Page 1

Annual Report 2010 MEDICULT MEDIA

HUM AGEN PIPE TS

MIDATL ANTIC DE V ICES


Origio Annual Report 2010 Highlights 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover

B

Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover C Letter from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 6 Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 8 Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 11 R&D Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 14 ORIGIO Prepares for the Next Generation of Culture Media . . . . . . . . . . . . . page 18 Financial Guidance and Business Milestones 2011 . . . . . . . . . . . . . . . . . . . . . . page 23 New Facilities in Måløv, Copenhagen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 26 Precision Micro Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 27 ORIGIO ScanLab Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 28 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 30 ORIGIO AUSTRALASIA Pty. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 35 Control and Risk Management Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 36 Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 37 Company Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 38 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 41 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 42 Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 44 ORIGIO’s Recent Journey – a Corporate Transformation . . . . . . . . . . . . . . . . page 46 Product Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 48 Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 49 Statement by the Board of Directors and Executive Board . . . . . . . . . . . . . . . page 79 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 80 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82 Obituary, Professor Kjell Bertheussen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82

Vision:

Mission:

To make the #1 dream of every infertile couple come true

We deliver leading, innovative ART solutions to the benefit of families


ORIGIO Around the World

Letter from the CEO Dear customers, colleagues and shareholders, Over thirty years have passed since Professor Robert Edwards developed human in vitro fertilization (IVF) therapy. In 2010, he was awarded the Nobel Prize for his pioneering work that made it possible to treat infertility. Assisted Reproductive Technology (ART) has created hope for millions of infertile couples throughout the world to make

• the patient wins due to a more gentle and cost-effective fertility process,

their ‘#1 dream come true’, and a cumulative total of

• the IVF clinics win, as they can provide improved

more than 4 million babies have been conceived via

treatment options and, in that way, potentially

ART since 1978.

also attract more patients to their clinics, • the society at large wins by welcoming more new

The ART market has progressed tremendously since the inception three decades ago, but it is still

world citizens at a lower cost per baby, • and ultimately, ORIGIO wins by being able to

a young and hugely underpenetrated market. At

execute on its vision – to help infertile couples

the same time, several mega-trends support the

around the world make their #1 dream come true

continued development and growth of the ART

– while launching a financially, highly attractive

market.

product.

ORIGIO wants to be in the forefront of the evolution

Our family

of the ART industry and again in 2010, the ORIGIO

We are very happy to have welcomed more new

team secured substantial progress on key targets.

members into the ORIGIO corporate family during the year;

Our pipeline Most notable was the headline data from the world’s largest fertility culture media study ever. The data substantiated a very interesting product

• the joint venture of ORIGIO ScanLab Equipment a/s securing our customers’ high quality IVF workstations, • the acquisition of Precision Micro Devices, LLC

concept named EmbryoGen® – a superior medium

further strengthening our already excellent value

for the commercially attractive subgroup of patients

proposition for micropipettes for ART,

having had a previous miscarriage. We believe,

• our new Russian and Australian colleagues

by launching a product for this subgroup, we can

allowing us to expand faster in these sizeable IVF

create a rare win-win-win-win situation:

markets,


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

ORIGIO offices Worldwide presence

• also, it was my pleasure to welcome a new Chairman of the Board of Directors – Mr. Flemming Pedersen, an experienced healthcare industry insider – while thanking the previous Chairman – Mr. Jens Holst – wholeheartedly for

I would like to take this opportunity to thank, yet

his strong contributions during the past years,

again, my colleagues in ORIGIO globally as well as

• 2010 was also the year during which ORIGIO’s

our many distribution partners around the world for

new media manufacturing facility and corporate

their strong contributions to our sustained growth

headquarters in Måløv, Denmark was completed

and development; our customers for their continued

ensuring adequate space for a continued

support and inspiration to further innovation; and

expansion in the years to come.

our shareholders for their loyalty and patience towards our cause and corporation.

It was with great sadness that we learned of the passing of Professor Kjell Bertheussen on February

Our mission is as motivating to us all, as it ever was.

14, 2011. Professor Bertheussen was one of the

We are confident that we – yet again – during 2011

founders of ORIGIO and his deep insight into

will pursue an exciting path of continued progress

biochemistry and cell biology has been of great

for the benefit of all stakeholders.

value to ORIGIO. Our financials Last but not least, ORIGIO secured attractive progress on the key financial guiding parameters of organic growth, EBITDA development, and operating cash flow. In conclusion, I find that 2010 was a very exciting year

Yours sincerely,

for the ART industry and ORIGIO, and that we, once

Jesper Funding Andersen

again, proved to live out our corporate values of being

CEO, ORIGIO a/s

aspirational, reliable and caring at the same time. 5


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Management Report Introduction

• Increased wealth creation. In developing

ORIGIO is a leader in delivering leading innovative

countries like Brazil, Russia, India and China,

ART solutions that benefit families. Through

increased wealth leads to a growing middle-

innovation and product advancement, we aim to

classes making ART affordable for more couples.

help the #1 dream of every infertile couple come true. ORIGIO currently consists of three product

• Maternal age. The average age for a mother

families; MediCult Media, Humagen Pipets and

at first birth has increased over the last several

MidAtlantic Devices, that cater for the broadest

decades. This is a consequence of societal

range of products – from disposables to equipment

changes, as more women are in the workforce

– for global ART professionals.

and many are waiting to further their career and secure their financial position before

Our market

having children. This does not correlate well

It is estimated that one in six couples world-wide

with the biological fact that women’s fertility

experience some kind of infertility problem at

decreases with age, with a significant drop in

least once during their reproductive lifespan.

their early thirties, as the quality of women’s

Approximately one third of infertility cases is female

eggs decreases. Developing technologies, such

factor related infertility, one third is male factor, and

as cryopreservation for the storage of gametes,

the remaining third involves problems on either side

embryos and blastocysts, can extend the natural

or unexplained causes.

fertility period, as it is the age of the eggs – not the age the of the mother – which is relevant for a

The development of ART has progressed

successful reproduction.

significantly over the last three decades. Today, the global ART market is estimated to be around

• Obesity and other health related problems.

1.4 million cycles per year, and more than 300,000

The rise of health problems like obesity (chart

babies were conceived from ART in 2010. The

2), eating disorders and diabetes world-wide

ART market has experienced steady growth but

impacts the reproduction capacity negatively.

with big variations from country to country due to

This together with e.g. Chlamydia, gonococcal,

e.g. infrastructure and reimbursement levels. A

and other diseases have negative consequences

number of mega-trends support the growth and the

for fertility rates.

continued development of the ART industry in the years to come:

• Lower sperm quality. There has been a genuine decline in semen quality over the past 50 years.

• The reproduction challenge. Many developed

As male fertility is to some extent correlated

countries face a “reproductive challenge” (see

with sperm count, the results reflect an overall

chart 1), as the number of children being born is

reduction in male fertility. Male infertility is

not sufficient to sustain the population. In order

believed to be on the rise due to among other

to maintain the current population, an average

things increased environmental contamination.

of 2.1 children must be born per female. ORIGIO

ART can help couples facing this problem by

believes that this population deficit brings

either sperm treatment or full ICSI cycles.

attention to the need for fertility treatment and that it thus will play an increasingly important role in the stabilization and demographic management of a country’s population.


Chart 1: Total fertility rate in Top 20 economies (GDP). Average number of children born by women in the reproductive age span (age 15-49) 3,0 2,5

Demographic Balance = 2.1 2,0 1,5 1,0 0,5 0,0 Japan

Korea, South

Italy

Russia

Germany

Switzerland

Spain

China

Canada

Belgium

Netherlands

Australia

United Kingdom

France

United States

Turkey

Brazil

Indonesia

Mexico

India

Source: CIA World Fact Book, 2010 estimate

7


Due to the abovementioned economic, sociological

• Broadening of motherhood. Many countries are experiencing an increasing acceptance of a

and medical reasons, ORIGIO believes that the

broadening of motherhood from the traditional

underlying need for ART will increase in the future.

heterosexual couples to other types of potential

In addition, the global ART market is massively

parents (single mothers, donors, surrogacy,

underpenetrated (please refer to page 20-21),

homosexuals, etc.). The use of ART can make this

supporting the fact that this market is poised for

happen.

attractive growth in years to come.

Chart 2: Obesity* across G-20 economies (excluding EU) % of population

Japan India Indonesia China France South Korea Italy Russia Brazil Turkey South Africa Germany UK Canada Australia Saudi Arabia Mexico Argentina USA 0

10

* Body Mass Index of at least 30 kg/m2 Source: Financial Times, September 2010

20

30

40

50


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Sales and Marketing Revenue for 2010 totaled DKK 308.0 million,

equipment sales was driven by the mini incubator

corresponding to an increase of 16% in floating

ORIGIO/Planer BT37, equipment sales in North

currencies. Overall organic growth for the group

America, as well as a heads-up start for the new

amounted to 12% in constant currencies. Sales of

joint venture, ORIGIO ScanLab Equipment, which

disposables amounted to DKK 261.0 million and

specializes in sales of equipment for IVF laboratories

now represents 85% of the total revenue. The

world-wide.

sales of disposables achieved organic growth of 8% in 2010, particularly as a result of selling direct

The strongest geographical growth in 2010 was

in more markets, a successful introduction of the

seen outside Europe and Americas with organic

CryopetteŽ, and better cross-selling of ORIGIO’s

growth of 22%. In Europe, revenue was up by 13% in

products in general. In 2010, revenue within

constant currencies and now represents 51% of total

equipment increased by 43% in constant currencies

revenue. In the Americas, organic growth amounted

and totaled DKK 47.0 million. The high growth in

to 7%, mainly driven by high equipment sales.

Product split of revenue DKK million

Revenue 2009

Revenue 2010

Revenue growth

Organic growth*

Disposables

237.7

261.0

10%

8%

Equipment

28.0

47.0

68%

43%

265.7

308.0

16%

12%

Revenue 2009

Revenue 2010

Revenue growth

Organic growth*

142.5

156.4

10%

13%

Total *Constant currency

Geographical split of revenue DKK million Europe Americas

78.6

87.1

11%

7%

Rest of World

44.6

64.5

45%

22%

265.7

308.0

16%

12%

Total *Constant currency

Chart 3: Geographical and product sales mix Sales by Region 2010

Sales by Product Groups 2010

15%

21% Europe 51%

51%

IVF pipets 38%

38%

9%

Americas 28%

IVF other disposables 9%

Rest of World 21%

28%

IVF media 38%

IVF equipment 15%

38%

9


A number of organizational initiatives were taken

Canada. As part of the US integration, the two US

during 2010 to further strengthen the sales and

entities were legally merged and are now operating

marketing organization.

on the same software platform. The merger enables an enhanced ability to leverage resources and

To broaden the already strong footprint in terms

product synergies and thereby strengthen the

of sales subsidiaries and distributor networks

Group’s leading position in the US.

around the world, ORIGIO LLC was established in St. Petersburg, Russia. The company successfully

The strengthening of the sales and marketing

initiated its operation during the third quarter of

organization world-wide furthermore included the

2010. ORIGIO LLC is owned 51% by ORIGIO and

recruitment of an International Technical Product

49% by AVA-Peter Ltd. – a leading medical supply

Director for equipment support and a new General

company in Russia and ORIGIO’s long-term partner

Manager for the Nordic & Baltic regions. Extra

in Russia.

resources were also added to the sales teams in China and Italy to better support the customers.

In Australia and New Zealand, ORIGIO started direct sales of all product categories July 1, 2010

Finally, ORIGIO ScanLab Equipment a/s, was

(please refer to page 35). To manage the full scale

established as a joint venture on July 1, 2010

roll-out of ORIGIO’s products, a new General

with the objective of selling work stations for IVF

Manager was hired. Also in July, ORIGIO began

laboratories world-wide (please refer to page 28).

direct sales to customers in Finland. In the US, the ORIGIO sales force was expanded in April 2010 to take over direct sales to customers in

A new corporate website was launched in June 2010. The website embraces all three brands and has detailed information about the products and services that ORIGIO offers. Furthermore, new functionalities like online ordering and order tracking are in development.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

ORIGIO also presented a new Product Catalogue during 2010 containing all three brands: MediCult Media, Humagen Pipets and MidAtlantic Devices.

Trade Exhibitions At the annual European Society of Human Reproduction and Embryology (ESHRE) exhibition 2010 in Rome, ORIGIO was represented with two exhibition stands, split into the traditional ORIGIO brands and ORIGIO ScanLab Equipment. The Cryopette® was presented at two live demonstration desks, which attracted several hundreds of embryologists. Also the bench top Incubator “ORIGIO/Planer BT37” was demonstrated at ESHRE for the first time – with great interest from many potential customers. The 2010 American Society for Reproductive Medicine (ASRM) annual conference was held in Denver, Colorado, October 24-27, with approximately 5,000 participants. Based on numerous comments from customers, management believes that the ORIGIO brand is an increasingly recognized and acknowledged brand as the company of choice in relation to ART needs.

11


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

R&D Pipeline Emerging technologies

IGF-II

The ORIGIO Group possesses a world-leading

The research activities on IGF-II, conducted at the

pipeline of R&D projects within ART and the related

University of Adelaide, Australia, have shown that

stem cell field (please see chart 4).

treatment of embryos with a combination of three components, added to ORIGIO’s EmbryoAssist™

GM-CSF / EmbryoGen®

and BlastAssist ® IVF media improves embryo

In December, 2010, ORIGIO completed the

development of murine embryos at day 5 and

world’s largest clinical study of IVF culture media,

implantation rates at day 8 compared to controls.

