A Timoteo, (mi) genuino hijo en la fe;

wholesale

The tense financial situation affecting European budgets triggered fierce competition and austerity measures, which also impinged on the wholesale busi- ness, albeit to a lesser extent than in our pharmacy business.

France

As in the previous year, our business in France – our most important whole- sale market – was characterised by fierce competition. Consequently, we once again saw revenue and gross profit figures fall at our French wholesaler ocp, a development that our new service offering only partly made up for. For instance, we developed e-learning modules for our partners as well as a new marketing concept, e-detailing, that boosts cost efficiency in a tailored and interactive way. Together with our customers, we also developed our “New Commercial Partner- ship” programme, which optimises discount models at participating pharmacies. “Pharmactiv” also developed well once again. With 1,289 partners now involved in this pharmacy cooperation programme, we believe that it provides a promising basis for our new strategy.

The French market is set to remain tense in the coming year – please read the outlook starting on ➞ page 145 for more information.

e-detailing is a marketing term used in the pharmaceutical industry to describe

discussion on medicines and pharmaceutical products using electronic media. e-detailing is a type of e-learning or product training used as part of the marketing mix in direct marketing and customer loyalty programs. Traditional consulting services provided to pharmacists by a pharmaceutical representative are enhanced in an interactive and tailored online approach.

United Kingdom

Our uk wholesaler aah developed particularly well. Despite a slight decrease in revenue over the reporting period as a whole, we were able to improve margins by introducing operating measures such as optimising purchasing terms. Along- side the dtp (direct to pharmacy) model, the trend towards reduced whole- sale models also continued. As market leader, we are a preferred partner for manufacturers for both models. Our services are also in demand for exclusive special arrangements that go beyond the scope of ordinary wholesale expertise.

Starting in 2012, aah will supply pharmacies, clinics and physicians with these specialty pharmaceuticals. Our uk wholesaler will benefit from our know-how with regard to special medicines of this kind, which need to be cooled and monitored throughout the transport chain. Exclusive agreements like this are highly coveted in the industry and therefore of particular importance for us.

The reduced wholesale model is a concept whereby pharmaceutical manu-

facturers supply a selected number of wholesalers for certain products and product groups.

The market continued to respond well to our customer loyalty scheme “All About Health”, which we launched in 2010 to raise health awareness among patients and consumers and inform them of pharmacies’ services.

We further adjusted our branch network in the course of implementing our Operational Excellence Program and decided to close our warehouse in Langley in the 2012 fiscal year.

Direct to pharmacy means the direct supply of pharmacies by manufacturers,

a model in which the wholesaler acts solely as the carrying agent and is at no stage the owner of the goods.

Germany

In 2011, the German pharmaceutical and healthcare market was character- ised above all by legal initiatives such as the price moratorium and the Gesetz zur Neuordnung des Arzneimittelmarktes (amnog, Act for the Restructuring of the Pharmaceutical Market in Statutory Health Insurance). The price moratorium came into force in early 2011, together with the increase in fixed mandatory discounts for prescription medicines without price caps. These initiatives aim to contain the steady rise in spending on pharmaceuticals and ensure comprehen- sive supply by wholesalers. According to the German government’s planning, the savings secured will alleviate the burden on health insurers by around eur 1bn per year, reducing the impact of the multi-billion euro deficit originally expected for the German health insurers. 1)

The amnog also provides for a further change affecting compensation of pharmaceutical wholesalers as of 1 January 2012. Instead of receiving a percentage-based mark-up, as was previously the case, wholesalers will receive a fixed amount of 70 cents plus a variable percentage-based mark-up of up to

i

3.15% on the manufacturer sales price. Competition increased in Germany as a result in 2011. All market participants wanted to secure the largest market share possible, leading to a marked drop in earnings in Germany.

Despite the tough market environment and continuing pressure from competition, gehe managed to defend its market share – in part thanks to the development and successful distribution of innovative services such as WAWITop and e-Placement. WAWITop is a tailored solution for pharmacists looking to optimise their inventory management system. It can help bring about a significant reduction in the operating expenses of a pharmacy. e-Placement, which gehe showcased to participants in our pharmacy cooperation scheme “gesund leben“ in October 2011, is an additional innovative solution for phar- macists to implement locally. Our studies show that this innovative system can boost pharmacies’ gross profit considerably in certain segments – mainly thanks to targeted placement of products on display depending on season, for example. Unlike traditional category management instruments, e-Placement considers the actual situation in each pharmacy, ensuring an optimal range selection and presentation according to the local requirements of the phar- macy customers.

In a pharmacy, display products are medicines that are visible but not freely

accessible to customers. They are usually positioned behind the sales counter.

The process optimisation measures included in our Operational Excel- lence Program also affect gehe; for instance, we have decided to optimise our branch network.

