INTERIM REPORT - mb.cision.commb.cision.com/Main/9273/2580894/882794.pdf · SEK 362 million, an...

INTERIM REPORT JANUARY – JUNE 2018

Recipharm AB (Publ) Interim report, January – June 2018 / 2 /

Q2

INTERIM REPORT

APRIL – JUNE 2018 • Net sales amounted to SEK 1,701 million (1,401), an increase of 21% • EBITDA increased by 27% and amounted to SEK 307 million (242)

corresponding to an EBITDA margin of 18.1% (17.3) • Operating profit (EBIT) amounted to SEK 262 million (123) • Profit after tax amounted to SEK 165 million (76) corresponding to a net

margin of 9.7% (5.4) • Earnings per share amounted to SEK 2.59 (1.19) before dilution and SEK

2.59 (1.19) after dilution • Acquisition of the remaining 26% minority shares in Nitin Lifesciences

Ltd • New share issue raising proceeds of SEK 508 million before transaction

costs • Divestment of the rights to ThyroSafe® for a total consideration of EUR

9.5 million • Signed agreement to acquire an inhalation CMO in Holmes Chapel, UK

JANUARY – JUNE 2018

• Net sales amounted to SEK 3,213 million (2,729), an increase of 18% • EBITDA increased by 39% and amounted to SEK 557 million (401)

corresponding to an EBITDA margin of 17.3% (14.7) • Operating profit (EBIT) amounted to SEK 382 million (168) • Profit after tax amounted to SEK 210 million (77) corresponding to a net

margin of 6.5% (2.8) • Earnings per share amounted to SEK 3.30 (1.15) before dilution and SEK

3.30 (1.15) after dilution • Net debt to Equity was 0.6 (0.6)

1/ APM: Alternative Performance Measures, see financial definitions after note 5. 2/ See page 23 for a bridge from EBITDA to EBIT

KEY FIGURES

Apr – Jun

Jan - Jun Jul 17 – Jun 18 Jan - Dec

SEK million 2018 2017 Change

in % 2018 2017 Change

in % 2017 Net sales 1,701 1,401 +21 3,213 2,729 +18 5,817 5,332 EBITDA1/2/ 307 242 +27 557 401 +39 885 730

EBIT1/2/ 262 123 +114 382 168 +128 206 -9 EBITDA margin (%)1/ 18.1 17.3 17.3 14.7 15.2 13.7 Earnings per share (SEK)1/ 2.59 1.19 3.30 1.15 -0.43 -2.70 Return on equity (%), adjusted1/

2.2

3.4 1.6

Equity per share (SEK)1/ 80.8 75.2 71.9 Equity ratio (%)1/ 43.0 46.1 41.5 Net debt1/ 3,336 3,256 3,422 Net debt to Equity1/ 0.6 0.6 0.7 Net debt to EBITDA1/ 3.8 4.2 4.7

21% Sales increase

307 MSEK, EBITDA

18.1% EBITDA margin


Q2

COMMENTS BY THOMAS ELDERED, CEO

Our best quarter ever

In the second quarter total sales increased 21 per cent over the previous year and we continue to see solid growth and improved performance. Increased sales, mainly from recently expanded capacities, in Wasserburg, Germany and Kaysersberg, France contributed more than 3 per cent to group growth. Our India based operations reported 37 per cent growth in local currency, thereby contributing almost 4 per cent to group growth. Altogether, at SEK 1.7 billion, sales reached an all-time high for a quarter. Growth in continuing operations, adjusted for currency translation effects and acquisitions, for the quarter was more than 17 per cent. EBITDA increased 27 per cent and was also the highest ever for a quarter. EBITDA-margin increased to 18.1 per cent. In the Sterile Liquids segment, we are gradually ramping up sales from the expanded lyophilization capacity in Wasserburg and the expanded blow-fill-seal capacity in Kaysersberg. Profit growth is slower than sales during the build-up phase. We have also made initial deliveries from the expanded lyophilization capacity in Italy, a quarter ahead of plan. Continuing operations in the Solids and Others segment generated good growth. Sales from the new outsourcing contract in Leganés, Spain followed plan. Good contributions to growth also came from new contracts elsewhere, primarily with large pharma companies. Temporary phasing effect and new contracts contributed favorably to improved EBITDA-margin. While the growth in Solids and Others is adding significantly to total profit, the somewhat lower margin in this segment will lower overall margin. The Development & Technology segment reported good growth, mainly by increased sales based on our own IP and product rights. Due to generic competition for a certain customer we have a reduced royalty income. During the quarter we have started to see positive sales and profit impact from the ongoing reshaping of our group-wide development services organisation, a work that will continue throughout the year. In June we divested certain product rights for potassium iodide tablets, generating a non-recurring income of SEK 97 million, not included in EBITDA. Recipharm will continue to manufacture the product. Due to uncertain third party financing we have decided to make a SEK 30 million impairment charge of our investments in an US pharmaceutical technology company. Increased sales require increased working capital and operating cash flow decreased by SEK 35 million. Following the total of SEK 580 million equity issues in June our net debt to equity ratio was 0.6, well in line with our policy. As projects finish we will see less capex and supported by increased profit, leverage will continue to decrease. In June we signed an agreement with Sanofi to acquire an inhalation CMO in Holmes Chapel, UK. This acquisition will add another attractive technology to our service offering. Work is ongoing to prepare for completion which is expected to happen during the fourth quarter. We are benefitting from our global reach and our competitive value proposition to customers. With our important investments and acquisitions we are taking leadership in selected markets. Our objectives and strategies remain unchanged. We will continue to build powerful, long lasting partnerships with strategically important customers, in addition to adding further technologies and differentiating businesses, based on customer needs.

The company invites investors, analysts and media to a telephone conference with a web presentation (in English) on 25 July at 10.00 am CET where CEO Thomas Eldered and CFO Karl G Lindström will present and comment on the interim report and answer questions. Information about the conference can be found on the company website: www.recipharm.com


Q2

REVENUES

NET SALES PER SEGMENT

Apr – Jun Jan – Jun Jan - Dec


in % 2018 2017

Change in % 2017

Sterile Liquids 642 558 +15 1,206 1,092 +10 2,126

Solids & Others 754 582 +30 1,400 1,096 +28 2,141

Development & Technology 261 217 +20 518 444 +17 874 Discontinued operations 87 85 +3 165 168 -2 339 Eliminations and others -44 -41 -77 -73 -148 Total 1,701 1,401 +21 3,213 2,729 +18 5,332

APRIL - JUNE 2018 Net sales Net sales increased by SEK 300 million and amounted to SEK 1,701 million, an increase of 21 per cent. Sales, excluding currency effects increased by SEK 243 million, an organic growth rate of 17 per cent. The increase is driven by the new manufacturing contract in Spain, effects from new expanded capacity in Sterile segment, and normalized sales in India compared to transition- and tax reform issues last year. Other operating revenue Other operating revenue amounted to SEK 147 million (46), where the variance is generated by gains from the sale of Thyrosafe product rights. The increase in recharges and currency revaluation effects was offset by SEK 10 million lower royalty revenues in the quarter.