“The effect of granulocyte-macrophage colony-

In 2010, the research group demonstrated that

stimulating factor (GM-CSF) during in vitro culture

embryo culture in media supplemented with

of human embryos on subsequent implantation

the combination of insulin-like growth factor-II

rates”. The study included 1,332 patients and was

(IGF‑II), urokinase plasminogen activator (uPA)

designed as a multi-center, randomized, parallel

and plasminogen significantly increased the

group, double-blinded, placebo-controlled,

percentage of murine mothers pregnant at day 18

efficacy trial of a culture medium (EmbryoAssist™)

by 27.8% compared to controls. The treatment had

containing GM-CSF.

no adverse effects on maternal body composition, birth weight or postnatal growth.

Exposure to GM-CSF showed a statistical significant improvement of the ongoing implantation rate in

ORIGIO holds exclusive world-wide rights to any

the commercially attractive subgroup comprising

product concept emanating from the results.

women who have previously experienced miscarriage, either naturally or in relation to an IVF

Iloprost

cycle. The study documented that exposure to

The first part of the safety and efficacy study on

GM-CSF increased the overall ongoing implantation

the effect of the prostacyclin analogue, Iloprost,

rate for this subgroup by 44.1% (p = 0.001) in week

was completed successfully in March 2010. This

7 and by 40.6% in week 12 (p = 0.003) compared

study has proven that the addition of Iloprost

to the control group. This improvement correlates

to Blastocyst culture medium is safe as

well with the scientific hypothesis that GM-CSF

evaluated on embryo development.

positively influences the embryo implantation The second part of the study will,

potential.

on a preliminary basis, investigate ORIGIO plans to start the launch of the new culture

the efficacy of Iloprost on

medium during the third quarter of 2011. The

implantation rates. This part

product will be launched under the product name

will include approximately

EmbryoGen (for further details please refer to

100 patients and is

pages 18-19).

expected to be

®

completed by the third The patentability of the use of GM-CSF in IVF media

quarter of 2011.

within the EU has been opposed by a UK based company. On October 20, 2010, oral proceedings

The study is an

took place at the European Patent Office in Munich

investigator initiated

and the result was that the patent integrity for

study taking place in

human use of GM-CSF in IVF media was upheld.

Houston, USA. ORIGIO

ORIGIO thereby maintains its strong intellectual

has world-wide rights to the patent

property rights position for the use of IVF medium

that comprises the application of Iloprost added

enriched with GM-CSF for human use world-wide.

to media for ART.

The opposition has appealed the decision.


Our products facilitate human birth every 5 minutes somewhere around the world

13


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

EmbryoSure™

and survival rates, in comparison to the existing

There is a growing trend within ART towards single

practice of growing embryos in a conventional

embryo transfer rather than transfer of multiple

culture dish. Data from the study showed that

embryos in order to reduce the risk of adverse

Incept’s SMART Start™ Embryo Culture System

effects on mother and child. Today, the selection of

met the primary endpoint of non-inferiority to the

embryos is based entirely on visual/morphological

conventional static dish culture.

scoring of the embryos. For single embryo transfer to replace multiple transfers world-wide,

ORIGIO plans to perform internal studies on bovine

an improved selection of the best embryo(s) by

embryos prior to initiating a second phase human

objective measures is required to achieve similar or

clinical study.

higher success rates. Stem cell media In Q1, 2009, ORIGIO signed a definitive agreement

ORIGIO has developed a superior well defined

with Novocellus Ltd. (Guildford, UK) to license

growth media for the culture of adult stem cells and

the non-invasive embryo selection technology,

embryonic stem cells. The patented SSRx media

EmbryoSure™, developed by Professor Henry Leese

supplement is free of any human or animal derived

at the University of York, UK. The technology is

components and is broadly applicable to other

based on amino acid profiling and is fully patented.

stem cell lines or bio-industrial lines. The ORIGIO technology has shown increased mesenchymal stem

As part of the agreement, ORIGIO will co-fund

cell growth by 50% compared to serum-free control

a human study program. The purpose of the

media without SSRx.

clinical program is to investigate the extent to which EmbryoSure™ is superior to current visual

Based on input from potential partners and to

techniques in selecting the most implantation

enable the optimal commercialization path of the

competent embryos. The clinical program will imply

concepts in this area, ORIGIO has in 2010 worked on

an exploratory phase followed by a prospective

three activities in parallel:

efficacy phase. The exploratory phase is to determine the algorithm for the selection of the embryos and is expected to take place in 4-6 clinics and involve 400 patients. Results are expected in the fourth quarter of 2011.

1. continued to develop and document the performance of the media concepts 2. performed media tests in collaboration with potential customers 3. continued progress on regulatory compliance of

By gaining access to this leading-edge technology,

the components

ORIGIO positions itself at the forefront of the emerging trend of single embryo transfer in ART.

Performance tests of human Embryonic Stem Cells (hESC) cultured with SSRx have shown promising

Incept BioSystems, Inc.

results. Furthermore, in-house studies have proved

In January 2011, ORIGIO completed an asset

that SSRx performs well in long-term tests and that

acquisition of the US-based Incept BioSystems,

stability is favorable for commercialization.

Inc. (Incept). Incept has developed an innovative and patented microfluidics system ‘SMART Start™‘

Material transfer agreements have been signed

that mimics in vivo conditions and thereby delivers

with potential partners in order for them to make

unique control and physiologic conditions ideal for

their own performance tests and thereby validate

embryo culture in the assisted reproduction lab.

ORIGIO’s results. These external tests are expected

Incept concluded an investigational human study

to run during the first half of 2011.

evaluating the SMART Start™ system in October 2010. The study assessed the system’s capacity to

The business potential (size of market, price point

safely support morphological embryo development

and speed of adoption) is dependent on the


outcome of the external performance tests as well

During 2010, ORIGIO obtained several new product

as the final conclusion on regulatory compliant

approvals. In EU, the following products were CE

components and performance tests hereof. Timing

marked:

of a potential product launch or partner agreement

• Cryopette®

will be decided shortly after the final results are

• ICSI Cumulase®

available (expected Q2 2011).

• MediCult Vitrification Cooling and Warming • Embryo Thawing Pack

Regulatory update 2010

• Biopsy Medium

IVF media and related disposables are classified as medical devices. Regulations on IVF products

In the US, the following products have been cleared:

continue to intensify and regulatory requirements

• Cryopette®

will further increase world-wide.

• MediCult Vitrification Cooling and Warming

In 2009, the name of the new company group

In Australia, the following product was registered:

comprising the previous MediCult, Humagen

• Cryopette®

Fertility Diagnostics and Mid-Atlantic Diagnostics was changed to ORIGIO. The name change

In China, regulatory demands are particularly strict.

required a re-registration of the product portfolio

ORIGIO is in the process of registering its media

in more than 50 countries world-wide. Furthermore,

range in this growth market. So far, the product test

ORIGIO moved to a new facility in Denmark and

standards are in preparation and meetings with the

changed the content of antibiotics in all media

Chinese authorities (SFDA) have taken place during

to gentamicin. All changes required a substantial

the second half of 2010. The regulation process is

additional regulatory effort from Regulatory Affairs

expected to last more than two years.

which continued in 2010.

Chart 4 R&D Pipeline

Product Probability of success

Research

Development

Preclinical

Human safety

0 - 10%

10 - 20%

Human efficacy Without transfer

With transfer

Regulatory

20 - 40%

40 - 80%*

80 - 100%

IVF media

EmbryoGen®

Q3 2011

Iloprost**

Q3 2011

Embryo selection

EmbryoSure™*

Microfluidics

SMART Start™

Stem cell medium

Stem cells

IVF

IGF-II

Stem cells

Q4 2011

Q4 2011

Different development path

Next milestone

Sequential launch

Est. revenue potential*** DKK mill/year

100+

Pilot impl data

0 - 100+

Update in April 2011

0 - 350+

Exploratory data

0 - 350+

Bovine test

0 - 200+

Agreement

0 - significant

* Probability at this stage estimated at 20-40% for EmbryoSure due to other uncertainties related to clinical use ** Timeline uncertain due to investigator initiated study. Probability at this stage estimated at 20-40% *** Revenue potentials may not be additive for IVF media projects

15


ORIGIO Prepares for the Next Generation of Culture Media 2011 will be the year during which ORIGIO’s largest

cell death), slower compaction and expansion, and

media development investment, the GM-CSF

ultimately lower birth weight. GM-CSF has been

medium, moves from pipeline to product. Project

shown to alleviate most of these problems bringing

P-0022 becomes EmbryoGen , a new option for

IVF embryos closer to naturally conceived embryos.

couples who experience the greatest challenges in

The embryo is evolved to respond to growth factors

achieving and maintaining pregnancy.

such as GM-CSF, and its development is clearly

®

impaired when such factors are not present during The idea behind GM-CSF

early development.

Granulocyte-Macrophage Colony-Stimulating Factor was first known to control white blood cell

The trial

growth in the body, and thus its nomenclature. The

In December 2010, the results from the world’s

name of the molecule has no direct connection to

largest IVF media trial were announced. More than

embryology.

1,300 patients in 14 centers received IVF treatment with either a standard IVF medium or a medium

Since then, several other roles of GM-CSF have

supplemented with GM-CSF. The study end-point

been discovered in the human body. It is present

was Ongoing Implantation Rate, i.e. fetal heart beat

throughout the reproductive tract, and specific

monitored in week 7 of gestation, followed by a

GM-CSF receptors are expressed by the embryo.

follow-up monitoring in week 12.

Several studies have subsequently shown a powerful positive effect on IVF embryos, both animal and

For the entire patient mix, the effect of

human.

EmbryoGen® did not reach statistical significance by week 7; but further data exploration revealed a

IVF embryos are still inferior to their in vivo

striking effect:

counterparts showing lower cell numbers and cleavage rates, higher apoptosis (i.e. programmed

EmbryoGen® beneficiaries The group of patients who had suffered previous

Chart 5: Ongoing implantation rate* in the

miscarriages experienced a highly significant

subgroup ’previous miscarriage’

benefit from EmbryoGen®. At week 7 and 12, these patients were 44.1% and 40.6% more likely to have maintained an implanted embryo. The study demonstrated that access to GM-CSF strongly improves the embryo implantation capacity in women who struggle to maintain ongoing implantation and pregnancy. These patients, who must endure repeated IVF attempts and whom IVF centers struggle to assist, now have an improved treatment option. Improving success rates in this group of patients means raising the baseline of IVF capabilities.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

EmbryoGen® market potential

ORIGIO is committed to advancing IVF treatment.

At the moment, the primary target group for

The growth factor-enriched EmbryoGen® is a bold

EmbryoGen® is assessed to be at least 200,000

step towards helping women who are capable of

cycles per year. Clinics offering i.e. multiple

pregnancy and healthy childbirth, but for whom

treatment “packages” will see a substantial financial

both natural conception and even standard IVF is

benefit (and professional satisfaction) in improving

not quite enough. Perfectly in line with ORIGIO’s

success rates in this group. And clinics under

vision and mission.

M I DAT L A N T I C DEVICES

reimbursement will see the cost of securing live birth from this group decrease substantially. Having

Pending regulatory approvals, EmbryoGen® is

secured world-wide exclusive rights for the use of

expected to be available in most jurisdictions as

GM-CSF in human ART media, EmbryoGen® poses

from Q3 2011.

a very attractive prospect for commercial value.

A Win - Win - Win - Win Situation Society

Patient

• Help intertile couples

• Quality of life (less cycles)

• Less costs per IVF baby

• Less cost

ORIGIO

Clinic

• Executing on ORIGIO’s vision • Increased revenue/profit

• Better treatment • Increased patient intake

• Increased scientfic voice

17


Size of world population

Percentage being women age 15-44

6.9 billion x

23% 1.6 bn

Women desiring pregnancy during reproductive age span (estimate)

x

75% 1.2 bn

Share of related infertile couples (1 of 6) or women with no partner (estimate)

x

17% 200 mill

Global IVF – a massively underpenetrated market

Share of these for which IVF/ICSI would be optimal treatment option (estimate)

x

15% - 30% 30 - 60 mill

x

Number of treatment cycles needed for life birth (average)

Estimated global medical need for IVF. Number of IVF/ICSI cycles

3-4

= 90 - 240 mill

• Infrastructure – the infrastructure of capable IVF clinics is in many countries insufficient to meet demand and develop the market. New clinics are

WHO has defined both male and female infertility

opening at increased speed in many developing

as diseases. The equation above estimates the

countries but it will take a long time before the

world-wide medical need for treatment of these

global infrastructure is fully developed to meet

diseases to correspond to 90-240 million IVF/ICSI

the medical need.

cycles. • Investment – IVF treatment is costly – and in Why then is the actual annual number of treatment

most countries around the world patients have

cycles only some 1.4 million per year leading to a

to pay all or the majority of the treatment costs

penetration of only some 1% of the medical need?

themselves. This severely limits current treatment

There are many reasons for this but on top of the list

levels. Naturally, ongoing wealth creation in

presides the following four ‘I’s:

developing countries as well as potential for increased reimbursement in countries where

• Information – the fact that knowledge about

governments have demographic imbalances

treatment options and outcome in many parts of

(i.e. too low fertility rates) or for other reasons

the world are insufficiently prevalent. Education

decide to offer public funds for treating this

of patient groups is growing but is still a vast

medical need, will over time alleviate this

challenge in most jurisdictions.

obstacle. Several socio-economic calculations


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Chart 6: Global medical need for IVF versus current penetration

1%

Global medical need for IVF (100% = 90-240 million cycles) Annual current penetration (1.4 million cycles)

99%

Source: ORIGIO estimate based on Demographic and Health Surveys (DHS) Comparative reports No. 9: ”Infecundity, infertility, and childlessness in developing countries” by ORC Macro and the World Health Organization (2004)

show that ART treatment clearly adds value to

It is a fact that the global IVF market is still

the society, also from an economic perspective,

underpenetrated (although the exact levels

as the lifetime societal benefits outweigh the

of under-penetration can always be debated)

costs of an ART baby – this calculation supports a

and will be so for many years ahead. ORIGIO is

reimbursement policy from the government (see

grateful to serve a market with a clear medical

page 37 for details).

need and massive room for improvement in terms of penetration levels and does believe

• Innovation – improving treatment efficacy and

that penetration will increase going forward. The

gentleness via innovation will also improve

company does not anticipate a decrease of the

penetration, as more patients will seek the IVF

underlying infertility prevalence or that any good

treatment option, if success rates are higher and

alternative to IVF treatment will surface in the near

the overall treatment less stressful for the patient.

future. From a penetration perspective, it is also worth noting that just 30 years ago only around

While ORIGIO will do its part in relation to the last

200 IVF cycles were performed globally. It truly is

mentioned ‘I’ above (Innovation – please refer to

a young market in which ORIGIO is operating, and

‘R&D Pipeline’ on page 14), the company does

the company feels that there is an ever-increasing

anticipate other stakeholders to work gradually more

demand for fertility treatments which will support

on the other ‘I’s in the years to come.

the growth for many years to come.

