2 0 0 6 A n n u A l r E P o r t

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2006 annual report

Meda AB, Pipers väg 2A, Box 906, SE-170 09 Solna, Sweden Phone: +46 8 630 19 00, Fax: +46 8 630 19 50

info@meda.se www.meda.se

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Meda | Shareholder information

INTERIM FINANCIAL REPORTS IN 2007

January – March 3 May

January – June 8 August

January – September 30 October

ANNUAL GENERAL MEETING (AGM)

The AGM is held on Thursday, 3 May 2007 at 5 PM in Meda’s office at Pipers väg 2A, Solna, Sweden.

SHAREHOLDERS WHO WISH TO PARTICIPATE IN THE AGM MUST:

Be registered in the VPC AB shareholders database by 26 April 2007.

Have sent notification of attendance to Meda by 12 noon on 26 April 2007 (include civil registration or corporate ID, address, phone number, and number of shares held.

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Submit notification of attendance to Meda via:

Regular mail: Meda AB (publ), AGM, Box 906, SE-170 09 Solna, Sweden, or

Phone: +46 8 630 19 00 or fax +46 8 630 19 50, or E-mail to hanna.bjellquist@meda.se

REGISTRATION

To be entitled to vote at the AGM, shareholders, whose shares are registered in the names of nominees, must temporarily register their shares in their own names so they are officially registered as shareholders with VPC AB by 26 April 2007. Con- sequently, shareholders should notify nominees in sufficient time before this registration date.

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Shareholder information

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Meda concentrates on marketing the Novolizer products that are on the market, while Almirall will take over and finance all continued R&D of drugs in the Novolizer system. A collaboration agreement regulates how future market rights and market measures for certain defined development projects will be shared between the parties. The collaboration significantly improved Meda’s profitability, while helping to accelerate development.

iN-liCENSiNG OF iNNOvATivE PAiN PRODuCT FROM ThE uS

Exclusive licence agreement for BEMA^TM Fenta- nyl in Europe. BEMA^TM technology is a patented system consisting of a thin disc that sticks to the mouth’s mucous membranes – allowing

the active ingredient (fentanyl) to be absorbed rapidly into the blood stream to provide pain relief. The product is now in phase III and is being documented for treatment of breakthrough pain in cancer patients.

ESTABliShMENT iN EASTERN EuROPE

Meda continued to expand in Eastern Europe, establishing its own marketing organisations in Hungary and Poland. Meda already had marketing companies in the Czech Republic, Slovakia, and the Baltic region.

ACquiSiTiON OF ThE PARlODEl SPECiAliST DRuG FROM NOvARTiS

Meda acquired Parlodel, a well-established dopamine agonist-prolactin inhibitor. Meda will leverage target group synergies with other products in the portfolio on the major European markets.

iNTEGRATiON OF viATRiS COMPlETE SOONER ThAN PlANNED

All management team members were on site soon after the acquisition was concluded in late 2005. The new organisation was fully operation- al by H1 2006; all subsidiaries changed their names to Meda.

Milestones in 2006

MEDA | Milestones in 2006

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The year in figures, 2006 | 2006 annual report

The year in figures, 2006

NET SALES

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005

OPERATING PROFIT

300 600 900 1,200 1,500

2006 2005

EBITDA MARGIN*

5 10 15 20 25 30

2006 2005

PROFIT AFTER TAX

100 200 300 400 500 600 700 800

2006 2005

SALES TRENDS, 2000 – 2006

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005 2004 2003 2002 2001 2000 SEK million

2,870

5,256

349

1,434

20.5

144

28.4

788

SEK million

% NET SALES

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005

OPERATING PROFIT

300 600 900 1,200 1,500

2006 2005

EBITDA MARGIN*

5 10 15 20 25 30

2006 2005

PROFIT AFTER TAX

100 200 300 400 500 600 700 800

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005 2004 2003 2002 2001 2000 SEK million

2,870

5,256

349

1,434

20.5

144

28.4

788

SEK million

%

NET SALES

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005

OPERATING PROFIT

300 600 900 1,200 1,500

2006 2005

EBITDA MARGIN*

5 10 15 20 25 30

2006 2005

PROFIT AFTER TAX

100 200 300 400 500 600 700 800

2006 2005

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005 2004 2003 2002 2001 2000 SEK million

2,870

5,256

349

1,434

20.5

144

28.4

788

SEK million

%

*Excluding one-offs 1,000

2006 2005

OPERATING PROFIT

300 600 900 1,200 1,500

2006 2005

EBITDA MARGIN*

5 10 15 20 25 30

2006 2005

PROFIT AFTER TAX

100 200 300 400 500 600 700 800

2006 2005

1,000

2006 2005 2004 2003 2002 2001 2000

349

1,434

20.5

144

28.4

788 SEK million

SEK million

%

Group sales reached SEK 5,256 million (2,870).

