Eliminatio
n
(14,439)
61,399
14,891
6,267
12,609
26,034
20,654
723
12,507
(34,384)
120,700
37,814
3,843
3,834
6,641
5,391
11,719
3,817
38,458
-
111,517
22,513 46,619
56,787
7,249
Italy
Spain
16,432
12,442
15,98
7
11,681
8,493
138,566
Total
41,835
Property, plant and
equipment
18,823
Total
Trade payables
Other current
liabilities
115,64
5
33,342
5,379
4,431
9,559
977
63,00
8
8,068
2,311
3,099
986
10,528
813
151,00
8
13,99
2
8,478
5,417
20,087
16,786
56
5,306 28,471
17,531
43,207
Total
89,975
(34,467)
322,19
3
51,413
6,183
(136,249)
35,321
1,790
14,25
1
(170,715)
86,143
153
3,136
-
90,262
(48,823)
The additional geographical information of net revenue and other income from external customers is detailed
above and is based on the locations of the customers:
2012
2011
Italy
174,472
168,064
Germany
69,363
69,321
Spain
46,056
55,605
Portugal
25,043
35,838
France
31,487
27,993
Rest of Western and Nothern Europe
44,678
46,789
BRIC and ASIA
85,271
77,531
Middle East & Africa
26,515
24,507
Americas & Australia
21,852
20,445
Eastern Europe & CIS
15,015
16,143
539,752
542,236
36.
Additional information
Contingent liabilities
The main legal, arbitration and tax proceedings in which companies of the Rottapharm Group were involved at
December 31, 2012 are described below. For these contingent liabilities no provisions were accrued as the
Group assessed the probability for a litigation and subsequent cash outflow with respect to tax assessment as
remote.
Operating lease commitments – Group as lessee
Page
Commitments, obligations and risks
F-7.51
Rottapharm S.p.A. (Italy) has been subject to a tax inspection for which a tax assessment has been issued on
October 14, 2011. The company has appealed against this assessment and is confident that the fiscal risk is
remote. Therefore, no provision was recorded in the consolidated financial statements.
Notes
The Group has entered into commercial leases on certain plants and machineries, motor vehicles and buildings.
These leases have an average life of between three and five years, except for plants and machineries in India that
are beyond five years. The leasing contracts are with no renewal option included. There are no restrictions
placed upon the Group by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as of December 31, are as follows:
Operating lease commitments
As of December 31,
2012
Within one year
From two to five years
After 5 years
Total minimum lease payments
2011
3,529
4,648
875
9,052
Rental costs for properties
As of December 31,
2012
5,191
7,564
1,959
14,714
2011
6,211
21,019
4,373
31,603
7,027
23,914
10,947
41,888
Financial lease commitments – Group as lessee
The Group has finance leases for some items of property, plant and equipment, mainly related to IT and office
equipment. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at
the option of the specific entity that holds the lease. Future minimum lease payments under finance leases
together with the present value of the net minimum lease payments are as follows:
Minimum payments
As of December 31,
2012
Within one year
From two to five years
After 5 years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
Present value of payments
As of December 31,
2011
10
28
38
(6)
32
2012
13
44
57
(10)
47
2011
10
28
38
13
44
57
38
57
Guarantees
Following the reimbursement of the loan to Mediobanca the pledge on the shares of Rottapharm S.p.A. have been
cancelled
Related parties transactions
The following table sets forth the details of the operational transactions with related parties for the years ended
December 31, 2012 and 2011:
Costs for
materials
Revenue
RRL Immobiliare S,p,A,
Associated Company
TOTAL
Consolidated
incidence %
Financial
assets
Accounts
and tax
receivable
Financial
liabilities
Accounts
payable
0
0
0
5,779
5,779
237,395
237,395
1,692
1,692
-
(1,040)
(1,040)
12
12
12
-
(4,308)
(4,308)
(4,308)
5,779
565
565
237,960
18
18
1,710
-
(355)
(355)
(1,395)
522,716
0%
112,711
0%
(155,184)
3%
16,033
-36%
387,414
61%
31,712
5%
(605,989)
0%
(33,386)
4%
F-7.52
Fidim S.r.l.
Parent company
Costs for
services
Financial
income
(expense)
Page
Notes
Costs for
materials
Revenue
Fidim S.r.l.
Parent
company
RRL
Immobiliare
S.p.A.