19


Profit and loss 2010

Net financial expenses increased from a net of

Revenue for 2010 totaled DKK 308.0 million,

partly due to the increased debt associated with

corresponding to an increase of 16% in floating

the new manufacturing and headquarters building.

currencies and 12% organic growth, on a constant

Impairment test of investments has resultated

DKK 9.1 million in 2009 to DKK 18.2 million in 2010

currency basis.

in a write-down of DKK 6.8 million of ORIGIO’s initial investments from 2005/2008 in Incept

The gross margin was 59.4% in 2010, which was

BioSystems, Inc. The write-down is due to the fact

slightly higher than in 2009. In 2010, EBITDA before

that ORIGIO in January 2011 purchased assets

special items increased by 21% to DKK 43.8 million

from Incept BioSystems Inc. at a price of which the

bringing the EBITDA-margin before special items

corresponding part is substantially lower than the

to 14.2% of revenue. The increase in EBITDA before

acquisition cost of ORIGIO’s 10% shareholding in

special items is a result of higher revenue combined

Incept BioSystems, Inc. The amount is included

with effective cost management.

under financial expenses.

Depreciation in 2010 was DKK 7.1 million. The

Corporate tax for 2010 was DKK 6.3 million

increase of DKK 3.0 million compared to 2009 is

compared to DKK 5.5 million in 2009.

related to depreciation of the newly constructed media manufacturing and headquarters building in

Net loss was DKK -10.0 million in 2010 compared

Denmark. Amortizations of DKK 8.9 million is DKK

to a profit of DKK 1.4 million in 2009. The decrease

2.0 million lower than the previous year. A significant

in net profit is due to the negative effect of special

part of the amortizations relates to the acquisitions

items of DKK -13.2 million and write-down of the

of the US business in 2007 and 2008, and the

investment in Incept BioSystems Inc.

majority of the intangible assets were amortized within the first three years.

Cash flow It has been decided to state a number of items separately (special items) in the income statement

Cash flow from operating activities

to give a more transparent view of the ORIGIO

Cash flow from operating activities increased from

group’s ongoing operating profit/(loss). Special

DKK 25.6 million in 2009 to DKK 27.5 million in 2010.

items amounted to DKK -13.2 million in 2010.

Cash management is a discipline within ORIGIO that

Of this DKK 5.7 million relates to ORIGIO’s old

has received increased focus during the past couple

headquarters in Jyllinge as management has

of years. This focus will continue, as management

assessed the net selling price and decided to

acknowledge the importance of cash management

write the book value down. Furthermore, special

supporting the continued growth of the company.

items include DKK 6.7 million as write-down of the former automation project following the acquisition in Q2 2010 of the new state-of-the-art

Balance sheet

manufacturing technology for micropipettes (PMD). ORIGIO succeeded to establish a joint venture

Assets

in Russia in 2010, ORIGIO LLC. The associated

Total assets increased from DKK 478.8 million at

expenses amounted to DKK 0.8 million and are

the end of 2009 to DKK 529.9 million at the end of

also included under special items. Special items in

2010, predominantly due to the completion of the

2009 amounted to a total of DKK -5.1 million, which

building project in Denmark. Total capitalization of

relates to the VitroLife/Merck offer process and

the new building amounted to DKK 161 million.

corporate re-branding project.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Liabilities

Denmark of 25%, this asset represents a potential

Total liabilities increased from DKK 300.3 million at

future (not discounted) value of DKK 19 million at

the end of 2009 to DKK 337.0 million at the end of

current taxation rates. Of this, DKK 15 million is

2010. Net equity increased from DKK 178.5 million

recognized as an asset. ORIGIO has accumulated

at the end of 2009 to DKK 192.9 million at the end of

negative taxable income in its subsidiaries with a

2010 generating a 2010 year-end equity ratio of 36%.

potential tax value of DKK 9 million of which only DKK 4 million is recognized as assets.

Net Interest Bearing Debt (NIBD) as at December 31, 2010 was DKK 233.2 million. ORIGIO believes

Own shares

it has sufficient capital reserves to run its daily

ORIGIO currently holds a total of 213,824 of its

business as well as execute on its pipeline projects.

own shares. In June, 2010, 25,240 shares were used in

A clear strategy has been defined to reduce NIBD

connection with the closing of the PMD acquisition,

by consistently growing EBITDA and ensuring that

and in November, 2010, 35,680 shares were

EBITDA is converted into free cash flow by focused

transferred in connection with the deferred payment

cash management.

to the sellers of Mid-Atlantic Diagnostics, Inc.

Tax assets

The shareholders

ORIGIO a/s has accumulated significant negative taxable income. This negative income represents

ORIGIO aims to increase its shareholder value in

an asset, as it will reduce taxes to be paid on future

order to make the company an attractive long-

earnings. The accumulated negative taxable income

term investment. The company strives to provide

to be carried forward in Denmark amounted to

open and trustworthy information to shareholders,

DKK 74 million in 2010. With a corporate tax rate in

other investors, analysts, the press, and other

Financial Guidance and Business Milestones 2011 Ensuring profitable growth, while furthering ambitions to develop superior products within ART and stem cells, continues to be the key objective for ORIGIO in 2011. ORIGIO will strive to ensure a balance between shortterm progress in EBITDA investment in an industry leading product portfolio and R&D pipeline, and a powerful organization capable of realizing its long-term objectives and vision.

Financial Milestones

Business Milestones

• Revenue of DKK 330-340 million including organic

• Launch of EmbryoGen® in Europe, the Middle East,

growth of ~7-10% (constant currencies), excluding revenue from EmbryoGen® • EBITDA percentage of 13-15%, excluding EmbryoGen® launch effect and related costs • Capital expenditures (capex) of DKK 10-15 million • Operating cash flow above DKK 25 million

Asia and South America (Q3 2011) • Consolidate US manufacturing of disposables at one site (Q2 2011) • Full implementation of PMD workstations for ICSI pipettes (Q3 2011) • EmbryoSure: interim exploratory data (Q4 2011) • Microfluidics: completion of bovine test (Q4 2011) • Stem cells: partnering agreement (Q2 2011)

Note: Guidance is based on a USD/DKK rate (average) of 5.35 for 2011 21


stakeholders and thereby give the best possible

• The global economic climate. Although the

basis for assessing the company’s activities,

general economic climate in the world economy

potential, and risk elements. ORIGIO endeavors to

does impact ORIGIO, management is of the

increase the proportion of institutional investors

opinion that ORIGIO is relatively less exposed

amongst its shareholders to further increase the

to general economic conditions than many

robustness of its shareholder structure.

other industries. However, in markets with limited reimbursement there will be a short-term

ORIGIO’s shares are listed on the Oslo Stock

negative impact, as IVF treatment is expensive.

Exchange. At the end of 2010, ORIGIO had more than 29.0 million shares outstanding. The share

• Radical innovation from competition. There

price as at December 31, 2010 was NOK 15.2,

is always a risk that radical innovation from

equivalent to a 25% increase during 2010. The

competition could circumvent a company’s

market capitalization at the end of 2010 was NOK

products or make its segments less valuable.

441 million.

However, ORIGIO does not foresee any ‘game changing’ innovation from competition or new

In previous years, ORIGIO has offered warrant-

entrants into human IVF in the short to mid-term

based incentive programs to its Executive

future that could render its products or services

Management and other employees, but during

irrelevant. Competition can always emerge with

2010, no warrants were issued. Details of

radical innovation, but ORIGIO believes it is well-

outstanding warrants are provided in the notes

positioned in the ART market.

to the financial statements. Warrants are always offered at exercise prices equaling the share price at

• Competitive pressure. Increasing price

the time of allotment to ensure maximum alignment

competition is always a risk that could impact

of interests between the officers of the company

earnings negatively. This could occur because

and its shareholders.

the buying side increases its bargaining power or because the selling side becomes more

Capital structure

competitive, e.g. some commoditization of the

The ORIGIO Group aims to have an adequate

products over time. ORIGIO believes that, over

capital structure in relation to the underlying

time, the buying side will gain more power, as

operating requirements and R&D projects. In this

clinics will team up in larger entities in certain

way, it is always possible for the Group to provide

markets.

sufficient and the necessary credit and guarantee facilities to support its operations and its long-term growth targets.

• Price competition. Even without ongoing incremental or radical innovation, product ranges will commoditize and be exposed to increased price competition. If the ORIGIO Group is not

Risk management

successful in terms of ongoing incremental and radical innovation, it will be more exposed to

Key risk elements

price competition. ORIGIO’s response to this is,

The ORIGIO business model involves, as any other

at all times, to increase cost-effectiveness within

commercial business model, a number of risk

its processes while pursuing innovation.

factors that potentially could impact its earning power and future business life. The most relevant of

Financial risks

these are commented on below:

Developments in ORIGIO’s results and equity are impacted by a number of financial risks,

Profit and loss risk

including foreign exchange risks, interest rate risks,

A number of factors may impact ORIGIO’s future

liquidity and credit risks. ORIGIO has a centralized

profitability, among these:

management of financial risks in the group’s


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

finance function. The financial risks are presented

versus the bank – NIBD/EBITDA – by borrowing

and discussed regularly at the Board Meetings.

approximately USD 14.2 million denominated

The strategy has in general been to use the least

in USD. Apart from this, no currency hedge is

complicated type of hedging .

undertaken.

• Exchange rate fluctuations. W  ith a substantial turnover in non-DKK based currencies, ORIGIO’s

• Interest rate fluctuations. As can be seen from note 14, ORIGIO’s biggest single loan, the real

income faces a substantial currency risk exposure

estate loan of DKK 100.2 million, is interest-rate

– especially versus the USD and EUR, and to a

hedged with an interest rate swap fixed at 4.97%

smaller extent versus the GBP. While ORIGIO

for 20 years. Details regarding the reminding

does not perceive the EUR as carrying a large

interest-bearing debt can be seen in note 14.

negative risk, there is inherent risk particularly in the USD exposure. However, with a large

The ORIGIO group does not engage in speculative

part of the cost base denominated in USD,

transactions.

the net risk decreases. Rather than hedging EBITDA or balance sheet exposure per se,

Financial risks and financial risk management are

ORIGIO has decided to hedge its key covenant

described in further detail in notes 12, 14 and 15.

23


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

New Facilities in Måløv, Copenhagen ORIGIO has moved to brand new facilities in the Copenhagen area in Måløv, Denmark. The new production site meets all the highest quality and clean-room standards required by regulatory authorities, clinics and customers throughout the world. The entire facility has been designed to optimize On July 12, ORIGIO successfully relocated the

material flow and manufacturing processes while

majority of its Danish activities to Måløv. On

supporting interdepartmental cooperation and

November 26, after four months of process

team work.

validation and qualification, the ORIGIO MediCult Media production also relocated to the new state of

ORIGIO MediCult Media comprises mixed, sterile

the art facilities.

filtered media aseptically filled in ISO classified clean rooms. To guarantee the quality of the

We have done our utmost to make sure that the

manufactured media, the clean rooms are divided

only thing customers noticed was the new address

into a number of zones classified from ISO 8

on media bottles. But many changes were made to

to ISO 5, according to a decreasing number of

further improve our reliability in the quality and the

particles. ISO 5 is the cleanest zone and this is

delivery of our media.

where filling is performed.


The first floor of the building is almost completely

Quality Control and Research laboratories are

occupied by the clean rooms’ ventilation system.

designed for maximum performance and flexibility

Running and maintaining a high standard of clean

and include isolator technology for sterility testing,

rooms require very significant investments in

bovine research facilities and specialized facilities

technical installations.

for stem cell media research.

To further improve the robustness of manufacturing, the new facilities incorporate a

The environment also benefits from our new

number of new features:

facilities, as ORIGIO has installed and validated an innovative ventilation system in its clean

• continuous monitoring of critical parameters,

room enabling a significantly reduced energy

• access to manufacturing IT systems at all

consumption compared to traditional technol­ogy.

workstations, • further automation of filling to improve reproducibility.