NET SALES BY QUARTER

JANUARY – JUNE 2018 Net sales Net sales increased by SEK 484 million and amounted to SEK 3,213 million, an increase of 18 per cent. Sales, excluding acquisition and currency effects increased by SEK 362 million, an organic growth rate of 13 per cent. The increase is mainly due to a new manufacturing contract in Spain, sterile capacity expansion effects, a combination of demand and normalized sales after transition issues in India last year, and continued strong development for our own products. Other operating revenue Other operating revenue amounted to SEK 188 million (81), an increase related to the sale of Thyrosafe product rights. Pass-through costs and currency gains compensated the reduction of SEK 17 million in royalty income in the period.

0

500

1 000

1 500

2 000

SALES BRIDGE, APR – JUN

Sales, SEK million Sales, % 2017 1,401 Currency +57 +4 Acquisitions - - Organic +243 +17 Total +300 +21 2018 1,701

SALES BRIDGE, JAN – JUN

Sales, SEK million Sales, %

2017 2,729

Currency 93 +3

Acquisitions 29 +1

Organic 362 +13

Total 484 +17

2018 3,213

Recipharm AB (Publ) Interim report, January – June 2018

/ 5 /

RESULTS

EBITDA PER SEGMENT

Apr – Jun Jan - Jun Jan – Dec


in % 2018 2017 Change

in % 2017 Sterile Liquids 129 122 +6 240 212 +14 391 Solids and Others 133 97 +37 231 154 +51 249 Development & Technology 72 45 +61 125 88 +42 192 Discontinued operations 2 1 +45 7 -12 +156 -20 Eliminations and others -29 -23 -46 -40 -82 Total 307 242 +27 557 401 +39 730

APRIL - JUNE 2018 EBITDA EBITDA amounted to SEK 307 million (242), an increase by 27 per cent. The EBITDA margin to sales increased from 17 per cent to 18 per cent. The increase was mainly due to a new manufacturing contract in Spain, normalization after transition issues in India, efficiency ratios within the Development services and price effects for our own products. Raw materials and consumables Raw materials and consumables amounted to SEK 511 million (404). The materials ratio to sales has increased 1 percentage points to 30 (29) per cent. This change was mainly caused by mix and phasing effects. Other external costs Other external costs amounted to SEK 372 million (322), an increase mainly due to currency and the new manufacturing contract in Spain. The ratio to sales decreased 1 percentage points to 22 per cent (23) mainly driven by productivity and efficiency improvements in D&T segment. Employee benefits expense Employee benefits expense amounted to SEK 553 million (462). The increase is mainly related to the new manufacturing contract in Spain, and capacity expansion in the Sterile Liquids segment. The ratio of employee benefits expenses to sales remained steady at 33 per cent (33). Depreciation, amortisation and impairment Depreciation and amortisation amounted to SEK 138 million (120), of which SEK 74 million (63) is fixed asset depreciation and SEK 64 million (57) is amortisation of intangible assets. The increase adjusted for acquisitions and currency is a consequence of sterile capacity investments in France and Germany. Financial items Interest income and similar revenues amounted to SEK 7 million (1) of which SEK 7 million (0) were currency exchange rate gains. Interest expenses and similar costs amounted to SEK 77 million (25), of which SEK 38 million (25) was interest expenses and SEK 30 million (0) was an impairment charge of an investment in a US pharmaceutical technology company.

Tax The income tax amounted to SEK 27 million (22). Profit after tax Profit after tax amounted to SEK 165 million (76). EBITDA (SEK MILLION), EBITDA MARGIN PER QUARTER AND LTM EBITDA MARGIN

EBITDA BRIDGE, APR – JUN

SEK million % 2017 242

Currency 9 +4

Acquisitions - -

Other 56 +23

Total 62 +26 2018 307

0,0%

4,0%

8,0%

12,0%

16,0%

20,0%

24,0%

050

100150200250300350

EBITDA EBITDA % EBITDA%, LTM

Recipharm AB (Publ) Interim report, January – June 2018

/ 6 /

JANUARY – JUNE 2018 EBITDA EBITDA amounted to SEK 557 million (401), an increase by 39 per cent. The EBITDA margin to sales increased from 15 per cent to 18 per cent. EBITDA excluding acquisitions and currency translation effects increased SEK 128 million mainly due to the new manufacturing contract in Spain, demand and new capacity for sterile products and prices and productivity improvements within Development and technology area. Raw materials and consumables Raw materials and consumables amounted to SEK 942 million (836). Currency effects and acquisitions have added SEK 40 million to the costs. Overall, the material cost ratio to sales has been reduced 2 percentage points to 29 per cent (31). This reduction is mainly caused by an increase in service sales and a sales increase for sterile products. Other external costs Other external costs amounted to SEK 710 million (630). Acquisitions and currency effects amounted to SEK 52 million. The ratio to sales improved to 22 per cent (23) mainly due to utilization effects within Development services. Employee benefits expense Employee benefits expense amounted to SEK 1,070 million (912). The increase is mainly related to the new manufacturing contract in Spain, and capacity expansion in the Sterile Liquids segment. The ratio of employee expenses to sales remained steady at 33 per cent (33). Depreciation, amortisation and impairment Depreciation and amortisation amounted to SEK 268 million (233), of which SEK 138 million (117) is fixed asset depreciation and SEK 127 million (116) is amortisation of intangible assets. The increases were mainly due to capitalization of expansion investments and other investments. Intangible assets for SEK 3 million was written off in the period (1). Financial items Interest income and similar revenues amounted to SEK 18 million (3) of which SEK 17 million (0) were currency exchange rate gains. Interest expenses and similar costs amounted to SEK 122 million (55), of which SEK 73 million (44) was interest expenses and SEK 30 million (0) was an impairment charge of an investment in a US pharmaceutical technology company. Tax The income tax amounted to SEK 70 million (39). Profit after tax Profit after tax amounted to SEK 210 million (77)

ACQUISITIONS The acquisition completed during the last 12 months was an additional 26 per cent stake in Nitin Lifesciences Ltd in India, on January 2 and June 13 2018. For additional information related to the acquisitions, refer to note 2.

EBITDA BRIDGE, JAN - JUN


Currency 18 +4

Acquisitions 6 +1

Other 132 +33

Total 156 +39 2018 557


Q2

MANUFACTURING SERVICES – STERILE LIQUIDS

The Sterile Liquids business segment manufactures sterile products on behalf of pharmaceutical companies and covers sterile technologies for liquid vials and ampoules, including lyophilisation and blow-fill-seal (BFS).