Associated
Company
TOTAL
Consolidated
incidence %
As at December 31, 2011
Financial
income
(expense)
Costs for
services
Financial
assets
Accounts and
tax receivable
Financial
liabilities
Accounts
payable
6
-
-
5,013
215,616
1,084
-
(344)
6
-
-
5,013
215,616
1,084
-
(344)
12
-
565
-
-
(231)
12
18
0
(4,115)
(4,115)
5,013
565
216,181
1,084
-
(231)
(575)
527,886
-%
(115,056)
-%
(153,003)
3%
(23,800)
-21%
432,064
50%
22,331
5%
634,251
0%
(34,730)
2%
(4,115)
-
In addition, the Group has acquired, at normal market conditions, services from the following companies in
which family members of the Group’s directors have some representations:
Payables as of
Decemer 31, 2012
Cost for services for the year ended
December 31,
2012
2011
Johan & Levi S.r.l.
7
132
227
Demi-Monde S.r.l.
8
77
229
Day SPA S.r.l.
58
22
64
Editree S.r.l.
0
148
40
73
379
560
Total
The Group as also recorded revenue for IT services rendered to the following Company in which some of the
Group’s Directors have some representations.
Payables as of December 31, 2012
Sales 2012
Sales 2011
G.W.M. Renewable Energy S.p.A.
32
32
32
Totale
32
32
32
37.
Financial risk management
The Group’s principal financial liabilities comprise Notes, loans and borrowings, trade and other payables. The
main purpose of these financial liabilities is to raise finances for the Group’s operations. The Group has trade and
Page
The compensation of key management personnel of the Group amounted to euro 3.8 million with regard to
short-term remuneration (euro 4.6 million for the year ended December 31, 2011). The amounts disclosed are
the amounts recognized as an expense during the reporting period.
F-7.53
The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s
length transactions. Outstanding balances at the year-end are unsecured, interest free and settlement occurs in
cash. There have been no guarantees provided or received for any related party receivables or payables. For the
year ended 31 December 2012, the Group has not recorded any impairment of receivables relating to amounts
owed by related parties. This assessment is undertaken each financial year through examining the financial
position of the related party and the market in which the related party operates.
Notes
other receivables and cash and short-term deposits that arrive directly from its operations. The Group also holds
financial assets available-for-sale.
The Group' activities expose it to a variety of financial risks: market risk, credit risk, liquidity risk and interest
rate risk. The Group' overall risk management program focuses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on the Group' financial performance. Risk management, such as
identification, evaluation and management of financial risks, is carried out by the Group' finance department.
The exposure to the various market risks can be measured by sensitivity analyses, in accordance with IFRS 7.
These analyses illustrate the effects produced by a given and assumed movement in the levels of the relevant
variables in the various markets (exchange rates, interest rates and prices) on financial income and expense and,
at times, directly on shareholders’ equity. The sensitivity analyses were performed by applying reasonably
possible movements in the relevant risk variables to the amounts in the financial statements at December 31,
2012 and 2011, assuming that such movements are representative of the entire year.
Exchange rate risk
The Group is subject to an exchange rate risk relating to trade receivables and payables stated in US Dollar. The
Group’s exposure to foreign currency changes for all other currencies is not material.
Foreign exchange risk arises from future purchase and service transactions, recognized assets and liabilities and
net investments in foreign operations. The Group did not enter into foreign exchange contracts or other financial
instruments in order to hedge its foreign exchange risk.
The Group holds unlisted collective investment fund through the Irish subsidiary Rottapharm Ltd, which
includes equity, alternative and private equity funds, all denominated in US Dollars.
The valuation of equity alternative and private equity funds investments is based on the last available net asset
value obtained from the brokers. This financial assets in classified as available-for-sale.
The following table shows a sensitivity analysis regarding the possible variation of the US Dollar exchange rate,
maintaining unchanged all other variables, and the effects of such variation on pre-tax income.
€ million
Effect on pre-tax income for financial & trade receivable and payable
Variation in USD exchange
rate
2011 Revaluation 10%
Devaluation 10%
10.5
-12.8
2012 Revaluation 10%
Devaluation 10%
2.9
-3.5
There are no direct effects on shareholders’ equity since the Group did not have any derivative instrument
relating to exchange rate hedging, at the end of each fiscal year.
Page
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates has been
significantly reduced in the current year with the restructuring of its financial debt described in Note 20, through
which the Group obtained the fixing of rates on the major part of the debt. In particular it was due to the issue of
the Notes at a fixed rate of 6.125% and to the subscription of the new loan agreement with Mediobanca S.p.A.,
based on a variable rate then hedged with an interest rate swap to a fix rate of 3.20%.
Accordingly, of the Euro 583.4 million carrying amount of the financial liabilities related to loans from bank
institutes and Notes, about Euro 493.8 million refer to fixed rate liabilities.