The new facility has been designed to meet the highest standards for aseptic manufacturing. It was designed and constructed by NNE-Pharmaplan

Further to quality improvements, the new facilities

contributing with its vast experience in the design

constitute a significant increase in capacity enabling

and construction of pharmaceutical manufacturing

ORIGIO to service its customers even better.

plants throughout the world.

Precision Micro Devices An acquisition of Precision Micro Devices (PMD) and thereby its operational assets was completed in June, 2010. PMD has developed an automated workstation for the production of quality specialty pipettes and microtools for ART. The new technology enables ORIGIO Humagen Pipets to substantially increase the productivity of the micropipette manufacturing process while further improving ORIGIO Humagen Pipets already leading and consistent quality.

25


ORIGIO ScanLab Equipment ORIGIO ScanLab Equipment a/s was established

the IVF labs; but also because ORIGIO expects that

as a joint venture and is owned 51% by ORIGIO and

advanced equipment will be part of some emerging

49% by LaboGene ApS. The company specializes in

technology concepts in IVF that hold a promise

sales of equipment for IVF laboratories world-wide.

for an increasing baby-take-home rate within the

The joint venture has been operational as from July

coming decade. In preparation for this, ORIGIO

1, 2010 and is located in Måløv, Denmark.

has thus decided to expand its offerings and capabilities in this area of IVF.

LaboGene ApS is a Danish company that specializes in the design, development and manufacture of

With the introduction of the ORIGIO/Planer

laboratory and industrial equipment in the fields

BT37 mini-incubator and now ORIGIO ScanLab

of clean air & laminar flow, vacuum & cooling

Equipment, this is an important starting point

and centrifugation. Prior to the joint venture

enabling the ORIGIO sales organization to handle

establishment, LaboGene had, for many years, been

equipment service and support as well as sales

in close co-operation with ORIGIO MidAtlantic

activities. Sales and technical seminars have

Devices regarding laminar flow cabinets to the

been held in 2010 to educate and develop the

Americas IVF market.

distribution network.

The establishment of this joint venture signals

ORIGIO ScanLab Equipment offers highly

ORIGIO’s desire to become more involved on a

specialized laminar air flow cabinets and

global scale in high quality IVF equipment – both in

centrifuges.

order to be able to supply an even broader range of high-end current products to our customers, i.e.

Centrifuges: ScanFuge is a range of low speed centrifuges of distinction from ORIGIO ScanLab Equipment comprising ideal centrifuge and accessories for IVF applications and protocols from the ScanFuge range: ScanFuge-Mini “The personal Micro –

Centrifuge of Choice”

ScanFuge Midi “Low Speed with Finesse” ScanFuge Maxi “Quality with Class”


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Advantages • considerably reduced noise levels • significantly improved air distribution and prolonged filter life • better balanced and uniform down flow • superior product protection

Laminar Air Flow cabinets

70% being re-circulated and 30% exhausted via an HEPA exhaust filter. The filter is surrounded by an

The Fortuna IVF cabinets & Mars IVF Class 2

area of negative pressure to ensure that no leakages

cabinets utilize a revolutionary new design of digital

can occur around the seals. An activated charcoal

electronically commutated fans with 110 mm deep

filter can also be fitted on the exhaust side of the

HEPA filters. Both cabinets can be customized to

airflow, facilitating the removal of volatile organic

suit the needs and preferences of embryologist, for

compounds from both the work chamber and the

example by installing a microscope or a monitor.

laboratory.

The Mars-IVF Class 2 provides a comfortable

The Fortuna-IVF Class 1 range of cabinets offers

working en­vironment with maximum protection

the ultimate in sample protection, operator comfort

for the operator, the embryo and the laboratory.

and optional fittings to provide the cabinet best

It is built and tested according to the EN 12469

suited for laboratories and laboratory procedures.

Standard. Fortuna-IVF Cabinets – vertical flow laminar with The Mars-IVF Class 2 provides ultimate clean air

turbulent-free air flow gives a clean, sterile work

perform­ance. A unique laminator system ensures

chamber environ­ment with complete protection of

that the down flow is uniform and balanced, thus

the procedures against microbiological intrusion or

ensuring that embryos are well protected by

contamination.

turbulent-free laminar flow, clean air, and with improved anti vibration performance.

Low energy and noise free electronically commutated fans and lamina­tor technology ensure:

The Mars-IVF Class 2 is a dual HEPA filter cabinet

less vibration less heat transmission a turbulent-free

and has a re-circulated air flow configuration with

air flow to the chamber.

27


Corporate Governance The Norwegian Corporate Governance Board

Business

issued on October 21, 2010, a revised Code of

ORIGIO’s business activities clause in its Articles of

Practice for Corporate Governance. The Code

Association reads: “The Objects of the Company

of Practice outlines the corporate governance

are to develop, produce and sell products for use

guidelines for companies quoted on the Oslo Stock

within the area of human reproduction and cell

Exchange. Adherence to the Code of Practice is

cultures and other related business at the Board of

based on a ‘comply or explain’ principle whereby

Directors’ discretion”. The Articles of Association

companies must comply with the individual items

can be found on ORIGIO’s website at www.ORIGIO.

or explain why they have chosen an alternative

com.

approach. The below descriptions cover every section of the Code of Practice.

Equity and dividends The Board of Directors considers the consolidated

According to Norwegian company law, a company

equity to be satisfactory. ORIGIO’s need for

with more than 200 employees must elect a

financial strength is considered at any given time

corporate assembly. ORIGIO, being a Danish

in light of its objectives, strategy and risk profile.

company, does not have a corporate assembly.

ORIGIO focuses on optimizing shareholder value and believes that for the coming years, this

Implementation and reporting on corporate

will mean that the company should not pay out

governance

dividends, but rather re-invest the proceeds from

It is the responsibility of ORIGIO’s Board of

its operations into future growth. Once its improved

Directors to define how it wants to exercise

‘pipeline’ products have been launched successfully,

corporate governance. The Board of Directors has

the company believes dividend payments may be

decided that ‘the Norwegian Code of Practice for

relevant.

Corporate Governance’ is to be observed with only a few exceptions as per below.

A mandate can be given by the Annual General Meeting to The Board of Directors to increase

The Board of Directors does not define the

ORIGIO’s share capital for the use at the Board of

corporate values of ORIGIO, but approves

Directors’ discretion, hereunder for the purpose

them after such values have been defined by

of acquiring other companies or parts thereof.

management and staff. Guidelines regarding

The Board of Directors believes that a mandate

corporate social responsibility is defined in

with a wider scope than what the Code of Practice

accordance with the Board of Directors (for more

recommends will provide the necessary flexibility to

details, please see ORIGIO’s stated values on page

act to the best interest of the shareholders and the

38 and its corporate social responsibility on page

company. The mandate is limited in time to the date

37).

of the next Annual General Meeting.

The Board of Directors and the management

Equal treatment of shareholders and

have ensured that employees (either directly or

transactions with close associates

through employee representatives) have direct

ORIGIO’s share capital consists of shares subject

access to the Board of Directors, should they find

to public trading and without voting limitations

that management acts illegally or violates ethical

or special rights. All shares are equal. Neither the

standards.

Board of Directors nor Management is aware of the existence of any shareholders’ agreement containing pre-emption rights or restrictions in voting rights.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

ORIGIO has defined in-house guidelines for trading

body. The AGM will be held before May 1 each

in the ORIGIO shares. The rules are in compliance

year. The 2011 AGM is scheduled for April 28. The

with applicable legislation and regulations for

relevant documents are available on ORIGIO’s

primary insiders and insider trading. The in-house

website at least 21 days prior to the date of the

guidelines require, among other things, that primary

General Meeting. The documents will contain the

insiders must obtain internal clearance from the

information necessary for the shareholders to take

company’s Chief Executive Officer prior to trading

a position on agenda items. The final registration

in the company’s shares.

date for attending the AGM is seven days prior to the date of the General Meeting.

The Board of Directors’ mandate to acquire treasury shares is based on the assumption that purchases

Registration to attend the AGM can be made

will take place on the market. Acquired shares

by mail, telefax, or electronically via VPS

may be disposed on the market as payment for

Investortjenester or www.ORIGIO.com.

acquisitions. The Board of Directors tries to make it possible In the Board of Directors’ opinion there have

for as many shareholders as possible to attend the

been no transactions between the company and

General Meeting. Shareholders, who cannot attend

a shareholder, director, member of the executive

the General Meeting themselves, may choose to

management or a party closely related to such

authorize a proxy, which clearly states that the proxy

individuals that can be described as significant.

can be used on each individual item for discussion. The shareholders may also choose to vote in writing,

The Board of Directors has appointed the law firm

including electronic means of communication,

Plesner as ORIGIO’ key legal council. Plesner is

during a specified period in advance of the General

represented by the Vice Chairman of the Board of

Meeting.

Directors, Mr. Jens Zilstorff. Fees paid to Plesner in this capacity can be summarized to (amount in

At least one representative of the Board of Directors

thousands): 2008: DKK 2,135, 2009: DKK 3,300 (of

participates in the General Meetings. Management

which DKK 1,363 relates to the take-over process

is represented by the Chief Executive Officer and

and branding project), and 2010: DKK 1,785.

the Chief Financial Officer. In 2010, 42.97% of the aggregate share capital was represented.

The Board of Directors should always be notified in the event that a board member or executive

The agenda is prepared by the Board of Directors,

personnel possesses a material interest in a

and the main items on the agenda are specified in

transaction or other matter entered into by the

§8 of the Articles of Association. The first item is the

company or legally binding on the company. The

selection of the chairman of the General Meeting.

Board of Directors will in such event evaluate

The Chief Executive Officer will review the status

the need for a valuation to be obtained from an

of ORIGIO. The minutes of the AGM are made

independent third party.

available on ORIGIO’s website.

Freely Negotiable Shares

ORIGIO does not fully comply with ‘the Norwegian

ORIGIO’s share capital consists of shares subject

Code of Practice for Corporate Governance’ in

to public trading and without voting limitations or

relation to the presence of Auditor, and the entire

special rights.

Board of Directors does not usually attend the AGM. The items on the agenda for the AGM do not

General Meetings

require this. The Chairman or the Vice Chairman of

The Annual General Meeting (AGM) ensures the

the Board of Directors is always present to respond

shareholders’ participation in ORIGIO’s governing

to questions.

29


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Nomination Committee

representatives. The Chief Executive Officer is not a

A Nomination Committee was appointed at

member of the Board of Directors.

the Extraordinary General Meeting on June 10, 2009. According to the Articles of Association,

The board members are elected for one year at a

the Nomination Committee is tasked with

time, except for the employee representatives who

recommending the General Meeting candidates

according to Danish law are elected for a 4-year

for the company’s Board of Directors as well as the

term. Expertise of the elected board members

board members’ fees. The Nomination Committee

and information on records of attendance at board

shall comprise up to four members, the majority

meetings as well as individual shareholdings in

of whom must be shareholders of the company or

ORIGIO is listed on page 41.

representatives of shareholders of the company, and they shall be independent of the company’s

All shareholder elected members are considered

Board of Directors and management. The

autonomous and independent of ORIGIO’s

Chairman of the Nomination Committee must be

management. The same applies in connection with

a shareholder of the company or a representative

important business associates. Laboratories LETI

of a shareholder of the company. In case of a tied

S.L., represented by Jaime Grego-Mayor, owned

vote, the vote of the Chairman of the Nomination

8.58% at year-end 2010. The Board of Directors

Committee shall count as two votes.

favors a representation of a long-term shareholder.

The Nomination Committee currently consists

The work of the Board of Directors

of the following four members: Janne Flessum

The Board of Directors has an annual plan for its

(Chairman, representing Orkla), Kristian Falnes

work and decides on all matters of substantial

(representing Skagen Vekst), Nils Vogt (representing

importance pertaining to the ORIGIO group’s

Miami AS), and Jaime Grego-Mayor (representing

activities. Such matters include decisions on

Leti Pharma S.L.).

strategic priorities, approval of periodic plans and budgets, as well as decisions on major investments

The Chairman of the Board of Directors shall –

or divestitures. The Board of Directors performs

without having any voting right – be convened to

an annual self-assessment in which it evaluates its

at least one meeting in the Nomination Committee

performance and expertise.

prior to it submitting its final recommendation to the General Meeting.

In matters of material character in which the Chairman of the Board of Directors is, or has

Corporate assembly and Board of Directors:

been, personally involved, the Board of Directors’

composition and independence

consideration of such matters will be chaired by the

It is essential that the Board of Directors as a whole

Vice Chairman.

is competent to deal with the board’s work and the main business activities of ORIGIO.

There is a clear division of responsibilities between the Board of Directors and the executive

According to the Articles of Association, four to

management. The Chairman is responsible for

six members of ORIGIO’s Board of Directors shall

the board’s work being conducted in an efficient,

be external members. At present, the Board of

correct manner. The Chief Executive Officer is

Directors consists of five external members and

responsible for the operational management of

two employee representatives: Flemming Pedersen

the ORIGIO group, including the responsibility

(Chairman), Jens Zilstorff (Vice Chairman), Jaime

for ORIGIO being organized, operated and

Grego-Mayor, Flemming Juul Jensen, Jørgen Drejer,

further developed in compliance with applicable

Kirsten Bakbøl, and Bente Jensen. The two latter

legislation, the Articles of Association, and

have been elected by the employees as employee


decisions made by the Board of Directors and the

Risk management and internal control

shareholders at the Annual General Meeting.

The executive management consists of seven individuals, see pages 44-45. ORIGIO’s executive

A key responsibility of the Board of Directors is to

management has monthly conferences calls

appoint the Chief Executive Officer and participate

supplemented by face-to-face meetings on an ad

in the appointment of other executive management

hoc basis. Subgroups of the executive management

members, as well as make recommendations to the

meet on a weekly basis in order to review various

General Meeting for the appointment of auditors.

operational issues.