Operating profit rose to SEK 1,434 million (349).

Profit after tax rose to SEK 788 million (144).

Earnings per share increased to SEK 7.25 (1.19).

Proposed dividend per share: SEK 1.0

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CEO’s report

Meda’s goal is to clearly be the leading specialty pharma company in Europe.

Developments during 2006 are highly aligned with Meda’s goals. Organic growth, combined with incorporation of Viatris, a German pharma company, boosted sales from SEK 2,870 million to SEK 5,256 million. Profitability improved significantly.

Operating profit rose from SEK 349 million to SEK 1,434 million.

And the EBITDA margin, excluding one-offs, widened from 20.5% to 28.4%.

We concluded the acquisition of 3M’s European pharmaceutical operation in January 2007. As I write this report, integration is nearly complete, which suggests full-year sales of about SEK 7 billion.

Meda’s fast successful expansion and enhanced key figures are primarily due to three factors:

Our fundamental strategy is strong and clear. Goal-oriented employees make key contributions to the operation. And shareholders give Meda the necessary show of confidence ahead of

tasks that contribute to building a totally new pharma company.

The strategy is based on acquiring products and companies that are suitable for Meda’s prioritised therapy areas: cardiology, dermatology, respiratory, pain and inflammation, and gastroenterology. And also on securing long-term partnerships with pharma companies that need marketing partners in Europe.

Thanks to the more than 1,000 employees in marketing and sales, who are spread throughout 24 European countries, Meda has excellent coverage of its customer segments. Meda delibe- rately maintains a flat organisation to enable fast decision paths, which are crucial for making the right business decisions. Good ideas are not to be held up in unnecessary bureaucracy.

When large business opportunities arise, Meda can act quickly and forcefully. Shareholders demonstrate trust for the company’s potential to expand – trust that we intend to maintain as best we can.

The company’s development during the past few years natu- rally leads to expectations regarding the future. I’m convinced MEDA | CEO’s report

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“Thanks to the more than 1,000 employees in marketing and sales, who are spread throughout 24 European countries, Meda has excellent coverage of its customer segments. Meda delibe- rately maintains a flat organisation to enable fast decision paths,

which are crucial for making the right business decisions. Good ideas are not to be held up in unnecessary bureaucracy.”

that we’re well positioned to meet these expectations.

Meda have today more than ten well-established pan-Euro- pean pharmaceutical products, and owns all these products but one. The company has five projects in late clinical development and new specialist products via acquisition of 3M’s pharma division in Europe. In addition, Meda’s critical size makes it an attractive partner, for example, for US companies that seek an effective marketing partner in Europe.

My assesment is that the pharma industry consolidation is continuing and that the specialty pharma segment has strong growth. Meda will play a leading role within this segment and will develop very strongly in coming years.

Anders Lönner President and CEO

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Business concept, strategy, and goals

MEDA | Business concept, strategy, and goals

MEDA’S BUSINESS CONCEPT IS…

... to offer cost-effective, medically well-motivated products.

GOAL

Enhance its position to become Europe’s leading speciality pharma company.

MEANS

Active acquisition strategy and organic growth through

market-adapted product development.

Meda is a pharmaceutical company that has fundamentally changed in the past few years. Formerly an agency in the Nordic region, Meda has developed into a leading European specialty pharma company. About seven years ago, Meda’s new CEO set up the goal that Meda would build its future on long-term collaborations and its own products. The method would be to acquire product rights, increase focus on long-term collaborations, and enhance marketing and business-development skills.

Marketing and sales were the priority, and subsidiaries were reorganised into efficient marketing organisations. Customers’

needs would be met through cost effectiveness, with focus on medical quality.