• Sales increased by 15% • EBITDA increased by 6% • EBITDA margin of 20.1% (21.9)

APRIL – JUNE 2018 Net sales Sales for Sterile Liquids increased by SEK 84 million to SEK 642 million, an increase of 15 per cent. Excluding currency translation effects sales increased by 10 per cent mainly due to utilization of newly extended lyophilisation and BFS capacity, and normalization of operations in India. EBITDA EBITDA for Sterile Liquids increased by SEK 7 million to SEK 129 million, equivalent to an EBITDA margin of 20 per cent (22). Adjusted for currency the EBITDA was approximately the same, hence the positive effects from sites with new manufacturing capacity were offset by standstills due to technical issues in a different sterile site.

JANUARY – JUNE 2018 Net sales In the first half of 2018 Sterile Liquids revenues increased by SEK 113 million to SEK 1,206 million, an increase of 10 per cent, mainly due to the capacity expansion for lyophilised- and BFS products. EBITDA EBITDA for Sterile Liquids increased by SEK 28 million to SEK 240 million, equivalent to an EBITDA margin of 20 per cent (19). Adjusted for currency translation effects EBITDA increased 10 per cent mainly due to sales volume in BFS and freeze-dry technologies offset by lower output in other injectable products.


SEK million % 2017 558 Currency 28 +5

Acquisitions - - Organic 56 +10 Total 84 +15 2018 642


SEK million % 2017 122 Currency 5 4 Acquisitions - - Other 2 2 Total 7 6 2018 129


Q2

MANUFACTURING SERVICES – SOLIDS & OTHERS

The Solids & Others business segment produces tablets, capsules, semi-solids and non-sterile liquids on behalf of pharmaceutical companies. The segment analysis has excluded the manufacturing operations to be discontinued in Stockholm and Höganäs.


APRIL – JUNE 2018 Net sales Sales in Solids & Others increased by SEK 172 million to SEK 754 million, an increase of 30 per cent. Adjusted for acquisition and currency translation effects sales increased by 26 per cent compared to last year. The increase is mainly due to the new manufacturing contract in Spain and recovery efforts from technical problems in first quarter. EBITDA EBITDA for Solids & Others increased by SEK 36 million to SEK 133 million, corresponding to an EBITDA margin of 17.6 per cent (16.7). The increase is mainly related to the new manufacturing contract in Spain and positive currency effects, offset by negative phasing effects.

JANUARY – JUNE 2018 Net sales Solids & Others increased sales by SEK 304 million to SEK 1,400 million, an increase of 28 per cent. Adjusted for acquisition and currency translation effects sales increased by SEK 244 million compared to last year. The increase is mainly due to a new manufacturing contract in Spain, and positive demand in a number of markets. EBITDA EBITDA for Solids & Others increased by SEK 78 million to SEK 231 million, corresponding to an EBITDA margin of 16.5 per cent (14.0). The increase is mainly related to the new manufacturing contract in Spain and the stronger demand has provided for better capacity utilization.



Currency 22 +4

Acquisitions - -

Organic 150 +26

Total 172 +30 2018 754



Currency 5 5

Acquisitions - -

Other 31 32

Total 36 37 2018 133


Q2

DEVELOPMENT & TECHNOLOGY

The business segment Development & Technology provides pharmaceutical development services. It also includes patents, technologies and product rights, and sales of own products to distributors and partners.


APRIL – JUNE 2018 Net sales Development & Technology increased sales by SEK 45 million to SEK 261 million, an increase of 21 per cent. The sales, excluding currency effects, increased by SEK 36 million mainly due to good demand for development services, normalization of operations in India and both positive price and volume effects for own products. EBITDA EBITDA for Development & Technology increased by SEK 26 million to SEK 72 million, equivalent to an EBITDA margin of 26.9 per cent (20.6). The currency translation effect was SEK 4 million. EBITDA, excluding acquisitions, increased by SEK 22 million mainly due to improved capacity utilization in development services and price and volume effects for our own products

JANUARY – JUNE 2018 Net sales Development & Technology increased sales by SEK 74 million to SEK 518 million, an increase of 17 per cent. The acquisitions contributed with SEK 6 million and the currency translation effect was SEK 16 million. The sales, excluding acquisitions and currency effects, increased by SEK 53 million, mainly due to normalization of Indian business, good demand for development services and positive price and volume effects for own products. EBITDA EBITDA for Development & Technology increased by SEK 40 million to SEK 125 million, equivalent to an EBITDA margin of 23.7 per cent (19.8). EBITDA adjusted for currency and acquisitions increased by SEK 36 million mainly due to capacity utilization for the development services as well as price and volume for own products.



Currency 9 +4

Acquisitions - -

Organic 36 +17

Total 45 +21 2018 261



Currency 4 +9

Acquisitions - -

Other 22 +50

Total 26 +59 2018 72


Q2

CASH FLOW

Apr – Jun Jan - Jun Jan - Dec

SEK million 2018 2017 2018 2017 2017 CF operating activities before changes in WC 265.4 191.5 449.6 272.8 455.7

CF from changes in working capital (WC) -146.4 -37.9 -283.3 -143.9 -104.3

CF from investing activities -69.3 -197.8 -475.0 -1,233.4 -1,585.4

CF from financing activities 555.3 -26.6 607.2 865.9 1,306.3

Total 604.9 -70.8 298.5 -238.6 72.3

APRIL – JUNE 2018 Cash flow from operating activities before changes in working capital was to SEK 265.4 million (191.5) while changes in working capital was SEK -146.4 million (-37.9). Cash flow from investing activities was SEK -69.3 million (-197.8) of which SEK -119.9 million (-139.9) was investments in property, plant and equipment and SEK 60.7 was proceeds from the divestment of the product right ThyroSafe ®. Cash flow from financing activities was SEK 555.3 million (-26.6) of which SEK 508 million was a new share issue announced 14 June.

JANUARY – JUNE 2018 Cash flow from operating activities before changes in working capital was to SEK 449.6 million (272.8) while changes in working capital was SEK -283.3 million (-143.9). Cash flow from investing activities was SEK -475.0 million (-1,233.4) of which SEK -307.2 million was the acquisition of additional shares in Nitin Lifesciences and SEK -215.3 million (-249.5) was investments in property, plant and equipment, and 60.7 was proceeds from the divestment of the product right ThyroSafe ®. Cash flow from financing activities was SEK 607.2 million (865.9), of which SEK 508 million was a new share issue announced 14 June.

FINANCING AND RETURN KEY FIGURES AND RETURN

Jan – Jun Jan - Dec

SEK million 2018, adjusted 2017 2017, adjusted Return on operating capital (%) 4.1 4.5 3.0 Return on equity 2.2 3.3 1.6

Net debt to EBITDA 3.8 4.2 4.7 Net debt to equity 0.6 0.6 0.7 Equity to assets (%) 43.0 46.1 43.4

The return on operating capital decreased to 4.1 from 4.5 last year. The decrease is due to the increase in operating capital from the acquisitions made in 2017 and 2018. Return on equity decreased to 2.2 from 3.3 in the same period in the previous year but increased from 1.6 at the end of 2017. The increase from last year is mainly due to higher profit in the period. The net debt to EBITDA ratio decreased to 3.8 from 4.2 compared to the same period in the previous year. The decrease is mainly due to the increased EBITDA for the period.