The Board of Directors schedules regular board

Management provides monthly performance

meetings each year. There are usually five fixed

reports to be reviewed by the board members. The

board meetings per year, and additional meetings

quarterly financial statements are also reviewed at

are held whenever needed, some face to face, and

board meetings. The Board of Directors undertakes

some as teleconferences. In 2010, there were six

an annual review in early February. The independent

face-to-face meetings, three conference calls and

auditor attends this meeting.

one board seminar. Risk management and internal controls are typically All board members receive regular information

agenda items for at least one board meeting per

about ORIGIO’s operational and financial progress,

year (for further information on risk management

and the management seeks to mail the information

and internal control, please see page 36).

to the Board of Directors in sufficient time for its preparation. The ORIGIO business plan, strategy

Remuneration of the Board of Directors

and risk management are routinely reviewed

According to the Articles of Association,

and evaluated by the Board of Directors. Board

the Nomination Committee is tasked with

members are free to consult the executives of

recommending the board members’ fees. The

ORIGIO, if needed.

members’ fees are not linked to performance, warrant programs or the like. Only one board

The Chief Executive Officer usually proposes the

member, Jens Zilstorff (Vice Chairman), works for

agenda for each board meeting. The final agenda

ORIGIO in another capacity, as he is the key legal

is completed in consultation between the Chief

counsel of ORIGIO. Fees paid to Plesner in this

Executive Officer and the Chairmanship. Besides

capacity are summarized on page 31.

the board members, board meetings are attended by the executive management, except for non-

Remuneration of the Executive Management

Danish resident members, who participate in at

Company guidelines for remuneration of the

least one board meeting per year or by conference

executive management can be described as follows:

calls when relevant.

The executive management shall at any point in time obtain a fully competitive compensation

The Danish Public Companies Act stipulates that

package reflecting each member’s experience,

large companies must appoint an Audit Committee.

capabilities and contributions to the company.

The Audit Committee is charged with the overview

The package shall consist of fixed and variable

of the financial reporting and disclosure as well as

components – the latter typically comprising

regulatory compliance and risk management.

an annual bonus with an absolute limit, linked to a realized EBITDA-level as well as the ad hoc

The Audit Committee consists of two members:

allocation of warrants. Warrants are always allocated

Flemming Pedersen (Chairman) and Jens Zilstorff.

at the market price at the time of the allocation.

The auditor participates in at least one annual meeting with the the Audit Committee.

The Code of Practice stipulates that the annual report should provide disclosure of the

31


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

remuneration of all members of the company’s

In the event that a bid is made for the company,

executive management. For privacy reasons,

the Board of Directors will arrange for a valuation

ORIGIO’s Board of Directors has decided not to

by an independent expert and make a statement

abide by this and only disclose the remuneration of

containing a well-founded evaluation of the bid,

the Chief Executive Officer in the annual report.

including a recommendation to shareholders whether or not to accept the offer. It will be

Information and communication

explained, if any specific board members have

ORIGIO normally presents provisional annual

excluded themselves from the Board of Directors’

accounts in late February. The annual report is

statement. Furthermore, the Board of Directors

available on the company’s website at least 21 days

has a responsibility to ensure that the company’s

prior to the Annual General Meeting. In addition to

business activities are not disrupted unnecessarily,

this, ORIGIO publishes its accounts on a quarterly

that the shareholders are treated equally, and that

basis. The presentations of the annual and quarterly

the shareholders are given sufficient information

reports are posted on ORIGIO’s website after they

and time to form a view of the offer.

have been published at the Oslo Stock Exchange. Auditor It is considered essential to keep owners and

The independent auditor is always present during

investors informed about ORIGIO’s progress and

the Board of Directors’ discussions of the annual

economic and financial status. Open investor

financial statements. At such meeting, the financial

presentations are conducted in relation to ORIGIO’s

statements and any issues of particular concern

annual and quarterly reports. The Chief Executive

to the auditor, including any points of contention

Officer reviews results and comments on markets

between the auditor and the management, are

and prospects for the future. Other members

discussed.

of the executive management, the Director of Investor Relations, and the Chairman of the Board

At least once a year, a meeting will be held between

of Directors participate in these presentations from

the auditor and the Board of Directors without the

time to time.

presence of the Chief Executive Officer or other members of the executive management.

All shareholders are treated equally as a matter of principle, thus the same information is released to

In the long-form Audit Report, the independent

the entire equity market at the same time whenever

auditor reports to the Board of Directors on,

information is deemed share price sensitive.

among other things, significant weaknesses in the procedures and intern controls. Furthermore,

The financial calendar for 2011 including an

management letters with recommendations are

overview of the financial reporting dates, the date

issued by the independent auditor.

for the Annual General Meeting, etc. is published on ORIGIO’s website.

Details of the fee paid for audit work and for other specific auditor assignments are specified in the

Takeovers There are no defense mechanisms against takeover bids in ORIGIO’s Articles of Association, nor have other measures been implemented to limit opportunities to acquire shares in ORIGIO.

financial statement, note 18.


ORIGIO AUSTRALASIA Pty. Ltd.

Northern Territory 1 clinic Queensland 16 clinics Western Australia 5 clinics South Australia 3 clinics New South Wales incl. Australian Capital Territory 20 clinics

New Zealand 7 clinics

Victoria 9 clinics

ORIGIO AUSTRALASIA, representing the MediCult Media, Humagen Pipets and MidAtlantic Devices branded products, is now up and running in the important markets of Australia and New Zealand. The three brands were previously represented

Tasmania 2 clinics

by MediCult Australasia for culture media and a local Australian distributor for the Humagen and MidAtlantic brands. ORIGIO AUSTRALASIA began its operations in the third quarter of 2010 and is concentrating on building the foundations for a sustainable business in this important market. The Australian and New Zealand markets have a combined annual number of fresh ART cycles approaching 40,000 and more than 62,000 fresh and frozen cycles combined. Although the population is relatively low when compared to some of the larger world markets, the uptake of ART services by the population of reproductive age women (15-45 years), particularly in the larger Australian market, is very high, being 12.6 per 1,000 women. Population growth and favorable demographics mean that the market is likely to return to its longterm growth trajectory.

Michael Henman, General Manager: “After 23 years working as an embryologist in an IVF laboratory, I saw it as a challenge to develop ORIGIO’s position in the Australian and New Zealand ART market. I have been impressed by the way ORIGIO has strategically expanded the business, and today has the strongest, full-scale product portfolio within embryo culture media, pipettes, devices and equipment for ART labs.”

33


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Control and Risk Management Systems The main features of ORIGIO’s internal control and risk

other things, procedures for producing the financial

management systems in connection with its financial

statement, procedures for approval and attestation,

reporting are as follows:

reconciliation, analyses and general IT controls.

Control environment

ORIGIO has introduced internal control standards, i.e.

The Board of Directors has established an auditing

standards for checks in connection with the financial

committee. The Audit Committee assists the Board

reporting from subsidiaries. The purpose of these

of Directors in supervising the presentation of the

standards is to establish and maintain a uniform level

financial statement and the efficiency of the internal

of internal checks and controls in connection with the

control and risk management systems regarding the

financial reporting. A central function is responsible

preparation of the financial statement.

for controlling the financial reporting from the subsidiaries.

The management has the responsibility for sustaining an effiencient control environment and an internal

Information and communication

control and risk management system in connection

ORIGIO wil continue to improve its information and

with the presentation of the financial statement.

communication systems to ensure the correctness and

Managers at various levels are responsible within their

completeness of its financial reporting. The reporting

respective areas.

instructions are updated as necessary, including budgeting and month-end accounting

The Board of Directors approves ORIGIO’s conduct of

procedures, and are reviewed at least once a year.

business including the currency and interest policies. Other policies and procedures are approved by the

Monitoring

Executive Management. The daily supervision of

At least once a year, updated risk and control analysies

compliance is the responsibility of all managers.

are presented to the Audit Committee including a control overview and evaluation of its effectiveness.

The organisational structure and the internal

The independent auditor reports to the Board of

guidelines constitute the control environment together

Directors in the long-form Audit Report, among

with the international Reporting Standards and the

others, about significant weaknesses in the procedures

Danish Financial Statements Act.

and internal controls. Furthermore, management letters with recommendations are issued.

Risk assessment The risk and control overview has been updated for

Comprehensive monthly data are reported from

2010. The risk assessment in relation to the financial

all group companies. The data are analysed and

statement is performed to identify items posing

questioned making it possible to identify and

potential risks. Based on the risk assessment, it is

correct any errors and irregularities in the financial

ORIGIO’s aim to describe and evaluate all business

reporting at an early stage to ensure correctness and

units’ existing procedures and controls to minimise

completeness.

or eliminate the potiential risks. Generally, it is the evaluation that the group has reasonable procedures

ORIGIO is in the process of implementing the same

and controls.

ERP platform – Navision – in all its companies. In 2010, the Navision ERP system was implemented in ORIGIO

Control activities

LLC in Russia, and ORIGIO Scanlab Equipment a/s

The purpose of the control activities is to prevent,

had already implemented Navision entering the joint

reveal and correct any errors or irregularities. These

venture with ORIGIO. Using the same platform will

activities are integrated into ORIGIO’s accounting

ensure more standardized reporting and transparency.

and reporting procedures and include, among


Corporate Social Responsibility ORIGIO aims to actively contribute with a positive

the mother’s age at birth) in present value on an

impact on society through our activities, customer,

“investment” of an IVF-conceived citizen.

colleagues and communities. The company’s core values of being aspirational, reliable and caring

ORIGIO considers it essential to supply high quality

form the basis for its decision making, both in terms

products that are safe for the patient, ensure that

of being a social responsible cooperation as well as

clinicians obtain consistent and optimal results, and

being a sound business.

at the same time guarantee that the products are manufactured in a sustainable manner. ORIGIO has

The ORIGIO Group has a vision to ‘make the #1

received CE markings in EU, clearance by the Food

dream of every infertile couple come true’. This

and Drug Administration (FDA (USA)) as well as

is highly meaningful to us and could per se be

Therapeutic Goods Administration (TGA (Australia))

perceived as ORIGIO’s core quest in relation to

certifications for a large range of its marketed

Corporate Social Responsibility. In addition to

IVF products. This provides reassurance that the

this very significant endeavor, several national

products comply with the relevant regulatory

economic analyses have proven that investing in

authorities’ health and safety legislation. ORIGIO

reimbursement of human IVF can be a healthy

is pursuing CE markings of the full MediCult Media

investment for a government. Chart 8 shows

portfolio and in 2010, 92% of the product sales were

that e.g. the Danish government after 50 years

obtained from products with a CE markings.

has received a 7-16 fold return (dependent of

Chart 8: Cost and net present value of benefit to society per IVF-baby after 50 years (Danish example) DKK

NPV of net benefit to society 50 years after birth

1.500.000

Cost of IVF-baby

1.200.000

900.000

600.000

300.000

0

<40 years old mother

>40 years old mother

Source: Dr. Mark Connolly, Global market Access Solutions

35


Company Values

Aspiration With our focus on the future, we are committed to improve IVF through innovation, to consistently provide high quality products and services, to attract and retain the top talent, to take on new challenges, and to anticipate and embrace change.

Reliability You can depend on us to provide the best products, tailor-made services and timely, relevant information. Issues are dealt with openly, fearlessly and fairly, every time.

Care How we handle our business from the supply of vital products, to our interactions with colleagues, customers and shareholders, and ultimately to the lives our products help create.


M ED I C U LT M ED I A

Safe and healthy work environment

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

The company has safety representatives, who are responsible for creating a safe and healthy work

ORIGIO believes that each employee contributes

environment. The safety representatives make

directly to ORIGIOâ&#x20AC;&#x2122;s growth and success. It is the

suggestions for reducing risks, implementing

objective of the company to create a place of

preventive actions, and, in that way, ensure that

employment with a good and challenging working

employee safety is incorporated in the daily routines.

climate where employees jointly produce results which are beneficial to the key stakeholders.

Results The focused program on building a better

Policies

workplace has also resulted in a significant decrease

ORIGIO wants to retain its employees and ensure

in the illness rate. The illness rate in Denmark has

that they are well-trained for their jobs and that the

for example decreased from 4.2% in 2008 to 3.4% in

individual skills are developed through continuous

2010.

education, in-job-challenges and changes. At the same time, ORIGIO is committed to creating a safe and healthy work environment and continuously

Anticorruption

improve the physical and psychological work environment. It is our objective to provide

ORIGIO is a global company present, either directly

equal employment opportunities for all persons

or through distributors, in a large number of

regardless of race, color, gender, age, religion,

countries with many different cultures. ORIGIO is in

marital status, national origin, disability, or other

favor of competition on fair terms and it is important

protected categories.

to ORIGIO to act responsibly. The objective of the company is therefore always to comply with

This policy applies to all terms and conditions

legislation and rules in the countries in which it

of employment, including hiring, promotion,

operates.

termination, layoff, recall, transfers, leaves of absence, benefits, and training.

Policies ORIGIO does not tolerate or support any form of

Actions

corruption, including but not limited to extortion

Upon joining ORIGIO, the employee participates

and bribery.

in an orientation program during which he/ she receives an introduction to the company, its

Actions

mission, vision, values and work expectations. At the

Efforts will be directed to make a specific

same time, each employee receives an individual

policy covering this area and ensure that all

training program regarding his/her specific, new

employees know the policy and are aware that

job function as well as associated work- and safety

the consequences of non-compliance could have

procedures.

implications for continued employment. This obviously applies especially for employees who

ORIGIO regularly conducts working climate

have interaction with suppliers, customers or public

surveys among all employees world-wide, in which

authorities.

employees respond anonymously to a series of questions. Based on the results, actions are

Results

established to improve the work environment.