Meda’s profile fits well into current pharma industry trends, in the wake of recent consolidations. The traditional big pharma companies, with heavy structures from early research to production and marketing, are finding it increasingly difficult to develop new blockbusters. At the same time, cost-containment program- mes in the publicly funded European medical sector have put growing pressure on prices, leading pharma companies to search for more cost-effective solutions, with more targeted marketing. In addition, evidence-based medicine (documented clinical profiles of drugs) has given smaller companies a competitive advantage over the traditional industry. This strategy was hugely successful in the United States, resulting in a new type of drug producer: specialty pharma.

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NET SALES

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005

OPERATING PROFIT

300 600 900 1,200 1,500

2006 2005

EBITDA MARGIN*

5 10 15 20 25 30

2006 2005

PROFIT AFTER TAX

100 200 300 400 500 600 700 800

1,000 2,000 3,000 4,000 5,000 6,000

2006 2005 2004 2003 2002 2001 2000 SEK million

2,870

5,256

349

1,434

20.5

144

28.4

788

SEK million

%

Meda is now one of the leading specialty pharma companies in Europe, with the aim of taking over the lead. The focus on specialty pharma has involved specialising Meda’s marketing and adapting its product development to specific markets. Meda has its own marketing companies in 24 countries, and its marketing organisation employs more than 1,000 people since acquisition of 3M’s European drug division. Meda-owned sales organisations have been built up in rapid succession in Hungary, Poland, Slovakia, and the Czech Republic. The combined population of these countries is about 64 million, and their pharma market is growing faster than the European average.

Like other specialty pharma companies, Meda avoids risky, capital-intensive early research. Product flows are created through collaborations, in-licensing, and acquisitions. As per the company’s profile, Meda is also focusing increasingly on niche busters – specialised drugs for smaller patient groups. This cre- ates higher margins, because sales overhead for specialist drugs is generally lower due to a limited, clearly defined marketing target group. The market for these types of drugs is usually less subject to competition and less price-sensitive compared to traditional focus on blockbusters, which requires massive marketing efforts on a market that is often highly competitive.

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MEDA | Business concept, strategy, and goals

Oslo

Copenhagen

Radebeul

Bad Homburg

Bordeaux Mérignac

Paris

Cologne

Turku

Lisbon

Stockholm

Athens Bratislava

Vienna

Milan Wangen

Prague

Madrid

Cambridge

Brussels Amstelveen

Sweden

Denmark

Germany

Poland Warsaw

Belgium Nether- lands

France

Switzerland Austria Czech Rep.

Slovakia

Greece Italy

Spain Portugal

UK Ireland

Finland

Estonia

Latvia Lithuania Norway

Dublin

HungaryBudapest Critical success factors in Meda’s strategy

include total pan-European market coverage and capacities for applications and development.

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The foundation of Meda’s platform as a specialty pharma company was built during 2000–2002. Meda’s future was to be based on its own products, so Meda focused on identifying objects for acquisition and in-licensing. In 2003–2005, Meda acquired several smaller northern European drug companies, and several medically well-motivated products from companies such as Glaxo-SmithKline, Novartis, Wyeth, and Omega Pharma/Pfizer.

At the same time, Meda began building its own marketing companies in key European countries, such as Germany, France, Italy, and the UK.

In August 2005, Meda announced its strategic acquisition of the German Viatris pharma group – a milestone acquisition making Meda one of the leading specialty pharma companies in Europe. Meda also achieved its stated goal of building marketing companies on the major European markets by acquiring Viatris’

established marketing organisations. Another advantage was creation of key product synergies – allowing Meda’s products to be sold on several markets. The pan-European sales and marketing organisation and increased capacity for registration and product development made Meda an attractive partner for players such as non-European drug licensers.

ACQUISITION OF 3M’S EUROPEAN PHARMACEUTICAL DIVISION

In early November 2006, Meda announced its acquisition of 3M’s European pharma division. Well-established products gave the division high profitability, with 2006 sales amounting to about SEK 2,000 million. The preliminary price of this acquisition of assets and liabilities is SEK 5,640 million. The contract became effective in early 2007, so profit/loss and balance effects of the acquisition will first become visible this year. The acquired operation’s EBITDA margin is 30%. So the purchase price is 10 times the acquired operation’s earnings before interest, taxes, depreciation, and amortisation (EBITDA). The aim is to rapidly integrate 3M’s pharma division into Meda, so one-time structural costs may lower profits in the short term, while future profitability is enhanced.