F-7.54
Interest rate risk
Notes
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the portion
of loans and borrowings at variable rates, considering the impact of hedge accounting since not significant in
term of loan hedged with respect to the total loan. With all other variables held constant, the Group’s profit
before tax is affected through the impact on floating rate borrowings as follows:
€ million
Variation in Euribor rate
Effect on pre-tax income
2011
+100 bps
-100 bps
-6.6
6.6
2012
+100 bps
-100 bps
-3.7
3.7
Market risk
The Group’s securities (mainly equities and collective investment funds) are susceptible to market price risk
arising from uncertainties about future values of the investment securities. The Group manages the price risk
through diversification and placing limits on individual and total equity instruments and funds. Reports on the
investment portfolio are submitted to the Group’s senior management on a regular basis. The Group’s Board of
Directors reviews and approves all equity investment decisions.
At the reporting date, the exposure to investment collective funds at fair value was Euro 3.3 million.
The effect on the statement of income of a decrease for such percentages depends on whether or not the decline
is significant or prolonged. An increase of 10% in the value of the financial assets would only impact the
shareholders’ equity of the Group.
€ million
2011
2012
Effect on pre-tax income for Portfolio investment
Variation in Stock price
Revaluation 10%
13.2
Devaluation 10%
-13.2
Revaluation 10%
0.3
Devaluation 10%
-0.3
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual
undiscounted payments:
Page
The Group manages the liquidity risk by strictly controlling its net working capital components. In order to
optimize its cash management thus limiting the liquidity risk, the Group has in place a central system suited to
measure and monitor the net financial exposure of each company in the Group. Management monitors the Group’
cash position on rolling forecasts based on expected cash flow to enable the Group to finance its operating
activities and to reimburse the loans at the maturity dates. The business plans (based on a 3-year plan) supports
the expected cash-flows of the Group. The excess of liquidity, when not needed to reimburse the loans, is
invested in short-term investments with a medium risk profile (described above). In order to better manage the
liquidity needs, the Group is entered in contracts with factoring companies for the sale of accounts receivable in
Italy, Germany, Spain, France and Portugal.
It should be noted that in earlier years the Group took on a considerable debt that will be met also by using the
expected cash flows from operations and a cash available at the date.
F-7.55
Liquidity risk
Notes
Within 6
months
Senior Notes
Loans from banks
Financial liabilities to factoring companies
Trade and other payables
Total
12,250
13,369
12,765
1,705
733
71,213
112,035
Within 6
months
Loans from banks
Trade and other payables
Financial liabilities for leasing
Total
57,585
43,331
9,500
13
322
775
111,526
6 to 12
months
1 to 2 years
2 to 3 years
12,250
45,675
24,500
47,500
24,500
42,523
1,607
2,510
1,757
4,733
64,265
74,510
68,780
6 to 12
months
2 to 3
1 to 2 years
years
238,209
35,324
44
273,577
133,100
133,100
197,677
197,677
more than
3 years
Total
498,000
40,161
571,500
189,228
12,765
1,446
9,025
733
75,946
539,607 859,197
more than
3 years
6,500
6,500
Total
633,071
78,655
9,500
57
322
775
722,380
The capacity of the Group to face its financial debt is ensured by the cash available and the future cash inflows
resulting from the Group economical and industrial plan.
Credit risk
The Group is exposed to credit risk from its operating activities and from its financing activities, including
deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
With regard to the trade receivables of the Group, the customer credit risk is managed by each subsidiary
applying proper procedures and control relating to customer credit risk management. Credit limits are
established for all customers based on internal rating criteria. Credit quality of the customer is assessed based on
an extensive credit rating scorecard. Outstanding customer receivables are regularly monitored and any
shipments to major customers are generally covered by letters of credit or other form of credit insurance.
Page
F-7.56
The requirement for an impairment is analyzed at each reporting date on an individual basis for major clients.
Additionally, a large number of minor receivables is grouped into homogenous groups and assessed for
impairment collectively. The calculation is based on actually incurred historical data. The maximum exposure to
credit risk at the reporting date is the carrying value of each class of financial assets disclosed in previous notes.
The Group does not hold collateral as security. The Group has not adopted any policy regarding credit risk
management.