ORIGIO is not aware of any involvement in anti-

Action plans are followed up at appropriate

corruption issues.

intervals. ORIGIO will continue to work on Corporate Social Responsibility matters during 2011.

37


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Shareholder Information As at December 31, 2010, the share capital

stricter requirements are imposed by the Danish

consisted of 28,995,246 shares with a nominal value

company law. The annual general meeting approves

of DKK 5. All shares are subject to public trading

the annual report and any amendments to the

and without voting limitation or special rights.

articles.

Shareholders have the ultimate authority over the company, and exercise their right to make decisions

On February 22, 2011, the share capital consisted of

regarding ORIGIO at general meetings, either in

29,115,695 shares with a nominal value of DKK 5. The

person or by proxy. Resolutions can be passed by

companyâ&#x20AC;&#x2122;s 20 largest registered shareholders were

a simple majority, while resolutions to amend the

as follows:

articles are subject to adoption by at least two thirds of votes cast and capital represented unless

Name Shareholding Number Of Shares

Ownership%

Orkla Asa

3,110,100

10.68%

Leti Pharma S.L.

2,488,000

8.55%

Skagen Vekst

1,550,000

5.32%

MP Pensjon

950,000

3.26%

Storebrand Vekst

769,029

2.64%

Bio Holding As v/Jens Holst

751,419

2.58%

Ormestad Tellef

680,272

2.34%

Danske Bank A/S (Nominee Account)

661,719

2.27%

Miami As

600,000

2.06%

Zwilgmeyer Peter Kenneth

500,000

1.72%

Nordea Bank (Nominee Account)

454,416

1.56%

Ml Pierce Fenner (Nominee Account)

409,824

1.41%

SEB Enskilda Asa Egenhandelskonto

400,000

1.37%

Holst Jens Ulrik

385,445

1.32%

Hovde Reidar

365,500

1.26%

Kvam Jan Arvid

325,500

1.12%

Skjerven Ketil Einar

310,100

1.07%

Joff Eiendom A/S

309,527

1.06%

Noer Eiendom A/S

308,500

1.06%

303,701

1.04%

Debra Bryant Other

13,482,643 46.31%

Total

29,115,695 100.00%

39


Board of Directors Flemming Pedersen (Chairman)

Flemming Juul Jensen

Diploma in Business Economics and MSc. in Business

M.Sc. Pharm. Born 1949. Elected to the board of Directors

Administration and Auditing from the Copenhagen

in 2000. Former Executive Vice President, Sales &

Business School. Born 1965. Joined the Board of

Marketing and member of the management at Lundbeck

Directors in 2010. Chief Financial Officer, Executive

A/S (a leading Danish pharmaceutical company). Has a

Vice President at ALK Abelló A/S (leading allergy

broad expertise in international sales and marketing of

vaccine company). Possesses an extensive experience

pharmaceutical products and subsidiary management.

from several board and executive positions involving

Member of the Board of Directors of STT-Condigi

general management, acquisitions and finance. Member

Holding AB. Lives in Buckinghamshire, UK. Owns 110,500

of the Board of Directors of MBIT Consulting A/S. Lives

shares and 0 warrants. Participated in all board meetings

in Copenhagen, Denmark. Owns 0 shares and 0 warrants.

in 2010.

Participated in all board meetings in 2010 after his election to the Board of Directors in April 2010.

Jens Zilstorff (Vice Chairman)

Jaime Grego-Mayor

Master of Law. Born 1955. Elected to the Board of

B.A. Liberal Arts from Brown University, General

Directors in 1990. Partner at Plesner Advokatfirma (Law

Management Program IESE Business School. Born 1964.

Firm) since 1989. Possesses strong legal expertise in an

Elected to the Board of Directors in 2007. Possesses a

international and Scandinavian arena and has an in-depth

strong international expertise within pharma, medtech

knowledge of ORIGIO. Member of the Board of Directors

and business development areas. Specific experience

of Baxter A/S, Solar Fonden af 1978, H.C. Petersen

within strategy, innovation and corporate finance. Vice

& Co.’s Eftf. A/S, Consort A/S, Consort Immobilien

Chairman of the Board of Directors of Laboratorios

A/S, Geograf A/S, Info-Connect A/S, RC-Holding A/S,

LETI, S.L.U. (leading Spanish allergy vaccine company).

Jobindex A/S, Bruun Rasmussen Kunstauktioner A/S, Key

Chairman of Audit and Election Committees of

Maritime Rederi A/S, MEIVIC ApS, Skanacid A/S, SEW-

Laboratorios LETI, S.L.U. Chairman of the Board of

Eurodrive A/S, Inge og Skjold Burnes Fond, The Danish

Directors and Executive Committee in Calzados Royalty,

European High Yield Fund F.M.B.A., Aktieselskabet af

S.A. General Manager of Laboratorios LETI, S.L.U. 1993-

20. november 2003, Consort KHB A/S, Consort Isefjord

2005. Lives in Barcelona, Spain. Represents Leti Pharma,

A/S, Colexon Renewable Energy A/S, CHA Furniture A/S,

S.L., which owns 2,488,000 ORIGIO shares. Participated in

Colexon Solar Invest A/S, HTI-Import og Handel A/S, ITH

all board meetings in 2010, except two.

Træindustri A/S. Lives in Copenhagen, Denmark. Owns 50,000 shares and 0 warrants. Participated in all board meetings in 2010.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Jørgen Drejer

Bente Jensen

Ph.D. Neurobiology. Born 1955. Elected to the

Diploma in International Trade. Born 1950. Joined

Board of Directors in 1998. Executive Vice President

the Board of Directors in 2003 as employee

and member of the executive management of

representative. Joined ORIGIO in 2000 as Customer

NeuroSearch A/S (a leading Danish biotech company).

Service Representative. Has an in-depth knowledge

Possesses a strong and broad competence within

of ORIGIO business and its organization. Owns

pharmaceutical research and development as well

5,000 shares and 0 warrants. Participated in all board

as biotechnology in general. Member of the Board

meetings in 2010.

of Directors of NsGene A/S, Atonomics A/S, Delta and the Danish Council for Independent Research. Member of the Academy of Technical Sciences. Lives in Copenhagen, Denmark. Owns 50,000 shares and 0 warrants. Participated in all board meetings in 2010.

Kirsten Bakbøl Born 1955. Joined the Board of Directors in 2004 as employee representative. Joined ORIGIO in 1999 as Assistant, Purchasing department. Has an in-depth knowledge of ORIGIO business and its organization. Owns 10,200 shares and 0 warrants. Participated in all board meetings in 2010, except one.

41


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Executive Management Jesper Funding Andersen, CEO – ORIGIO a/s

Debra Bryant, EVP – ORIGIO a/s, CEO – ORIGIO, Inc.

Master of Business Economics from Copenhagen Business

Ph.D. Microbiology, Wake Forest University, 1980. Born

School. Born 1966. Appointed Chief Executive Officer of

1955. NIH Postdoctoral Fellow in Molecular Biology, 1980-

ORIGIO in November 2005. Previous experience includes

1983. Research Scientist, Oncogen (owned by Bristol

Management Consultant in McKinsey & Co. Inc. (a global

Myers) 1983-1984. Research Scientist for Humagen Pipets

strategy consulting company), Group Vice President at

Inc. 1984-1990. Chief Executive Officer at Humagen 1990.

Maersk Medical A/S (a leading Danish medical device

2007, appointed Executive Vice President of ORIGIO a/s

company), Senior Vice President for International Business

and Chief Executive Officer of ORIGIO, Inc. Owns 303,701

at GN Resound A/S (a large Danish hearing aid company).

shares and 55,000 pre-assigned warrants.

Member of the Board of Directors of MissionPharma A/S (a supplier of generic pharmaceuticals to third world countries) and Chairman of the Board of Directors of Ellipse A/S (a Danish supplier of laser and light based medical equipment). Owns 88,046 shares and 665,000 warrants.

Susanne Hauschildt Bendz, CSO, EVP Innovation &

Søren Østergaard, EVP International Sales – ORIGIO a/s

Corporate Marketing – ORIGIO a/s

Bachelor of Science in Medical engineering from

Ph.D. in biology (immunology) from University of

Engineering Academy of Aarhus, Denmark. Born 1959.

Copenhagen. Born 1958. Appointed Executive Vice

Appointed Executive Vice President of in December

President and Chief Scientific Officer in August 2004.

2007. Previous experience includes more than 20 years of

Previous experience includes Research Assistant, and

international sales and marketing experience in the medical

Clinical Research Director at ALK Abelló A/S (a leading

technology sector, latest as Vice President and General

Danish allergy vaccine company) and later in Coloplast

Manager in GN Resound A/S (a large Danish hearing aid

A/S in Wound Care Management Group and Corporate

company) and as Director of Sales in Europe at Medicotest

responsible for clinical development (the largest Danish

(a Danish manufacturer of electrodes for medical

medical device company). Owns 75,000 shares and

applications). Owns 0 shares and 55,000 warrants.

135,000 warrants.


Allan Toft Jacobsen, EVP Manufacturing – ORIGIO a/s

Jeannett Hvidkjær, CFO – ORIGIO a/s

M.Sc. in Chemical Engineering from the Technical

Bachelor in Business Economics and Accounting

University of Denmark, specialized in microbiology and

from Copenhagen Business School. Born 1966.

molecular biology. Born 1971. Joined ORIGIO in 2005.

Joined ORIGIO in 2005 as Chief Accountant.

Appointed Executive Vice President Manufacturing in

Appointed Chief Financial Officer in August 2009.

December 2007. Previous experience includes Manager

12 years of experience as a public accountant at

for Manufacturing and QC at ORIGIO, various other QC,

Ernst & Young and 5 years as Chief Accountant at

manufacturing and production positions at Colgate

a national Danish newspaper. Owns 0 shares and

Palmolive in Denmark and France. Owns 10,000 shares

45,000 warrants.

and 85,000 warrants.

Terry Fortino, EVP Americas Sales – ORIGIO a/s, CEO – ORIGIO, Inc. B.S. Marketing, Michigan State University, 1970. Born 1947. Diagnostics Sales, Wampole Laboratories 19701973. Laboratory Equipment & Diagnostics Sales, Rupp & Bowman Co. 1973-1984. Eastern U.S. Division Manager, Rupp & Bowman Co. 1984-1988. Director of Sales, Biogen 1988-1989. Founder & President, MidAtlantic Diagnostics 1989-2008. Executive Vice President, ORIGIO a/s and CEO, ORIGIO, Inc. 2008. Owns 85,936 shares and 0 warrants.

43


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

ORIGIO’s Recent Journey – a Corporate Transformation ORIGIO (MediCult Media) was founded in Norway

the fertility market with media applications for IVF

in 1987 by Doctors Kjell Bertheussen and Nicolai

treatments. ORIGIO developed subsequently a full

Holst together with Jens U. Holst after Doctor

range of media products covering all processes

Bertheussen, professor of biochemistry at Norway’s

within IVF. The company was listed on the Oslo

Tromsø University, pioneered the novel serum-free

Stock Exchange in 1996, and its first two sales

Synthetic Serum Replacement (SSR™) principle

subsidiaries were established in the UK and France

for media production. In 1988, ORIGIO entered

during the same period.

In 2005, ORIGIO embarked on a transformative journey along three dimensions Key milestones on that journey are depicted on the opposite page – including, the acquisitions of Humagen Pipets and MidAtlantic Devices. So far, the transformation has created the largest, focused player on the global ART scene, with a broad product offering and a leading pipeline of new technologies.

Product range dimension - in terms of current product range offered to ART clinics

2.

Geographical dimension

Innovative dimension

– in terms of ORIGIO’s global

- in terms of ORIGIO’s exposure

foot-print with direct sales

to emerging and radical new

presence

technologies each with a potentially substantial impact on the relevant ‘baby-take-home-rate’

1. 3.