Collaborations and acquisitions

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Austria Netherlands Belgium UK Spain Italy Nordics Germany France

50 100 150 200 250 300 350 400 Other

UK Spain Italy France Germany

SALES PER COUNTRY, 2006

200 400 600 800 1000 1200 Other

Austria Netherlands Belgium Italy UK Spain Nordics France Germany

MARKETING ORGANISATION PER COUNTRY*

50 100 150 200 250

Other Austria Portugal UK Nordics Benelux Spain Italy France Germany

COMBINED SALES PER COUNTRY, 2006

MARKETING ORGANISATIONS

SEK million MSEK

Employees Employees

Meda

3M

Meda 3M

Betadine Tramadol Cibacen/Cibadrex Novolizer Produkter Azelastine Allergospasmin Thioctacid

Acemetacine/Rantudil Sargenor

Etofenamate Övriga 6b. FÖRDELAD FÖRSÄLJNING AV MEDAS TOPP 10-PRODUKTER, 2006

Betadine Tramadol Cibacen/Cibadrex Azelastine Allergospasmin Thioctacid Novopulmon Acemetacine/Rantudil Sargenor

Formatris SALES OF MEDA'S LARGEST PRODUCTS, 2006 Astma / Allergi

Hjärta / Kärl Mage / Tarm Smärta / Inflammation Hud / Infektion Lokala produkter SALES – BARA TOP 10 PRODUKTER

Frankrike Italien Spanien Storbritannien 12. 3M:S MARKNADSFÖRSÄLJNING PER LAND, 2006

Cardiology Dermatology Respiratory

Pain and Inflammation Gastroenterology Local products SALES PER THERAPY AREA, 2006

Sales & Marketing Development & Regulatory Supply Chain

Administration EMPLOYEES PER FUNCTION, 2006

Western Europe Central and Eastern Europe Northern Europe MARKETING ORGANISATION PER REGION, NO. OF EMPLOYEES, 2006*

*After 3M’s European pharma division acquisition

America Asia Europe Africa/Australia Middle East ITB SALES PER REGION, 2006

Hjärta/Kärl Dermatologi Lokala produkter 3M:S FÖRSÄLJNING PER TERAPIOMRÅDE, 2006

Pain and inflammation Gastroenterology Local products COMBINED SALES PER THERAPY AREA, 2006*

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MEDA | Collaborations and acquisitions

BACkGROuND AND MOTivES FOR ThE ACquiSiTiON

The acquisition is a consistent step in Meda’s strategy to become the leading European specialty pharma company. The deal gives Meda several strategic advantages. Meda’s market position is further enhanced on the most important pharma markets in Europe, while its effectiveness in its high-priority therapy areas (TAs) – cardiovascular and dermatology – increases. With the expanded product portfolio, about 90% of Meda’s turnover now consists of its own products, ensuring long-term control and lower risk compared with agencies.

Business activities in what was previously 3M’s pharma division are being pursued on all European markets. Key synergies can be achieved through a more effective organisation on the major markets, such as France, Italy, the UK, Spain, and Ger- many. Cost synergies are expected to exceed SEK150 million.

The acquisition also provides more skills and resources to Meda’s medical development department, particularly in clinical development and Regulatory.

MARkETiNG ORGANiSATiON AND PRODuCT PORTFOliO 3M’s European pharma division had about 300 employees, mostly in marketing and sales. It had its own marketing organisations in 12 European countries. The marketing organisation focused primarily on the dermatology and cardiovascular TAs, and the product portfolio consisted of drugs such as Aldara, Mi- nitran and Tambocor, the three that represented about 80% of total sales. These drugs have a high medical value and are mainly prescribed by specialists. Aldara, a cancer-treating drug, has the greatest growth potential. Aldara sales total about SEK 250 million annually. The European Commission approved the drug for a wider indication range to include actinic keratosis in 2006. The cardiovascular TA includes the well-established Tambocor (for arrhythmias) and Minitran (preventive treatment against angina).