Net debt in relation to equity was 0.6 (0.6), below the max target of 0.8. The equity to assets ratio decreased compared to last year partly due to an increase of assets mainly from investments.


Q2

PARENT COMPANY

Recipharm AB (publ) includes Group management and functions that provide services to the business. The parent company’s net sales was SEK 60.1 million (58.9) and operating result was SEK -55.8 million (-46.0) during the period. Investments amounted to SEK 57.9 million (60.9), mainly due to the serialisation project.

EMPLOYEES

The number of employees (equivalent to full-time employees “FTE”) during the period was 4,690 (4,111).

SIGNIFICANT EVENTS DURING THE PERIOD Recipharm appoints new CFO Recipharm announced on May 9 the appointment of Tobias Hägglöv as Recipharm’s new Chief Financial Officer, effective later in the year. Recipharm expands inhalation capabilities with acquisition of Sanofi CMO business Recipharm announced on June 13 the acquisition of Sanofi CMO business located in Holmes Chapel, UK. Recipharm will acquire the assets and business for a consideration of GBP 45 million (SEK 527 million). Supplementary considerations may be made in 2020 and 2021, subject to superior development of the business. The business had LTM March 2018 proforma revenue of GBP 51 million (SEK 597 million) and proforma EBITDA of GBP 8.5 million (SEK 100 million). The acquisition of Sanofi’s manufacturing centre and business provides Recipharm with a solid platform to take further advantage of the growing respiratory drug market. It also adds additional inhalation commercial drug product manufacturing capabilities, complementing services already offered by Recipharm’s inhalation development facility in the US. Recipharm completes a directed issue of 4.0 million Class B shares, raising proceeds of SEK 508 million Recipharm announced on June 14 the direct share issue of 4,000,000 Class B shares at subscription price of SEK 127 per share. Through the issue, Recipharm received proceeds amounting to SEK 508 million before transaction costs. Recipharm divests the rights to its ThyroSafe® product Recipharm announced on June 15 the agreement with SERB SA on a divestment of its rights to its potassium iodide product ThyroSafe® except for the US territory. The total consideration amounted to EUR 9.5 million (SEK 97 million) with EUR 5.9 million paid upon closing and

EUR 3.6 million later, conditional upon reaching certain product development milestones. SERB will according to the agreement have an option to acquire the US rights at a later stage. Recipharm resolves to issue shares with payment in kind to complete the acquisition of Nitin Lifesciences Limited Recipharm announced on June 15 the issue of 558,261 series B shares in the Company. The shares were subscribed for by the Sobti family and payment for the subscribed shares consists of shares in Nitin Lifesciences Limited, as described in Recipharm's press release dated 2 January 2018 in connection with the announcement of the acquisition. The purchase price for the acquired shares, which corresponds to approximately 6 per cent of the total number of shares in Nitin Lifesciences Limited, amounted to INR 600 million (approximately SEK 72 million). Following completion of this acquisition, Recipharm is the holder of all shares in Nitin Lifesciences Limited.


Q2

SHARES Recipharm’s class B shares were first available for trading on Nasdaq Stockholm on April 3 2014.

FINANCIAL CALENDAR Interim report Jan – Sep 2018 November 8, 2018 Interim report Jan – Dec 2018 February 21, 2019

CONTACT INFORMATION: Thomas Eldered, CEO, tel +46 8 602 52 00 Karl G Lindström, CFO, tel +46 8 602 52 00 [email protected]

THE LARGEST SHAREHOLDERS (30 JUNE)

Shareholder Capital (%)

2018 Votes (%)

2018 Flerie Participation AB 1/ 18.2 39.5 Cajelo Invest AB 1/ 11.4 37.3

Lannebo fonder 8.6 2.8 Första AP-fonden 6.0 2.0 Fjärde AP-fonden 5.7 1.9

The undersigned Board members assure that this Interim report provides a true and fair view of the development of the Group’s and Parent Company’s operations, position and performance as well as describing material risks and uncertainties faced by the companies being part of the Group. Stockholm, July 25 2018

Thomas Eldered (CEO) Lars Backsell (Chairman) Carlos von Bonhorst

Anders G. Carlberg Olle Christenson Marianne Dicander Alexandersson

Helena Levander Wenche Rolfsen

1/ Flerie Participation AB is controlled by CEO Thomas Eldered and Cajelo Invest AB is controlled by Chairman Lars Backsell.

This information is information that Recipharm AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 07:45 CET on July 25, 2018. This interim report and other financial information about Recipharm AB (publ) are available at www.recipharm.com. This report is prepared in Swedish and thereafter translated into English. Should any differences occur between the Swedish and the English version, the Swedish version shall prevail. This report has not been reviewed by the company’s auditors.

http://www.recipharm.com/


Q2

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

Apr – Jun Jan - Jun Jan – Dec SEK million 2018 2017 2018 2017 2017 Operating income Net sales 1,700.8 1,400.7 3,213.4 2,728.7 5,331.9 Other operating revenue 146.6 46.1 188.4 81.3 182.7 1,847.4 1,446.7 3,401.8 2,810.0 5,514.6 Operating expenses Raw materials and consumables -510.6 -404.0 -942.3 -835.7 -1,660.4 Other external costs -371.6 -321.6 -709.9 -629.7 -1,350.3 Employee benefits expense -552.8 -462.5 -1,070.1 -911.7 -1,909.5 Depreciation and amortisation -137.8 -119.6 -267.5 -233.3 -533.1 Other operating expenses -13.3 -15.2 -29.7 -29.5 -69.7 Share of result in participations 0.9 -1.4 -0.2 -2.2 -0.3 -1,585.2 -1,324.2 -3,019.6 -2,642.1 -5,523.3 Operating profit 262.2 122.5 382.1 167.9

-8.7

Interest income and similar revenues 6.9 1.3 18.4 3.1 26.0 Interest expenses and similar costs -76.6 -25.3 -121.7 -54.8 -138.7 Net financial income/expense -69.7 -23.9 -103.4 -51.7 -112.7 Profit before tax 192.5 98.6 278.7 116.2 -121.4 Income tax -27.5 -22.4 -69.0 -39.0 -38.6 Profit for the period 164.9 76.2 209.8 77.2 -160.0