Brazil

Panpharma developed according to plan. Revenue grew in the market in which it operates, and we were particularly pleased that Panpharma managed to secure year-on-year percentage growth in the high single-digit range for gross profit. This development can be attributed to our strong focus on qualitative growth, which was achieved by concentrating on independent pharmacies and generic pharmaceuticals and leveraging the strong market position in the refer- rals business. As market leader with a national sales network and strong capital backing, Panpharma also managed to position itself as the central distribution partner of the largest generics provider in Brazil. Panpharma can anticipate greater efficiency and therefore good earnings developments following the

introduction of new technology by Celesio over the course of the year. Better product availability will also boost our appeal.

On 7 October 2011, we acquired a majority interest of 60% in the Oncoprod Group, Brazil. Oncoprod is the leading wholesaler for specialty pharmaceuticals in Brazil. With the takeover, we attained leadership in the Brazilian specialty pharmacy market. Unlike in Europe, specialty pharmaceuticals such as cancer medicines are only available from hospitals and specialist clinics in Brazil, not from pharmacies. Due to the special storage and transport requirements for these medicines, distribution and supply is performed by specialist pharmaceutical wholesalers such as Oncoprod. The company was founded in 1995 and now has over 300 employees at seven locations in Brazil. Revenue of around eur 400m was generated in 2011.

Austria

Market conditions in Austria remained stable, supporting the positive devel- opment of our Austrian wholesaler Herba Chemosan. Herba saw revenue from non-prescription medicines increase by 3.5%, while revenue from prescription products was up 1.1%.

Portugal

The Portuguese pharmaceutical and healthcare market is suffering pain- fully as a result of the country’s overall economic situation. Like all coun- tries confronted by the debt crisis and budget deficits, drastic cost-cutting programmes are affecting the healthcare system – measures that also influence the wholesale business. In particular, the market felt the negative effect of price cuts in 2011. In addition, a new margin system was approved in November 2011. This will replace the current fixed lump-sum compensation with a system that combines decreasing margins and lump-sum components.

ocp Portugal stepped up cooperation with industry partners to defend market shares and at least go some way towards countering these negative effects.

As a result of the economic developments in Portugal and the increase in country risk premiums and discount rates, our extraordinary impairment test of assets revealed the need to recognise an impairment loss of eur 23.3m on the goodwill of opc Portugal. Bad debt allowances were also increased.

Norway

Business was satisfactory overall at our wholesaler Norsk Medisinaldepot (nmd). nmd moved into a large new warehouse in Oslo in 2011.

Belgium

Tougher competition caused us to lose market shares in Belgium. Our pharmacy cooperation programme Pharmactiv developed well, however, with 185 pharmacies having joined the programme since its launch at the end of 2010.

There was a change in government in December 2011. We assume that the announced restructuring programme will also affect the healthcare sector.

Denmark

The Danish pharmaceutical and healthcare market saw the market contract by 8% in 2011. This breaks down as a decline of 11% in the market for hospital pharmacies and 6% for private pharmacies. Growing competition for generic products was accompanied by plummeting prices.

Our wholesale subsidiary Tjellesen Max Jenne managed to capture a consid- erable share of the market in the second half of the year thanks to the optimisation of automated ordering systems and increased marketing and sales activities. Celesio had to recognise impairment losses of eur 21.0m on the wholesale business in Denmark following an extraordinary impairment test of assets. The impairment loss primarily reflects the market decline and fierce competition. Accompanied by lower margins and profit, this trend will continue to impact negatively on operating results in the Danish wholesale business.

Ireland

Ireland is also suffering from a weak economic environment and government austerity measures. Price cuts were introduced three times in the past year alone, directly impacting on the wholesale margin. Our Irish wholesaler Cahill May Roberts fell considerably short of operating targets as a result.

Czech Republic

The Czech market remained challenging in 2011. gehe Praha nevertheless managed to increase revenue, although margins fell.

Slovenia

Kemofarmacija, our wholesaler in Slovenia, once again generated good earn- ings. However, for the first time the market environment in Slovenia presented more of a challenge than in previous years. In particular, one of our former customers disrupted the market by setting up a wholesale business, fuelling intense competition.

Italy

Government measures, coupled with falling demand for prescription pharma- ceuticals, set the scene for a troubled market environment in Italy. Our regional wholesaler afm managed to hold its own nevertheless – mainly as a result of redrafting existing agreements – and generated good earnings. Furthermore, cost savings were realised following measures to optimise storage and transport processes.

other business areas

The earnings development at Rudolf Spiegel Versand followed the trend of the previous year.

The Manufacturer Solutions division bundles our service offering for the pharmaceutical industry. Pharmaceutical manufacturers in particular are confronted with aggressive competition in today’s rapidly evolving pharma- ceutical and healthcare market. Some pharmaceutical manufacturers therefore increasingly focus on their core competencies, relying on external providers of pharmaceutical services at certain points along the value-added chain. Manu- facturer Solutions and the business areas within the division offer services to meet these demands.

In September 2011, we reached an agreement with Medco Health Solutions, Inc. to discontinue our joint services for chronically ill patients with effect as of the end of the third quarter. Consequently, we sold our 50% share in Medco Celesio b.v., the joint venture founded in 2010, to Medco Health Solutions, Inc.