The largest markets for these products are France, Germany,

Italy, and Spain. Several of Meda’s largest products also fall into these areas, such as Betadine (preventive treatment against skin infections) and Cibacen/Cibadrex (for high blood pressure). Since the products complement each other, synergy effects are also expected in marketing.

200 400 600 800 1000 1200 1400 1600 Other

50 100 150 200 250 300 350 400 Other

200 400 600 800 1000 1200 Other

50 100 150 200 250

SEK million MSEK

Employees Employees

Meda

3M

Meda 3M

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1) Patented asthma inhaler

OTHER COLLAbORATIONS AND ACQUISITIONS IN 2006 Alongside the Viatris integration and the latest acquisition of 3M’s European pharma division, these key collaborations and acquisitions were completed:

iN-liCENSiNG OF iNNOvATivE PAiN PRODuCT FROM ThE uS, AuGuST 2006

BEMA™ Fentanyl is a pain product in phase III of documenta- tion for breakthrough pain treatment of cancer patients. It is a soluble adhesive disc that’s applied to the mouth’s mucous mem- brane; the disc contains fentanyl. When the disc is applied to the inner cheek, the drug is released and provides an analgesic effect. Meda’s pan-European market coverage and its expertise in pain provide a key competitive edge.

STRATEGiC COllABORATiON wiTh AlMiRAll, JuNE 2006 The collaboration allows Meda to concentrate on marketing the Novolizer¹⁾ products that are on the market, while Almirall takes over and finances all future R&D of drugs in the Novolizer system. The collaboration agreement regulates how future marketing rights and marketing measures for certain specific development projects will be shared by the parties. The collaboration significantly improved Meda’s profitability, while helping to accelerate development.

ACquiSiTiON OF SPECiAliST DRuG FROM NOvARTiS, FEBRuARy 2006 Meda acquired the European rights to Parlodel, a proven dopamine agonist-prolactin inhibitor. Meda plans to use target group synergies with other products in its portfolio. The most significant markets for Parlodel are the larger ones in continental Europe, where Meda can use its extensive sales organisation.

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THE EUROPEAN PHARMACEUTICAL MARKET¹⁾

Turnover on the global pharma market was USD 601 billion. Europe represented 29% (USD 172 billion). This is comparable to the combined pharma market in Japan, Asia, Africa, Australia, and Latin America, which amounted to about USD 163 billion. Europe’s biggest markets are Germany (USD 32 billion), France (USD 30 billion), Italy and the UK (USD 20 billion each).

These countries now represent about 60% of the European market, which grew by about 6% in 2005. The fastest growth was in eastern Europe, where access to pharmaceuticals is on the rise, and treatment of chronic diseases in areas such as cardiovascular and respiratory is rapidly expanding. Markets such as Poland (USD 4.6 billion, +8%), Hungary (USD 2.3 billion, +17%), Czech Republic (USD 1.9 billion, +8%), Slovakia (USD 0.8 billion, +12%), and the Baltic region (USD 0.7 billion, +12%) are key growth markets. Meda is represented in all these markets with its own marketing companies.

UNDERLYING GROWTH FACTORS These factors drove European pharmaceutical sales growth in recent years:

1. DEMOGRAPhiC ChANGES

In most western countries, the percentage of el- derly persons is on the rise, leading to increased use of medications for age-related diseases. The average drug cost for a 60-year-old is estimated to be double that for a 40-year-old. In time,

this will lead to greater demand for pharmaceuticals.

2. GREATER uSE OF PhARMACEuTiCAlS The shift from hospital care to outpatient care has led to an increasing number of patients receiving pharmaceutical treatment for a longer period. Care providers have given greater priority to continuous maintenance treatments to prevent hospital stays, and patients increasingly accept this. The influx of new patients and the rise in drug use per patient have led to volume growth of the number of prescriptions and drug doses on the pharma market.

3. ChANGES iN ThE PhARMACEuTiCAl RANGE One key factor behind the pharma industry’s expansion in the past decade is development of new drugs for diseases that were never before treated pharmacologically, e.g., obesity, high blood lipids, and impotence. Because of this, the products have often had a high price. In many cases, this was motivated from an overall social or medical perspective, because the drugs lead to reduction in other costs. In other cases, the pharma companies’ marketing changed prescribing trends. Most of the increased pharmaceutical costs in western countries are due to increased prescribing of new, usually more expensive preparations. But changes in the total pharmaceutical range can also have a cost-lowering effect, as with increased use of generic drugs.