OTHER COMPREHENSIVE INCOME

Apr – Jun Jan – Jun SEK million 2018 2017 2018 2017 2017 Items that may be reclassified subsequently to profit or loss Translation differences 87.4 -90.3 196.6 -31.0 -35.9 Gains/losses from fair value valuation of financial instruments -1.2 4.5 -1.6 6.3 35.6 Deferred tax relating to items that may be reclassified 0.3 -1.0 0.4 -1.4 -7.8 Total 86.5 -86.8 195.4 -26.0 -8.1 Items that will not be reclassified to profit or loss Actuarial gains/losses on pensions 0.1 -0.7 0.3 -1.1 3.1 Deferred tax relating to items that will not be reclassified 0.0 -0.1 0.0 0.0 0.9 Total 0.1 -0.8 0.3 -1.1 4.0 Other comprehensive income for the period 86.6 -87.6 195.6 -27.1 -4.1 Comprehensive income for the period 251.5 -11.4 405.4 50.0 -164.1 Net profit distributed to: Parent company´s shareholders 164.0 75.4 208.5 72.9 -170.5 Non-controlling interest 0.9 0.8 1.3 4.3 10.5 Total 164.9 76.2 209.8 77.2 -160.0 Group comprehensive income distributed to: Parent company´s shareholders 235.4 3.7 399.5 54.4 -160.1 Non-controlling interest 16.1 -15.1 5.9 -4.3 -4.0 Total 251.5 -11.4 405.4 50.0 -164.1 Earnings per share before dilution (SEK) 2.59 1.19 3.30 1.15 -2.70 Earnings per share after dilution (SEK) 2.59 1.19 3.30 1.15 -2.70


Q2

CONSOLIDATED STATEMENT OF FINANCIAL POSITION, CONDENSED

Jun 30 Dec 31

SEK million Note 2018 2017 2017 ASSETS

Non-current assets

Product rights 290.0 299.1 295.0 Goodwill 2,589.3 2,635.3 2,486.4 Customer relations 2,329.7 2,182.3 2,360.7 Other intangible assets 215.8 185.8 212.0 Property, plant and equipment 3,092.7 2,718.0 2,884.3 Non-current financial assets 277.6 218.0 266.9 Total non-current assets 8,795.0 8,238.4 8,505.2

Current assets

Inventories 1,119.6 994.8 1,006.4 Accounts receivable 1,341.4 1,043.7 1,054.7 Other receivables 281.9 200.6 291.2 Prepaid expenses and accrued income 111.3 100.0 102.6 Cash and cash equivalents 1,085.4 448.1 770.9 Total currents assets 3,939.6 2,787.3 3,225.8 TOTAL ASSETS 12,734.6 11,025.7 11,731.0

SHAREHOLDERS EQUITY AND LIABILITIES

Share capital 33.9 31.6 31.6 Other paid-in capital 4,593.6 4,026.5 4,026.5 Reserves 259.1 44.8 68.4 Retained earnings (including net profit) 590.3 652.5 422.0 Equity attributable to Parent Company shareholde 5,476.9 4,755.3 4,548.4 Equity attributable to Non-Controlling interest 1.6 325.2 325.5 Total equity 5,478.5 5,080.5 4,874.0

Non-current liabilities

Interest-bearing liabilities 4,383.2 3,681.1 4,154.5 Provisions 509.7 292.7 508.2 Deferred tax liability 953.7 826.6 920.5 Other non-current liabilities 24.5 16.3 21.6 Total non-current liabilities 5,871.1 4,816.7 5,604.8

Current liabilities

Interest-bearing liabilities 17.7 22.9 16.8 Overdraft facility 20.5 0.0 21.8 Account payable 711.3 557.6 614.4 Tax liabilities 55.5 57.0 72.5 Other liabilities 105.7 98.6 99.9 Accrued expenses and prepaid income 474.1 392.4 426.8 Total current liabilities 1,384.9 1,128.4 1,252.2 TOTAL EQUITY AND LIABILITIES 12,734.5 11,025.7 11,731.0


Q2

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEK million Share

capital Other paid-

in capital Reserves

Retained earnings

incl. net profit

Equity attr. to parent

company share-

holders

Non-contr.

interest Total

equity Equity at 1 January 2017 31.6 4,026.5 62.2 666.9 4,787.0 343.1 5,130.1 Profit for the year 2017 -170.5 -170.5 10.5 -160.0

Other comprehensive income 6.4 4.0 10.4 -14.5 -4.1 Non-controlling interest -13.6 -13.6 Transactions with owners: Share-based incentive program 15.6 15.6 15.6 Dividend -94.0 -94.0 -94.0

Equity at 31 December 2017 31.6 4,026.5 68.4 422.0 4,548.5 325.5 4,874.0 Effect from new accounting standards

2.6 2.6 2.6

Profit for the period 2018 208.5 208.5 1.3 209.8 Other comprehensive income 190.7 0.3 191.0 4.6 195.6 Non-controlling interest -48.9 -48.9 -329.8 -378.8 Transactions with owners: Share-based incentive program 5.8 5.8 5.8 New share issue 2.3 567.1 569.4 569.4 Equity at 30 June 2018 33.9 4,593.6 259.1 590.3 5,476.9 1.6 5,478.5


Q2

CONSOLIDATED CASH FLOW STATEMENT


SEK million Note 2018 2017 2018 2017 2017 Operating activities

Profit before tax 192.5 98.5 278.7 116.2 -121.4 Adjustments for items not affecting cash

- Depreciation, amortization and impairment of assets

167.7 119.6 297.5 233.3 533.1

- Changes in provisions -1.2 -7.9 -14.3 -17.3 194.8 - Gains from disposal of non-current assets -97.2 - -97.0 - -0.5 - Share of result of associated companies -1.3 1.3 -0.3 2.1 -1.1 - Other 12.3 4.1 -2.2 14.6 1.5 272.8 215.7 462.5 348.9 606.3

Income taxes paid -7.4 -24.1 -12.9 -76.1 -150.6

Operating cash flow before changes in working capital

265.4 191.5 449.6 272.8 455.7

Cash flow from changes in working capital

Change in inventories -51.4 -55.9 -104.7 -39.6 -39.8

Change in operating receivables -81.8 -39.9 -273.9 -123.1 -150.7

Change in operating liabilities -13.3 58.0 95.2 18.8 86.1

Operating cash flow 118.9 153.6 166.3 128.9 351.4

Investing activities

Acquisition of property, plant and equipment -119.9 -139.9 -215.3 -249.5 -548.2

Disposal of property, plant and equipment 0.0 0.0 0.0 0.1 5.8

Acquisition of intangible assets -8.5 -5.1 -13.4 -6.9 -48.1

Disposal of intangible assets 60.7 - 60.7 - -

Acquisition of subsidiaries/operations, net of cash acquired

- -47.0 -307.2 -974.7 -974.7

Acquisition of financial assets -0.1 -2.4 -2.6 -2.4 -20.2

Disposal of short-term investment -1.5 -3.5 2.8 - -

Cash flow from investing activities -69.3 -197.8 -475.0 -1,233.4 -1,585.4

Financing activities

Dividend paid to Parent Company shareholders - -94.0 - -94.0 -94.0

New share issue 508.0 - 508.0 - -

Change in overdraft facility -9.0 -33.5 -2.1 -25.8 -4.0

Loans raised 60.0 79.0 610.0 1,160.6 1,790.6

Repayment of borrowings -3.7 21.9 -508.7 -174.9 -386.2

Cash flow from financing activities 555.3 -26.6 607.2 865.9 1,306.3

Total cash flow for the period 604.9 -70.8 298.5 -238.6 72.3

Cash and cash equivalents at beginning of period 470.3 527.6 770.9 695.8 695.8 Translation difference on cash and cash equivalents