Notes
The following table shows the due date of the receivable:
Description
Trade receivables
Of which allowance for doubtful
accounts
Other receivables
Tax receivables
Accrued income and prepayment
Total
104,159
1-30
days
6,919
31-60
days
4,817
61-90
days
8,495
91-180
days
9,744
181-360
days
13,116
Over 360
days
8,045
155,294
21,149
2,567
2,575
123,321
865
0
21
7,805
17
0
201
5,035
927
0
655
17,191
443
2
230
10,419
18
0
162
13,310
759
1,119
2
9,925
(4,231)
24,178
3,688
3,846
182,775
1-30
days
17,645
31-60
days
2,017
61-90
days
1,903
91-180
days
3,113
181-360
days
(38)
Over 360
days
697
935
0
11
18,591
750
0
0
2,767
111
292
0
8,424
1
1
651
3,766
516
817
0
1,295
223
0
0
920
Not overdue
Description
Not overdue
Trade receivables
95,364
Of which Write off fund
Other receivables
12,262
Tax receivables
1,589
Accrued income and prepayment
2,490
Total
105,586
Total
Total
120,700
(1,511)
14,798
2,699
3,152
139,838
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by Group’s Finance Department in
accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties
and within the limit of an investment strategy that is set to minimize the concentration of risks and therefore
mitigate financial loss through potential counterparty failure. The Group’s maximum exposure to credit risk for
the components of the statement of financial position at December 31, 2012 and 2011 is the carrying amounts as
illustrated in previous notes. The carrying amount of all financial instruments (assets and liabilities) is equal to
their fair value, except for the Notes which have been listed on the Official List of the Irish Stock Exchange and
admitted to trading on the Global Exchange Market of the Irish Stock Exchange. Based on the price quotation as
of December 31, 2012 the fair value of the Notes was Euro 411.6 million, higher than the carrying amount.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
 Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
 Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly
 Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not
based on observable market data
Page
 financial assets available for sale for Euro 3.3 million (Euro 102.7 in 2011). This financial assets could be
identified as Level 1, since its fair value is derived from quoted market prices in active markets. The
valuation of these equity alternative and private equity funds investments is based on the last available
net asset value obtained from the brokers. The listed investments are valued at market rates at the
balance sheet date;
F-7.57
As described at paragraph 16 and 20, as of December 31, 2012 the Group held the following financial
instruments carried at fair value on the statement of financial position:
Notes

financial liabilities for cash flow hedge derivatives for Euro 8.9 million (Euro 53 in 2011) and financial
asset for embedded derivatives for Euro 0.4 million. This financial liabilities could be identified as Level
2, since its fair value is determined using a valuation technique with market observable inputs, which
includes a swap model, using present value calculations. The model incorporate various inputs including
the credit quality of counterparties and the interest rate curves.
During the year ended 31 December 2012, there were no transfers between Level 1 and Level 2 fair value
measurements.
38.
Statement of cash flows
According to the requirements of IAS 7, the table below shows the detail of the additional information related to
the analysis of the cash flows of the Group:
2012
2011
Income tax expense paid
Interest paid to third parties
Interest collected from third parties
29,265
18,653
595
36,446
21,439
334
Total
48,513
58,219
39.
Event after the reporting period
On January 14th, 2013, Rottapharm S.p.A. subscribed No. 11,850 newly issued shares of the Marco Tronchetti
Provera & C S.p.A., for a unit value of Euro 1,585.00 each, plus a share premium of Euro 16,929,265.50 for a total
value of Euro 35,711,515.50. This investment is designed to support and develop industrial initiatives in the field
of trading commodities and raw materials, with particular interest in the initiative already started by Marco
Tronchetti Provera & C S.p.A. with a Chinese partner in the pharmaceutical sector in relation to all the raw
materials and active ingredients utilized by Rottapharm for its core activities.
On March 1st, 2013, the Group has acquired from Novartis Consumer Health the Zyma® Brands for Euro 24,75
million. Zyma® Brands are leading products in the Vit D and Fluoride supplement segments and is sold in in 19
countries including France, Germany, Italy. The Brands are primarily targeted for use in pediatric patients for the
prevention of dental caries (Zymafluor®), the prevention and treatment of rickets (ZymaD®) or for preventing
both conditions simultaneously (Zymaduo®/Zymafluor®D), but they have increasing relevance to the adult and
geriatric markets thanks to Vit D. The products occupy leading shares in their categories in the major markets.
Total net revenue from sales of the Zyma® Brands in 2012 amount to Euro 16.6 million, with over 90% of sales
generated in the three major European markets of France, Italy and Germany. In France, where Zyma sales total
over Euro 10 million, Rottapharm S.a.s. has taken over some 50 people from Novartis Santé Familiale to run the
business Zyma and strengthten its position and whole portfolio’s promotion to the doctors.
Page
The Chairman of the Board of Directors
F-7.58
No other significant events or transactions have occurred since the balance sheet date that may have a significant
impact the future performance of the group, or that are of such significance in relation to the Group affairs to
require mention in a note to the consolidated financial statements.

Consolidated financial statement, December 2012

Transcription

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