Market review

1) Source of marketing data 2005: IMS Health.

MEDA | Market review

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CHANGED MARKET CONDITIONS

The high cost of publicly financed pharmaceuticals has led to a successive shift of influence over the choice of drug from the prescribing doctor to various types of co-ordinating committees and purchasing organisations. As a purchaser, publicly financed health care has increased its influence to achieve more rational drug use. Direct comparisons of the medical properties and prices of specific products have become important tools, and this changes previous conditions for the pharma industry.

PhARMA MARkET uNDER CONSOliDATiON

Growing competition in the pharma industry has led to increasingly rapid consolidation. Many of the giant multinational pharmaceutical companies – big pharma – have merged to capitalise on economies of scale in production and marketing, and to promote production productivity in R&D. Motivation to find new blockbusters has led big pharma companies to concentrate their activities and increase their focus on a handful of big sellers. As a rule, products need to have an annual sales potential in excess of USD 200-300 million for these giant companies to consider them worth producing. One effect of this focus on blockbusters is that many medically valuable products are no longer a priority for the big pharma companies because they are not big enough or are too local. In some cases, the companies even completely aban- don certain TAs to focus on areas in which they have long-term research. This opens the door for smaller companies to acquire established products with existing sales and profitability figures.

GENERiC DRuGS

One direct effect of political initiatives to increase price competition is the explosion of generic drugs – copies of brand-name drugs whose patents have expired. Generic drugs are often used as an alternative to more expensive original drugs in many EU countries, with large variations. In many of the new EU member

states, such as the Baltics and Poland, generic drugs make up a large percentage of total prescriptions – in some countries, more than 70% of the volume. At the same time, prescribing of generic drugs is still low in several large markets. France, Spain, and Italy are examples of countries with a low percentage of generic drugs. Sweden, Denmark, Germany, and the UK fall in the middle range.

OuTSOuRCiNG

Outsourcing is increasingly a common trend in the pharma industry. Previously, pharma companies more or less had a monopoly on the expertise and resources needed to develop, produce, and market drugs, but today all of these services are available from specialised, cost-effective companies. Outsourcing enables smaller companies to collaborate to develop new drugs and improve properties of existing ones in selected niches, with no need for large, costly organisations that were associated with the pharma industry up to now.

Market review

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As a consequence of these trends in the pharma industry, a new type of pharma company has developed – specialty pharma. Its mission is to take advantage of opportunities to acquire everything from smaller niche products to potential blockbusters from the big pharma companies, while meeting the market’s need for cost-effective solutions.

Meda’s definition of the specialty pharma niche is that:

Meda acquires new products through search and develop- ment, rather than research and development – as in traditio- nal pharmaceutical companies. Meda actively, systematically works to identify products for in-licensing or acquisition.

A specialty pharma company can take responsibility for product development in the later clinical phase, but often avoids risky, capital-intensive, early research. Cost of producing a new drug from early clinical research to launch of the final product has mushroomed, on average from USD 800 million in 2001 to USD 1.2 billion in Q1 2006¹⁾. At the same time, risk of failure is great.

Specialty pharma companies can take over and further develop useful products that a big pharma company is phasing out in connection with restructuring. Increased focus on marketing and product life-cycle management can further enhance sales potential of such drugs.

•

Specialty pharma companies are attractive partners for pharma and biotech companies with no marketing organisations. Specialty pharma companies have the capacity and expertise to handle potential big sellers and smaller niche products. Marketing can be adapted to a greater extent to various market conditions.

Meda focuses on specialist drugs for a smaller target group, called niche busters.

Specialty pharma is a common term today, and the companies it refers to often have products that include everything from generics to new versions of specialist products. To some degree, specialty pharma companies are categorised by type of activities.

1. SPECiAlTy PhARMA FOCuSiNG ON PRODuCT DEvElOPMENT Companies that not only market specialist products and acquired original drugs but also work with product development – creat- ing new pharmaceutical forms or treating new indications. Such market-adapted product development is often called product life-cycle management. Meda’s ambition is to play a central part in this category of specialty pharma companies.