10.1

-8.7 16.0 -9.2 2.7

Cash and cash equivalents at end of period 1,085.4 448.1 1,085.4 448.1 770.9

Interest received 0.3 0.5 1.4 1.6 5.5

Interest paid -54.4 -21.9 -66.5 -33.7 -94.2


Q2

PARENT COMPANY STATEMENT OF PROFIT AND LOSS

OTHER COMPREHENSIVE INCOME


SEK million 2018 2017 2018 2017 2017 Operating Income

Net sales 29.1 29.7 60.1 58.9 118.6 Other operating revenue 2.3 1.0 5.5 2.5 6.8 31.4 30.7 65.6 61.4 125.4 Operating expenses

Other external costs -33.7 -29.4 -59.8 -55.0 -108.8 Employee benefits expense -29.1 -24.2 -53.9 -46.3 -93.1 Depreciation and amortisation -3.1 -2.1 -5.4 -4.2 -8.1 Other operating expenses -0.8 -0.6 -2.2 -1.9 -3.3 -66.7 -56.3 -121.3 -107.4 -213.3 Operating profit/loss -35.3 -25.6 -55.8 -46.0 -87,9 Financial items -4.3 18.7 23.8 31.2 -160.7 Profit/loss after financial items -39.5 -6.9 -31.9 -14.8 -248.6 Appropriations and tax - 6.4 - 12.2 0.5 Profit/loss for the period -39.5 -0.5 -31.9 -2.6 -248.1

Apr – Jun Jan – Jun Jan - Dec

SEK million 2018 2017 2018 2017 2017 Items that may be reclassified subsequently to profit or loss

Translation differences 0.1 -0.3 -2.1 -0.5 0.2 Other comprehensive income for the period 0.1 -0.3 -2.1 -0.5 0.2 Total comprehensive income for the period -39.4 -0.8 -34.0 -3.1 -247.9

PARENT COMPANY STATEMENT OF FINANCIAL POSITION, CONDENSED

Jun 30 Dec 31

SEK million 2018 2017 2017 ASSETS

Non-current assets

Intangible assets 9.6 15.0 12.0 Property, plant and equipment 221.4 109.1 169.0 Non-current financial assets 6,887.8 6,510.6 6,559.9 Current assets 1,660.8 874.3 1,295.0 TOTAL ASSETS 8,779.7 7,509.0 8,036.0 SHAREHOLDERS EQUITY AND LIABILITIES

Equity 3,991.7 3,687.8 3,449.3 Liabilities 4,788.1 3,821.2 4,586.7

TOTAL EQUITY AND LIABILITIES 8,779.7 7,509.0 8,036.0


Q2

ACCOUNTING PRINCIPLES, RISKS, DEFINITIONS AND NOTES

Accounting principles The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) which have been approved by the European Commission for application within the EU. This interim report was prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company applies the Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR2, Accounting for Legal Entities. The accounting principles and calculations in this report are the same as those used for the 2017 Annual Report, except for the adoption of new standards effective as of 1 January 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The Group applies, for the first time, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments that require restatement of previous financial statements. As required by IAS 34, the nature and effect of these changes are disclosed below. Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the interim condensed consolidated financial statements of the Group. Recipharm’s accounting policies in accordance with the new standards are outlined in note 1.1 in the 2017 Annual Report on pages 56-57. IFRS 9 Financial instruments The new policies for financial asset classification and measurement are based on an analysis of the business model in which the asset is held and the cash-flow characteristics of the asset. The analysis shows that the new policies will not have any material effect on Recipharm’s financial statements. All financial assets that are currently measured at fair value are expected to continue being measured at fair value. The Group assesses that loans and accounts receivable will also continue to meet the criteria for measurement at amortised cost. The Group will apply the simplified approach for recognising expected credit losses for accounts receivable. This means that the expected credit loss for the remaining term to maturity will be taken into account. Recipharm applies IFRS 9 retrospectively. This means that the cumulative change in the transition to IFRS 9 is recognised in retained earnings at 1 January 2018 and that comparative figures are not restated. The effect on equity at 1 January 2018 from applying IFRS 9 was:

SEK million

Accounts receivable -0.9

Deferred tax liability +0.3

Effect on retained earnings from IFRS 9 -0.6

IFRS 15 Revenue from contracts with customers Most of Recipharm’s contracts with customers pertain to the manufacturing of pharmaceuticals with no associated services, for which the revenue is recognised when the goods are delivered, and when risk and ownership are also transferred to the buyer. This means after internal analysis approval and delivery from inventories. The Group also has a smaller share of short-term contracts for development services or laboratory services that are recognised during the period in which they are performed. These services have not been impacted by the transition to IFRS 15. In one of the markets, manufacturing contracts exist for which control of the assets is held by the customer throughout the entire manufacturing process, and the value of the assets increases as Recipharm processes the product. For these contracts, the conclusion is that the revenue under IFRS 15 should be recognised over time, entailing slightly earlier recognition compared with previous accounting policies. This change essentially has no material effect on either revenue or operating profit. Recipharm applies the standard retroactively to all contracts not completed by 1 January 2018. This means that the cumulative change in the transition to IFRS 15 is recognised in retained earnings at 1 January 2018 and that comparative figures is not restated. The effect on equity at 1 January 2018 from applying IFRS 15 was:

SEK million

Inventories -25.9

Accounts receivable +30.2

Deferred tax liability +1.7

Effect on retained earnings from IFRS 15 +3.2

New accounting principles from 1 January 2019 IFRS 16 Leasing The assessment of effect from IFRS 16 has been initiated. IFRS 16 will have some effect of Recipharm’s accounts, primarily in terms of non-current assets and liabilities, but the full extent has yet to be determined. Significant risks and uncertainties A detailed description of risks is provided in the 2017 Annual Report on page 34. No new significant risks are considered to have arisen since the publication of the annual report.