Key Milestones on ORIGIO’s Transformational Journey

1. Expansion of geographical presence (via own subsidiaries) • 2005 Italy

• 2006 USA

• 2005 Germany

• 2008 Benelux

• 2005 Australia

• 2008 China

• 2006 Spain

• 2010 Russia

2. Current product range • 2007 Humagen Pipets acquired (quality specialty pipettes and microtools for IVF) from founder Debra Bryant, Ph.D. • 2008 MidAtlantic Devices acquired (innovative devices and ‘total supplier’ to IVF labs) from founder Terry Fortino • 2009 Exclusive global rights obtained to the Planer/BT37 mini-incubator • 2010 Joint venture, ORIGIO ScanLab Equipment, established with a leading manufacturer of equipment for IVF labs

3. Emerging/innovative technologies • 2005 Global exclusive rights obtained to the patented concept of adding Iloprost to a fertility media • 2005 Global exclusive rights obtained to the patented concept of adding IGF-II to a fertility media • 2005 Initial investment undertaken by Humagen Pipets in IVF microfluidics via Incept BioSystems • 2007 The world’s largest IVF study on culture media enhanced by GM-CSF undertaken by ORIGIO • 2008 Positive interim results published by ORIGIO regarding the GM-CSF study • 2009 Global exclusive rights acquired to the patented embryo selection technology from Novocellus Ltd. (EmbryoSure) • 2010 Positive headline results for the GM-CSF study published by ORIGIO announcing the product launch of EmbryoGen® for a commercially attractive subgroup of IVF patients

45


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Product Offering Selected products

Sperm preparation

Oocyte retrieval

Oocyte retrieval

Sperm preparation In vitro maturation Sperm immobilization Denudation Oocyte cryopreservation

Microtools Fertilization

IVF

ART equipment

ICSI

Embryo culture

Embryo biopsy / PGD

Embryo transfer

Blastocyst transfer

Embryo

Blastocyst

cryopreservation

cryopreservation

More than 100,000 babies per year are born using ORIGIO products


Financial Statement

47


Income Statement (DKK ’000)

Group

Parent

Note 2010 2009 2008 2010 2009 2008 Revenue

2

307,988

265,683 203,235

95,238

88,706

89,047

Costs of sales

3

(125,051)

(108,664) (75,171)

(37,766)

(33,279)

(31,016)

Gross contribution 182,937

157,019 128,064

57,472

55,427

58,031

Sales and Marketing expenses

3

(85,043)

(71,590) (60,049)

(22,168)

(21,413)

(24,300)

Administrative expenses

3

(34,348)

(31,236) (24,129)

(17,818)

(19,357)

(17,094)

Research and Development expenses

3

(19,725)

(17,997) (18,891)

(17,477)

(16,224)

(18,115)

EBITDA before special items

43,821

36,196

9

(1,567)

(1,478)

Depreciation

3 (7,137)

EBITA before special items

36,684

24,995

(4,182) (3,152) 32,014

21,843

(5,148) (5,139)

(2,404) (1,939) (3,971)

(3,417)

Amortization

3

EBIT before special items

(8,934) 27,750

(10,928) (11,499) 21,086

10,344

(1,339) (6,478)

(331) (2,793) (4,302)

(6,210)

Special items

4

(13,232)

EBIT 14,518

(5,140)

0

(6,551)

15,946 10,344 (13,029) 2,882

15,822

(5,140)

0

(9,442) (6,210)

Financial income

5

161

967

7,988

13,116

Financial expenses

5

(18,339)

(10,045)

(7,491)

(7,580)

(7,946)

(5,596)

Profit/loss before income tax

(3,660)

6,868

5,735

(4,787)

(9,400)

1,310

6

(6,335)

(5,476)

7,773

Profit/loss for the year

Income tax

(9,995)

1,392

13,508

0

0

(4,787)

(9,400)

9,800 11,110

Distribution of profit/loss Minority interests 582 243 584 – – – Transferred to retained earnings

(10,577)

1,149

12,924

(4,787)

(9,400)

11,110

Profit/loss for the year

(9,995)

1,392

13,508

(4,787)

(9,400)

11,110

Earnings per share Earnings per share (EPS)

7

(0.37)

0.04

0.47

Earnings per share diluted (EPS diluted)

7

(0.37)

0.04

0.47

Statement of Comprehensive Income (DKK ’000)

Group

Parent

Note

2010

2009

2008

2010

2009

2008

Profit/loss for the year

(9,995)

1,392

13,508

(4,787)

(9,400)

11,110

(44) (10,087)

(3,624)

(44)

(10,087)

Other comprehensive income: Interest swap

(3,624)

Exchange rate adjustment foreign subsidiaries 4,202 (1,513) 917 – – – Other comprehensive income

578

(1,557)

(9,170)

(3,624)

Comprehensive income

(9,417)

(165)

4,338

(8,411)

(44) (10,087) (9,444)

1,023


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Statement of Financial Position as at December 31 – Assets (DKK ’000)

Group Note

2010

Parent 2009

2010

Goodwill 139,450 131,560

2009

0

0

Licenses and rights 1,829 2,017 1,619 1,787 Development projects in progress 9,635 6,166 9,635 6,166 Other intangible assets 37,279 21,178 21,818 Intangible assets

8 188,193 160,921 33,072

141 8,094

Properties 158,824 30,341 145,315 17,356 Plant and machinery 14,590 4,861 9,333 2,156 Assets under construction

2,636

86,637

125

81,872

17,462

7,420

15,646

5,387

Other fixtures and fittings, tools and equipment Property, plant and equipment

9 193,512 129,259 170,419 106,771

Shares in subsidiaries

10

25,960

25,499

Loan to subsidiaries

10

181,574

183,365

Other investments

10 561 6,747 0 0

Deferred tax asset

6 18,977 18,777 15,000 15,000

Financial non-current assets

19,538

25,524

222,534

223,864

Total non-current assets 401,243 315,704 426,025 338,729

Inventories

11 39,622 30,833 11,844 10,147

Trade receivables

12 53,408 42,630 6,695 6,701

Receivables from group enterprises

23,673

14,367

Other receivables 2,409 7,644 169 5,620 Prepayments 2,254 2,996 849 1,923 Receivables, etc. 58,071 53,270 31,386 28,611

Securities

437 63,437

71 63,437

Cash and cash equivalents

18,560

15,551

3,783

6,674

Assets classified as held for sale

13

11,995

0

11,995

0

Total current assets

128,685

163,091

59,079

108,869

Total assets 529,928 478,795 485,104 447,598

49


Statement of Financial Position as at December 31 â&#x20AC;&#x201C; Equity and Liabilities (DKK â&#x20AC;&#x2122;000)

Group

Parent

Note 2010 2009 2010 2009 Share capital 144,976 141,964 144,976 141,964 Translation reserve (1,383) (5,585) 106 106 Retained earnings 47,642 41,131 40,596 28,295 Equity attributable to ORIGIO a/s

191,235

177,510

185,678

170,365

Minority interest in equity

1,696

985

-

-

Total equity

192,931 178,495 185,678 170,365

Credit institutions

14 203,147 196,013 202,321 195,693

Other non-current liabilities Deferred tax

529

8,890

6 465 465

0

0

0

0

Non-current liabilities 204,141 205,368 202,321 195,693 Short-term portion of non-current liabilities

14

26,832

25,916

16,636

15,352

Bank borrowings 20,554 4,502 17,527 3,088 Trade payables 27,097 25,119 9,996 16,859 Payables to group enterprises

-

-

10,322

19,476

Income taxes

3,252

1,047

0

0

Other payables 43,726 38,348 31,229 26,765 Other current liabilities 121,461 94,932 85,710 81,540 Liabilities associated with assets held for sale

13

11,395

0

11,395

0

Total current liabilities 132,856 94,932 97,105 81,540 Total liabilities 336,997 300,300 299,426 277,233 Total equity and liabilities

529,928

478,795

485,104

447,598

Financial instruments

15

Contingent assets and liabilities, security etc.

16

Staff and remuneration

17

Fee to the independent auditor

18

Related parties and transactions 19


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Statement of Cash Flow (DKK ’000)

Group

Parent

Note

2010

2009

2010

2009

Profit/loss for the year

(9,995)

1,392

(4,787)

(9,400)

Depreciation and other adjustments

20

51,406

31,691

4,189

4,751

Changes in net working capital

21

(4,290)

(473)

(4,670)

4,044

financial items and tax

37,121

32,610

(5,268)

(605)

Cash flow from operations before

Financial income 3,780 598 16,301 1,448 Financial expenses (9,080) (3,514) (4,527) (5,444) Tax (4,363) (4,134) 0 0 Cash flow from operating activities

27,458

25,560

6,506

(4,601)

Investment in intangible assets

(5,265)

(6,249)

(4,963)

(4,154)

Investment in property, plant and equipment (100,167) (49,435) (94,766) (45,308) Investment in securities (net) 55,495 75,673 55,861 77,826 Investment in group companies

(461)

(4,569)

Loans to group companies

1,791

(9,818)

Loans from group companies

(8,615)

16,846

Interest on loans to group companies

7,682

7,293

Investment in associated companies

0

(560)

0

0

Investment deferred payment

0

1,091

Cash flow from investment activities

(49,937)

19,429

(43,472)

39,207

Cash flow before financing activities

(22,479)

44,989

(36,966)

34,606 (14,768)

Loan and credit institutions repayment

(16,246)

(15,019)

(16,246)

Deferred payment acquisitions

(11,503)

(10,292)

0

0

Short-term employee loan

0

1,619

0

1,619

Capital paid by minority

424

173

New loans established

36,376

0

35,857

0

Capital increase including warrants exercised 3,055

0 3,055

0

Interest paid on acquisition loans

(3,052)

(2,363)

(3,052)

(2,363)

Cash flow from financing activities

9,054

(25,882)

19,614

(15,512)

Change in cash and cash equivalents

(13,425)

19,107

(17,352)

19,094

Cash and cash equivalents at January 1

11,049

(8,048)

3,586

(15,508)

Exchange rate adjustments

382

(10)

(8)

0

11,049

(13,774)

3,586

Cash and cash equivalents as at December 31

22

(1,994)

51


Statement of Changes in Equity (DKK ’000) Group Equity as at January 1, 2009 Comprehensive income

Share capital Translation reserve Retained earnings

Disposals of own shares

Total 175,925

141,964

(4,072)

37,464

569

(1,513)

1,105

243

(165)

2,058

2,058

Warrants compensation Capital increases

Minority interest

504 504 173 173

Equity as at December 31, 2009

141,964

(5,585)

41,131

985

178,495

Equity as at January 1, 2010

141,964

(5,585)

41,131

985

178,495

4,202

(14,201)

582

(9,417)

Comprehensive income

Warrants compensation

738

738

Disposals of own shares 823 Dividend paid to minority (295) Capital increases 3,012 19,151 424

823 (295) 22,587

Equity as at December 31, 2010

144,976

(1,383)

47,642

1,696

192,931


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

(DKK ’000) Parent

Share capital

Translation reserve

Retained earnings

Total

Equity as at January 1, 2009

141,964

106

35,177

177,247

Comprehensive income

(9,444)

(9,444)

Warrant compensation

– 2,058 2,058

Disposals of own shares

504

504

141,964

106

28,295

170,365

Equity as at December 31, 2009 Equity as at January 1, 2010

141,964

106

28,295

170,365

Comprehensive income

(8,411)

(8,411)

Warrant compensation

– 738 738

Disposals of own shares

Capital increase Equity as at December 31, 2010

3,012 144,976

823

823

– 19,151 22,163 106

40,596

185,678

(DKK ‘000) Group Share capital (nominal)

2007

2006

Share capital as at January 1, 2010 141,964 141,964 138,442 Equity issues 3,012 – 3,522 Warrants exercised – – –

113,217 25,000 225

100,124 10,000 3,093

Share capital as at December 31, 2010

Total number of shares

2010

2009

2008

144,976

141,964

141,964

138,442

113,217

28,995,246

28,392,897

28,392,897

27,688,424

22,643,424

Number of

Costs of

Nominal

% of share

Own shares

shares

shares

value

capital

Own shares as at January 1, 2010 274,744 3,178 1,374 1.0% Purchase – – – 0% Sale 60,920 705 305 0.3% Own shares as at December 31, 2010

213,824

2,473

1,069

0.7%

53


Note 1. Accounting Policies and Estimates Accounting Policies The Financial Statement for ORIGIO a/s for 2010 has been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved adopted by the EU, the Oslo Stock Exchange’s requirements for financial reporting by listed companies, and Danish disclosure requirements for listed companies. The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all years presented, except for the implementation of IFRS3 (revised in 2009) – please refer to page 62 for a description of the impact on the reporting. In the Income Statement, a number of items are classified separately in order to give a more transparent view of the ORIGIO Group’s operating profit/(loss). The comparable figures and key figures for 2009 have consequently been presented accordingly. The Consolidated Financial Statements The consolidated financial statement comprises the parent company, ORIGIO a/s, and subsidiaries in which ORIGIO a/s directly or indirectly owns more than 50% of the voting rights or in other way has control. The group financial statement is prepared on the basis of the financial statements of the individual companies, compiled according to uniform accounting principles. Eliminations are made for dividends from subsidiaries, all revenue and expenditure items, internal profits and internal-company balances as well as inter-company shares. Minority interests’ share of the result is included in the net results for the group and the share of the group’s equity is included as a separate item of the group equity Acquisition and Divestment of Companies Newly acquired or newly established companies are recognized in the consolidated financial statement from the date of acquisition. Divested or terminated (closed down) companies are recognized in the consolidated income statement to the date of divestment. Comparative figures are not adjusted for newly acquired, divested or terminated companies. On acquisition of companies, the purchase method is applied, according to which the newly acquired companies’ identified assets and liabilities are measured at fair value on the date of acquisition. Any excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recognized as goodwill. Any deficiency in the cost of acquisition below the fair value of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit and loss in the year of acquisition. The interest of minority shareholders is stated at the minority proportion of the fair value of the assets and liabilities recognized. Subsequently, any losses applicable to the minority interest in excess of the minority interests are allocated against the interests of the parent company. Foreign Currency Transactions in foreign currency are stated at the exchange rate on the transaction date. Monetary items in foreign currency are converted at the exchange rates on the balance sheet date. Financial statements of foreign subsidiaries are converted using the exchange rates on the balance sheet date for balance sheet items and average exchange rate for items of the profit and loss account. All exchange rate adjustments are included in the profit and loss account under financial items, apart from the exchange rate differences arising on: • • • • •

Conversion of equity in subsidiaries at the beginning of the year at the exchange rates on the balance sheet date Conversion of the profit for the year from average exchange rates to exchange rates on the balance sheet date Conversion of long-term loans that constitute an addition to the holding of shares in subsidiaries Conversion of the forward hedging of investments in subsidiaries Conversion of capital interests in associated companies