2. GENERiC COMPANiES

Companies that primarily sell generic products, occasionally expanding their range with synonymous products under other brands. Sometimes these products are improved in some aspect.

•

Specialty pharma

1) Tufts Center for the Study of Drug Development.

MEDA | Specialty pharma

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Business activities

MEDA | Business activities _Betadine Tramadol Cibacen/Cibadrex Novolizer Produkter Azelastine Allergospasmin Thioctacid

Frankrike Italien Spanien Storbritannien Tyskland Övriga

12. 3M:S MARKNADSFÖRSÄLJNING PER LAND, 2006 Cardiology Dermatology Respiratory

SALES &

MARKETING

SupplyChain Adm

inistra tion

Development

& Regulatory

Administration

Supply Chain

SALES &

MARKETING

Development

& Regulatory

Administration

Supply Chain

SALES &

MARKETING Development & Regulatory

Meda is a leading European specialty pharma company with wholly owned subsidiaries in 24 European countries. On 31 December 2006, Meda had 1,502 employees. Meda AB is the parent company, with its main office in Solna outside of Stockholm. It specialises in marketing and market-adapted product development. Priority TAs are cardiovascular, dermatology, respiratory, pain/inflammation, and gastroenterology. After acquisition of 3M’s European pharma division, Meda’s own pharmaceuticals constitute about 90% of its products. The 10 largest products represent about 50% of total sales. But Meda is not dependent on any single product, because no product represents more than about 15% of sales.

Meda’s business activities fall into four main divisions: Sales and Marketing, Development & Regulatory, Supply Chain, and Administration.

Frankrike Italien Spanien Storbritannien Tyskland

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Chief operating officer Jörg-Thomas Dierks

Western Europe Ton Van’t Hullenaar

France Christian Senac

Central & Eastern Europe Esfandiar Faghfouri

Northern Europe Anders Larnholt

ITB/other export markets Berthold Hildebrand

Marketing centres

Spain Jose Vicente Santa Cruz

UK Anton Jenkins

Belgium Veronique Goldzstajn

Netherlands Dirk Groen

Portugal Jorge Miranda

Ireland Owen McKeon

Germany Esfandiar Faghfouri

Italy Francesco Matrisciano

Austria Günter Cseh

Sweden Patric Johansson

Denmark Iris Jakobsen

Norway Leif Pedersen

Finland/Baltics Juha Pimiä

America

Asia

Europe

Africa/Australia

Middle East

Cardiovascular

Dermatology Emmanuel Haulet

Pain/inflammation Mary Carmen Diez

Respiratory Joachim Finsterle Poland

Wojciech Gora

Switzerland Dan Furrer

Greece George Panagakis

Hungary Eva Terjan

Czech Republic Jiri Stransky

Slovakia Josef Hlavenka

THE SALES AND MARKETING DIVISION

Meda has a strong pan-European presence through local marketing companies throughout Europe. The marketing organisation is characterised by a non-hierarchical, efficient, flexible structure.

Since the acquisition of 3M’s European pharma division, the marketing organisation employs more than 1,000 people, which makes it the largest department in Meda. This flexibility, combined with the size and geographic cover of the organisation, allows further products to be added to the existing portfolio without increasing headcount to the same degree. Meda’s COO, Jörg-Thomas Dierks leads this work. The marketing organisation and its structure are illustrated below.

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Austria

50 100 150 200 250 300 350 400 Other

200 400 600 800 1000 1200 Other

Austria

50 100 150 200 250

Other Austria Portugal UK Nordics Benelux Spain Italy France Germany MARKETING ORGANISATIONS

SEK million MSEK

Employees Employees

Meda

3M

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MARkET REGiONS

Meda’s marketing organisations are divided into three large regions according to cultural, historical, and geographical ties.

By establishing a handful of large regions with overarching management, Meda expects to bring about synergies and simplify decision-making. Product launches and cross-border marketing campaigns reflect these synergies.

Meda’s marketing organisation is divided into these geographical regions:

Western Europe

France, Spain, the UK, Belgium, the Netherlands, Portugal, Ireland, and Luxemburg.