Q2

NOTE 2 BUSINESS COMBINATIONS Nitin Lifesciences On January 2 Recipharm announced that reached an agreement to acquire the remaining 26 per cent of the shares of Nitin Lifesciences Limited which were owned by members of the founding Sobti family. The consideration was INR 2,800 million (SEK 351 million) on a cash and debt free basis whereof INR 600 million (SEK 75 million) will be paid in newly issued Recipharm shares (RECI-B). The acquisition was completed in two steps. The cash part, for a 20.8 per cent stake in the company, was paid on January 2. On June 15 Recipharm issued 558,261 series B shares subscribed for by the Sobti family as payment for the remaining shares. The purchase price for the acquired shares amounted to INR 600 million (approximately SEK 71.6 million). Following completion of this acquisition, Recipharm is the holder of all shares in Nitin Lifesciences Limited. As full goodwill was reported at the time of the acquisition of the first 74 per cent, the acquisition of the remaining shares did not result in any further fair value adjustments, instead non-controlling interest at acquisition date is fully reduced (SEK 329.8 million) and the residual amount (the difference between the total consideration and non-controlling interest) is reported as a reduction of retained earnings (SEK -48.9 million).

NOTE 1 NUMBER OF SHARES AND POTENTIAL SHARES

A-shares B-shares D-shares Total Number of shares as of 31 December 2017 15,222,858 47,624,674 370,000 63,217,532 New share issue 4,000,000 67,217,532 New share issue, acquisition of shares in Nitin Lifesciences 558,261 67,775,793

Number of shares as of 30 June 2018 15,222,858 52,182,935 370,000 67,775,793

Potential shares, 1,906,990 (808,569), are related to Recipharm's share-based incentive program as well as the convertible issued in October 2016. Of total number of shares the company holds 10,350 B-shares and 370 000 D-shares. This is to secure delivery of shares to participants in the Share-based incentive program


Q2

NOTE 3 SEGMENT ANALYSIS

For control purposes Recipharm is separated into three segments: Manufacturing Sterile Liquids (MFG-SL), Manufacturing Solids & Others (MFG-SO) and Development & Technology (D&T). The business segment MFG-SL includes manufacturing of products on behalf of pharmaceutical companies and covers sterile technologies including liquid vials and ampoules, lyophilisates and blow-fill-seal products. The business segment MFG-SO includes manufacturing of products on behalf of pharmaceutical companies and covers tablets, capsules, semi-solids and non-sterile liquids. The business segment D&T provides pharmaceutical development services. It also includes a register of patents, technologies and product rights, and sales of own products through distributors. Discontinued operations and non-recurring items are reported separately. The segment reporting is based on the structure the management follow the business. Transactions between segments are based on same conditions as for external customers. Jan – Jun 2018

SEK million MFG-SL MFG-SO D&T

Elim & Other Total

Disc. operations

Non rec. items Total

Net sales, external 1,191.3 1,357.7 505.9 - 3,054.9 158.5 - 3,213.4

Net sales, internal 14.6 42.6 12.5 -76.6 -6.9 6.9 - -

EBITDA 240.3 231.4 124.5 -45.7 550.5 6.5 92.9 649,7

EBITDA % 19.9 16.5 24.0 - 18.1 4.0 - 20.2

Depreciations -127.0 -93.7 -39.9 -3.1 -263.8 -0.7 - -264.5

Impairment - - -3.0 - -3.0 - - -3.0

EBIT 113.4 137.7 81.6 -48.9 283.7 5.8 92.9 382.1

Goodwill 1,322.1 686.2 581.1 - 2,589.3 - - 2,589.3

Non-current assets 3,933.1 2,868.9 1,628.8 338.1 8,768.9 26.2 - 8,795.0

Total assets 5,152.2 4,417.6 2,247.0 494.2 12,311.0 423.6 - 12,734.6

Jan – Jun 2017


Elim & Other Total

Disc. operations


Net sales, external 1,078.6 1,060.6 433.6 - 2,572.8 155.9 - 2,728.7

Net sales, internal 13.8 35.4 10.6 -72.8 -12.6 12.6 - -

EBITDA 211.8 153.8 87.9 -40.4 413.1 -11.8 - 401.3

EBITDA % 19.4 14.0 19.8 - 16.1 -7.0 - 14.7

Depreciations -108.1 -78.1 -37.2 -2.0 -225.4 -6.0 - -231.4

Impairment - - -1.9 - -1.9 - - -1.9

EBIT 103.6 75.7 48.8 -42.4 185.7 17.8 - 167.9

Goodwill 1,281.6 1,008.7 345.1 - 2,635.3 - - 2,635.3

Non-current assets 3,812.9 2,941.7 1,285.0 138.2 8,177.8 60.6 - 8,238.4

Total assets 4,896.0 4,078.7 1,802.7 19.8 10,797.2 228.5 - 11,025.7

Jan – Dec 2017


Elim & Other Total

Disc. operations


Net sales, external 2,095.6 2,383.2 853.0 - 5,331.9 - - 5,331.9 Net sales, internal 30.1 97.2 20.9 -148.3 - - - - EBITDA 390.8 229.2 191.7 -82.1 729.6 - -205.3 524.3 EBITDA % 18.4 9.2 21.9 13.7 - 9.8 Depreciations -226.0 -181.6 -82.9 -3.6 -494.1 - - -494.1 Impairment - -2.4 -1.9 - -4.3 - -34.6 -39.0 EBIT 164.8 45.2 106.8 -85.7 231.2 - -239.9 -8.7 Goodwill 1,278.1 661.6 546.6 - 2,486.4 - - 2,486.4 Non-current assets 2,606.4 2,144.5 1,585.0 2,169.3 8,502.2 - - 8,505.2 Total assets 4,028.8 3,742.1 2,184.1 1,775.9 11,731.0 - - 11,731.0


Q2

NOTE 4 EARNINGS PER SHARE

NOTE 5 DISAGGREGATION OF REVENUE Jan – Jun 2018

SEK million Revenue recognition MFG-SL MFG-SO D&T

Discontinued operations Total

Pharmaceutical manufacturing

Revenue recognised at point in time

1,172.7 1,343.0 158.5 2,674.2

Pharmaceutical manufacturing

Revenue recognised over time

18.6 14.7 33.3

Product sales Revenue recognised at point in time

381.6 381.6

Total sales of products 1,191.3 1,357.7 381.6 158.5 2,930.7 Service sales Revenue recognised over

time 124.2 124.2

Total sales of services 124.2 124.2 Total net sales 1,191.3 1,357.7 505.9 158.5 3,213.4 Recipharm only accepts creditworthy counterparts in financial transactions and, when needed, uses a system for managing overdue invoices. Long-term contracts and customers’ dependence on their CDMO suppliers are important factors that reduce credit risk. Recipharm has many financially solid customers and few credit losses. Payment terms for issued invoices vary from 1 to 3 months.