Central and Eastern Europe

Germany, Italy, Austria, Poland, Switzerland, Greece, Hungary, the Czech Republic, and Slovakia.

Northern Europe

Sweden, Denmark, Norway, Finland, Estonia, Latvia, and Lithuania.

iNTERNATiONAl TRADE BuSiNESS (iTB)

ITB is a business unit at Meda; ITB is responsible for Meda products that are marketed and distributed by partners. The unit ge- nerates significant sales and profit for the group. ITB’s partnering process is a systematic method for handling Meda’s products on key markets. The unit uses a proven marketing concept that is adapted to local conditions. In 2006, Meda’s ITB unit had sales of about SEK 600 million. The goal of ITB is to create conditions for establishing new subsidiaries. The unit’s work contributed to the new organisations that were formed in Slovakia and the Czech Republic in 2005 and in Poland and Hungary in 2006.

During 2006, the unit contracted several new partnerships in Asia and parts of Eastern Europe.

MEDA | Business activities

Frankrike Italien Spanien Storbritannien Tyskland

200 400 600 800 1000 1200 1400 1600 Other

50 100 150 200 250 300 350 400 Other

200 400 600 800 1000 1200 Other

50 100 150 200 250

SEK million MSEK

Employees Employees

Meda

3M

Meda 3M Betadine

Tramadol Cibacen/Cibadrex Novolizer Produkter Azelastine Allergospasmin Thioctacid

Frankrike Italien Spanien Storbritannien Tyskland Övriga

18

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MARkETiNG CENTRES

Meda’s marketing centres are marketing organisations in the company, with no geographical connection, which are responsible for globally managing a group of products in a specific TA.

Meda has four marketing centres: respiratory (Bad Homburg), dermatology (Brussels), cardiovascular (Paris), and pain/inflammation (Madrid).

Meda’s marketing centres also maintain relationships with opinion leaders and international organisations (Medical Mar- keting). Marketing centres convey appropriate information on the products in the Meda group and manage the exchange of information, ideas, and experiences with local subsidiaries.

MARkETiNG

Meda’s marketing consists mainly of personal sales combined with training and seminars, often in collaboration with clinics.

Pharmaceutical specialists conduct sales visits in all countries and focus on the target group, primarily doctors and health care staff

at specialist clinics and general practices. Meda’s marketing is based on expertise and quality. To be successful with customers, Meda must convey how medically valuable and cost-effective its products are.

As Meda focuses more on niche busters, its marketing increasingly targets specialists. The cost of marketing pharmaceuticals to specialists differs greatly from the cost of marketing them to general practitioners in outpatient care. On the biggest European markets, the marketing cost per krona of revenue is 20–30 times higher for products marketed to general practitioners compared with products marketed to specialists. The result is lower sales overhead for specialist drugs when marketing is geared toward a limited, clearly defined target group.

Bad Homburg Paris

Madrid

Brussels

Business activities | 2006 annual report

Meda has four marketing centres:

respiratory (Bad Homburg), dermatology (Brussels), cardiovascular (Paris), and pain/inflammation (Madrid).

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CuSTOMERS

Meda’s customer structure consists of these categories:

Prescribing doctors and other health care staff

One of the most important target groups is doctors, nurses, and other health care staff. This group receives and feeds back information and experience about the appropriateness of the products.

Patients

Health and quality of life are important to people. Modern patients demand more information and more involvement in decisions on their treatment. Often the patients obtain information on their own from the web and from other sources. Pharma companies must provide relevant information to patients.

Another key channel is patient organisations that exist for most common diseases.

Pharmacies and chains

Pharmacies are a vital sales channel for OTC meds, and their staff is crucial as advisors to customers. In most countries, pharmacies are private. Sweden is an exception with its publicly owned monopoly. In many European markets, the trend is for pharmacies to merge into chains.

Drug authorities

The pharma industry is heavily regulated and controlled for the sake of patient safety. Changes have occurred in the EU – in particular, there is a new central process for registering new drugs. Besides overseeing and making decisions on new drug registrations, authorities also determine if pharmaceutical subsi- dies will cover a new preparation.

Opinion leaders

The health care field has opinion leaders with great influence on international, national, and local levels. Because Meda is specialised in specific TAs, it has a great need to provide information and build faith in its products in this group.

MEDA | Business activities

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