Geographical area Net sales Non-current assets

Jan-Jun 2018

Jan-Jun 2017

Jan-Dec 2017

Jun 30 2018

Jun 30 2017

Dec 31 2017

Sweden 782.1 749.0 1,456.9 1,512.4 1,301.5 1,398.7

Italy 649.0 569.2 1,079.1 1,996.2 1,903.4 1,927.4

France 565.9 503.1 975.0 818.8 654.4 765.1 India 351.9 275.0 617.9 2,466.3 2,376.7 2,412,1

Portugal 278.0 274.0 530.8 980.1 1,033.3 1,004.0

Spain 307.1 117.3 220.8 151.0 111.4 142.1

Germany 223.7 176.4 334.8 799.8 782.6 785.2 Other 55.7 64.7 116.5 70.4 75.3 70.6

Total 3,213.4 2,728.7 5,331.9 8,795.0 8,238.4 8,505.2

Apr - Jun Jan – Jun Full year

SEK million Note 2018 2017 2018 2017 2017 Parent company´s shareholders:

Earnings per share before dilution (SEK) 2.59 1.19 3.30 1.15 -2.70

Earnings per share after dilution (SEK) 2.59 1.19 3.30 1.15 -2.70

Profit before dilution (SEK thousand) 164,018 75,425 208,480 72,862 -170,492

Effect from potential shares (SEK thousand) 10,057 8,980 20,115 17,986 40,774

Profit after dilution (SEK thousand) 174,075 84,406 228,595 90,847 -129,718

Average number of shares before dilution (thousand)

1 63,218 63,218 63,218 63,218 63,218

Potential shares (thousand) 1 1,907 279 1,907 809 1,358

Issued shares (thousand) 1 795 - 400 - -

Average number of shares after dilution (thousand)

65,920 63,496 65,525 64,026 64,576


Q2

GLOSSARY CDMO Contract, Development and Manufacturing Organisation CER Constant Exchange Rate CMO Contract Manufacturing Organisation LTM Latest Twelve (12) Months FINANCIAL DEFINITIONS ALTERNATIVE PERFORMANCE MEASURES INDICATORS DEFINITION AND REASON FOR USE Adjusted for non-recurring Ratio or amount adjusted for costs related to the discontinuing of manufacturing items operations in Stockholm and Höganäs, divestment of rights to Thyrosafe® and acquisition costs Debt/equity ratio Interest-bearing liabilities divided by shareholder's equity

The debt/equity ratio is an indication of financial strength, relationship between debt and equity EBITDA Profit before financial items, taxes, depreciation and amortisation, adjusted for non-recurring items

EBITDA shows operating profit, which is also used in combination with other data for measurement purposes

EBITDA margin Profit before financial items, taxes, depreciation and amortization adjusted for non-recurring items, divided by net sales The EBITDA margin shows operating profit in relation to net sales

Equity per share Shareholders’ equity on the balance-sheet date divided by the number of shares (balance-sheet date) Equity per share shows the equity generated to the shareholders per share

Equity/assets ratio Total equity divided by total assets Equity/assets ratio, adjusted Total equity adjusted for non-recurring items divided by total assets adjusted for non-recurring

items The adjusted equity/assets ratio shows how much of total assets are financed using total equity

Interest-coverage ratio Operating profit plus financial income divided by financial expenses Measures the company’s ability to cover its interest expenses

Net debt Interest-bearing liabilities less cash and cash equivalents Net debt is calculated to show the net of interest-bearing liabilities and cash

Net debt/equity ratio Net debt divided by total equity The debt/equity ratio is an indication of financial strength, relationship between net debt and equity

Net debt in relation Net debt divided by EBITDA (rolling 12-month basis) to EBITDA Net debt in relation to EBITDA shows the impact of and risk level for liabilities Net sales (CER) CER: Constant Exchange Rates

Net sales (CER) shows net sales without the impact of currency exchange rates and, in many cases, this comparison is a fairer measure

Non-interest-bearing Includes deferred tax liability liabilities Measures non-interest-bearing liabilities Operating capital (average) Net debt plus shareholders’ equity (average opening and closing balance for the period)

Measures the use and efficiency of capital Operating cash flow Cash flow from operating activities (12 months) divided by the weighted average number of shares per share (12-month rolling basis)

Cash flow per share provides an indication of value; how much cash and cash equivalents each share generates

Operating margin Operating profit divided by net sales Measures the profitability of operations

Operating profit Operating profit before financial items and tax Operating profit shows the earnings from operations, including depreciation/amortisation and impairment losses The equity/assets ratio shows how much of total assets are financed using shareholders’ equity

Return on equity Profit for the year (12-month period) divided by average total equity Return on equity shows the return on the company’s equity

Return on equity, adjusted Net profit for the year (12-month period) adjusted for non-recurring items divided by average total equity Return on equity, adjusted, shows the return on the company’s equity adjusted for non-recurring items

Return on operating capital Operating profit (12-month period) divided by average operating capital Return on operating capital shows the return disregarding financial assets and financing

Return on operating capital, Operating profit adjusted for non-recurring items (12-month period) divided by average operating adjusted capital

Return on operating capital shows the return disregarding financial assets and financing


Q2

Non-recurring items consist of profit from divestment of the product rights to ThyroSafe® and acquisition costs (2018), and restructuring costs and reserve for onerous contracts from the discontinuing of businesses in Stockholm and Höganäs (2017). THE PHARMACEUTICAL CDMO MARKET CDMOs, such as Recipharm, provide pharmaceutical companies with diverse manufacturing and development services – from managing a product’s transition from laboratory to full-scale commercialisation. Outsourcing development and manufacturing services enables pharmaceutical companies to focus on their core business, such as R&D and marketing, and can crucially reduce costs, time-to-market, and risk. In addition, CDMOs can provide access to technology due to their highly specialised knowledge. In a world of increasingly technological and supply chain complexity, CDMOs with their focussed operations are typically well equipped to assimilate, develop and master the latest technologies. ABOUT RECIPHARM Recipharm is a leading Contract Development and Manufacturing Organisation (CDMO) in the pharmaceutical industry employing around 5 000 employees. Recipharm offers manufacturing services of pharmaceuticals in various dosage forms, production of clinical trial material and APIs, and pharmaceutical product development. Recipharm manufactures several hundred different products to customers ranging from big pharma to smaller research and development companies. Recipharm’s turnover is approximately SEK 6 billion and the company operates development and manufacturing facilities in France, Germany, India, Israel, Italy, Portugal, Spain, Sweden, the UK and the US and is headquartered in Stockholm, Sweden. The Recipharm B-share (RECI B) is listed on Nasdaq Stockholm. For more information on Recipharm and our services, please visit www.recipharm.com

BRIDGE FROM EBITDA TO EBIT

Apr - Jun Jan - Jun Jan - Dec

2018 2017 2018 2017 2017

EBITDA 307.1 242.2 556.8 401.3 729.6

Depreciation and amortisation -137.8 -119.6 -267.5 -233.3 -533.1

Non-recurring items 92.9 - 92.9 - -205.3

EBIT 262.2 122.5 382.1 167.9 -8.7

Recipharm AB (Publ) │ Corp ID 556498-8425 | Address Drottninggatan 29, Box 603, SE-101 32 Stockholm Telephone +46 8 602 52 00 | Fax +46 8 81 87 03 │ www.recipharm.com

http://www.recipharm.com/

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