These exchange rate differences are recognized as other comprehensive income. Derivative Financial Instruments On initial recognition, derivative financial instruments are recognized at cost in the balance sheet and subsequently measured at fair value. Positive and negative fair values of derivative financial instruments are recognized under other receivables or other payables, respectively.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Changes in the fair value of a derivative financial instrument that meets the criteria for hedging the fair value of a recognized asset or liability are recognized in the income statement with the changes in the value of the hedged asset or liability. Changes in the fair value of a derivative financial instrument that meets the criteria for hedging the fair value of a future asset or liability are recognized in other comprehensive income. Income and expenses related to such hedging transactions are transferred from other comprehensive income at the realization of the hedged asset or liability and recognized under the same item as the hedged asset or liability. Changes in the fair value of derivative financial instruments that do not meet the criteria for treatment as hedging instruments are recognized in the income statement. Warrant Programs Equity based warrant programs have been established and are offered to a number of employees, the Executive Board and members of the Board of Directors. Warrant programs were offered in 2005, 2007 and 2008. The value of services received as consideration for granted warrants is measured at the fair value of the warrant. The fair value is measured at the allotment date and recognized in the income statement under staff costs over the period in which the final right to the warrants is obtained. The contra entry to this is recognized under equity. In connection with the initial recognition of the warrants, an estimate is made of the number of warrants that the employees are expected to obtain rights to. Subsequently, an adjustment is made for changes in the estimate of the number of shares that the employees have obtained rights to so that the total recognition is based on the actual number of shares that the employees have obtained rights to. The fair value of the allotted warrants is estimated by application of the Black and Scholes pricing model. Segment Information The information is based on business segments which the management uses to report on and control the group internally. The segment information complies with the groupâ&#x20AC;&#x2122;s accounting policies, risks and internal controls. Geographical segmentation is provided for revenue and non-current assets of the major individual countries or areas. The Income Statement In the income statement, classifications are made according to function. This means that all costs have been transferred to the function to which they relate: costs of sales, sales and marketing, administrative costs or development expenses. Revenue Revenue related to sales of goods for resale and finished goods is recognized in the income statement provided that delivery and risk transition has taken place before the year-end. Revenue is recognized less VAT and discounts. Cost of Sales Cost of sales comprises raw materials and consumables, trading goods, QC costs and other costs including premises and salaries, which have been incurred in order to obtain the net revenue for the year. Sales and Marketing Expenses Sales and marketing expenses include expenses for sales and marketing personnel, advertising and exhibition expenses, distribution expenses and premises. Administrative Expenses Administrative expenses comprise the expenses related to the management and administration of the group, including expenses related to the administrative staff, management, office premises as well as office expenses. Research and Development Expenses Research and development expenses comprise regulatory expenses, wages and salaries, clinical and non-clinical testing, external scientific consultancy as well as other expenses, which directly or indirectly can be attributed to the companyâ&#x20AC;&#x2122;s research and development projects, product improvements and development projects which do not fulfil the criteria for capitalization. In addition, the amortization and impairment of capitalized development projects are recognized. All expenses concerning research activities are recognized as expenses incurred.

55


Special Items Special items comprise significant income and expenses of an exceptional nature relative to ORIGIO’s operating activities. Significant amounts such as costs of restructuring processes, costs related to investment in or divestment of activities/ companies and amounts of a one-off nature such as costs related to take-over offers, corporate branding process and impairment write-down are included in special items. Financials Financial income and financial expenses include interest, exchange gains and losses on securities, debt and transactions denominated in foreign currencies, amortization of financial assets, etc. Tax on Results for the Year Calculated tax, comprising tax on the taxable income for the year and the year’s change in deferred tax, is recognized in the income statement with the part that relates to profit and in other comprehensive income with the part that relates to items recognized there. The Danish corporation tax is allocated to the jointly taxed Danish companies according to their taxable incomes (full division with refund regarding tax losses). Jointly taxed companies are included in the Danish tax prepayment scheme. Deferred tax is calculated on all temporary differences between accounting and taxable values. Deferred tax is calculated with the actual tax rate. Deferred tax arising on tax-deductible temporary differences (tax assets) is included in the balance sheet only if there is reasonable certainty that the tax assets can be off set by the company against future taxable income. STATEMENT OF THE FINANCIAL POSITION Intangible Assets Licenses and patent investigating costs related to the license agreements are entered at cost less accumulated amortization. Amortization is made on a straight-line basis over term of the agreement. Other intangible fixed assets are stated at cost less accumulated amortisation. Amortization of these assets is made according to a declining method over the expected future lifetime of the assets. The expected lifetimes are: • Licenses: 10 years • Customer relations: 9 years • Technology: 15 years Goodwill arisen from acquisition of companies and activities is measured at cost price less any impairment as a result of permanent decreases in the earning capacity of the company in question. Development Expenses Development projects that are clearly defined and identifiable and where sufficient resources are allocated to complete the project and a potential future market can be proven and where the company intends to produce, market or use the project, are recognized as intangible assets where the expenses of the project can be calculated reliably and there is sufficient certainty that the future earnings or the net selling price can cover the production, selling, administration and development expenses. ORIGIO defines the above criteria for capitalization of development expenses as the point in time when projects have successfully passed the interim data phase in the human efficacy trial. Other development expenses are recognized in the income statement as incurred. Recognized development expenses are measured at cost less accumulated amortization and impairment losses. The cost comprises salaries and other costs attributable to the company’s development activities. Upon completion of the development activity, development projects are amortized according to the straight-line method over the estimated useful life as from the point in time when the asset is ready for use. The basis of amortization is reduced by impairment losses, if any.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Properties, Plant and Equipment Properties, plant and equipment are measured at cost less depreciation on a straight-line basis according to the physical and financial lifetime of the assets. Cost comprises acquisition price and costs directly related to acquisition until the time when the company starts using the asset. The expected lifetimes are: • Building and building parts: 20-30 years • Plant and machinery: 15-30 years • Other fixtures and fittings, tools and equipment: 3-10 years The carrying amount of land is not depreciated. The depreciation basis is determined taking into account the scrap value of the asset less any impairment losses. The scrap value is revalued on a regular basis. Profit and losses arising from disposals are recognized in the income statement under depreciation. Leases Leases related to property, plant and equipment where the company assumes all material risks and rewards of ownership (financial leases), are recognized as assets. On initial recognition, the assets are valued at computed cost equal to fair value. Assets held under finance leases are depreciated as other similar tangible assets. Lease payments under agreements considered as operating leases and other rental agreements are recognized in the income statement over the term of the agreements. The company’s total obligation related to operating leases and rental agreements is stated under contingent assets and liabilities, etc. Other Investments The shares in other investments are measured at fair value less any impairment as a result of permanent decreases in the earning capacity of the company in question. Received dividends are included in the financial income. Investments in Subsidiaries and Associated Companies by the Parent Company The parent company’s shares in subsidiaries and associated companies are measured at cost less write-downs as a result of permanent decreases in the earning capacity of the company in question. For transactions with companies within the group, inter-company profits are eliminated. Received dividends are included in the income statement of the parent company. Impairment of Non-current Assets The carrying amount of intangible assets, property, plant and equipment as well as non-current asset investments is reviewed for impairment when events or changed conditions indicate that the carrying amount may not be recoverable. If there is such an indication, an impairment test is made. An impairment loss is calculated based on the higher of the net present value and the net selling price. In order to assess the impairment, the assets are grouped on the smallest identifiable group of assets that generates cash flows (cash flow generating units). Impairments are recognized in the income statement under the same items as the related depreciation and amortization. Inventories Inventories are valued at the lower of historical cost (compiled by the FIFO principle) and net realisation value. Cost of goods for resale as well as raw materials and consumables comprises the purchase costs. Costs of finished goods and work in progress comprises the cost of raw materials, consumables, direct payroll, manufacturing costs and indirect production costs. Indirect production costs comprise indirect materials and payroll costs as well as maintenance of and depreciation on machinery, plant and equipment used in the production, plant administration and management. Borrowing costs are not capitalized. The net realizable value of stocks is measured as the selling price less costs related to the completion of the products and costs related to the execution of sales. Furthermore, net realizable value is determined with regard to marketability, obsolescence and development in expected selling price.

57


Receivables Receivables are measured after write-offs for individual risks. Securities â&#x20AC;&#x201C; Bonds Bonds are measured at market value. Both realized and unrealized value adjustments are recognized in the income statement as financial items. Prepayments Prepayments recognized under assets comprise expenses incurred related to the following financial year. Assets held for sale Assets are classified as assets held for sale when activities to carry out such sale have been initiated and it is probable that the assets will be disposed of within 12 months. They are stated at the lower of carrying amount and fair value less selling costs. Assets held for sale are not depreciated. Equity Own shares acquired by the parent company or subsidiaries are recognized directly under equity. Correspondingly, sales fees and dividends are included directly under equity. Income Tax Payable and Deferred Tax Current tax liabilities and current tax receivables are measured as tax calculated on the taxable income for the year adjusted for tax on the previous yearsâ&#x20AC;&#x2122; taxable income and taxes paid on account/prepaid. Deferred tax is measured in respect of temporary differences between the carrying amount and the tax base of assets and liabilities. No deferred tax is recognized for goodwill unless amortization of goodwill for tax purposes is allowed. In cases, e.g. in respect of shares, in which the statement of the tax base can be made according to alternative taxation rules, deferred tax is measured on the basis of the planned use of the asset or settlement of the liability, respectively. Deferred tax assets, including the tax value of tax loss carried forward, are measured at the expected realizable value, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction. Adjustment of deferred tax is made as regards elimination of unrealized inter-company profits and losses. Deferred tax is measured on the basis of the tax rules and tax rates in force in the respective countries at the balance sheet date when the deferred tax is expected to crystallize as current tax. Any changes in deferred tax as a consequence of amendments to tax rates are recognized in the income statement. Financial Liabilities Debt to banks and other credit institutions is recognized initially at the proceeds received net of transaction expenses incurred. In subsequent periods, financial liabilities other than provisions are measured at amortized cost corresponding to the capitalized value using the effective interest method; consequently, the difference between the proceeds and the nominal value is recognized in the income statement over the maturity period of the loan. The capitalized residual lease commitment on finance leases is recognized under finance leases. Other liabilities, comprising trade payables and other payables, are measured at amortized cost corresponding to nominal value. Cash Flow Statement The cash flow statement shows the cash flow for the year from operating, investment and financing activities, changes in cash and bank borrowings, and cash and bank borrowing position at the beginning and end of the year. Cash Flow from Operating Activities Cash flow from operating activities is presented as the share of the results for the year adjusted for non-cash operating items, changes in the net working capital and income tax paid.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Cash Flow from Investment Activities Cash flow from investment activities comprises payments in connection with the purchase and sale of intangible assets, property, plant and equipment and financial fixed assets. Cash Flow from Financing Activities Cash flow from financing activities comprises changes in size or structure of the share capital and related costs, contracting of loans, instalments on interest-bearing debt, payment of dividends to shareholders and paid interest on debt related to acquisitions. Cash and Cash Equivalents Cash and cash equivalents comprise cash and cash equivalents and bank borrowing with a term not exceeding three months and which can be traded into cash without any difficulties and which are only exposed slightly to changes in value. Key Figures Key figures are presented in accordance with the following definitions: Gross contribution margin, %: Gross contribution divided by revenue. EBITDA before special items margin, %: EBITDA before special items divided by revenue. EBITDA margin, %: EBITDA divided by revenue. EBIT before special items margin, %: EBIT before special items divided by revenue. EBIT margin, %: EBIT divided by revenue. Earnings Per Share: Profit/loss for the year divided by the average number of shares excluding treasury shares. Earnings Per Share after dilution: Profit/loss for the year divided by the diluted average number of shares excluding treasury shares. Cash Flow Per Share: Cash flow from operating activities divided by average number of shares excluding treasury shares. Equity ratio, %: The equity divided by the total amount of assets as per balance sheet day. Return on equity: Profit/loss for the year divided by average equity.

Accounting Estimates and Assessments In the statement of the carrying amounts of certain asset and liability items, estimates are required on how future events will affect the carrying amounts of these assets and liabilities at the balance sheet date. Estimates material to the financial reporting are, among others, made in the statement of depreciation/amortization, write-downs and contingent assets and liabilities. The estimates used are based on assumptions assessed by management. However, estimates are inherently uncertain. The assumptions can be incomplete or inaccurate and unexpected events or circumstances might occur. Furthermore, the enterprise is subject to risks and uncertainties that might result in deviations in actual results compared to estimates. As part of the accounting policies applied by the group and besides from estimates, management assesses situations which might influence amounts, recognized in the financial statements materially. Such assessments comprise among others determination of revenue recognition as well as recognition of development costs and share-based transactions. ORIGIO considers a variety of factors in determining the appropriate method of revenue recognition under these arrangements, such as the degree to which elements of the contract can be separated, their value to ORIGIO, the earnings process associated with each element and the degree of further work required to be completed by ORIGIO under the agreement. Generally, ORIGIO measures goods or services rendered at the fair value of goods or services received. For the warrants granted to employees, ORIGIO measures their value by reference to the fair value on the date of allocation of equity securities to be issued upon exercise, taking into account the terms and conditions upon which the warrants were granted, including trading conditions and market parameters such as volatility of the shares and vesting aspects. Recoverable Amount of Goodwill The assessment of whether goodwill is impaired requires a determination of the value in use of the cash-generating units to which the goodwill amounts have been allocated. The determination of the value in use requires estimates of the expected future cash flows of each cash generating unit and a reasonable discount rate. Property, Plant and Equipment The carrying amount of the tangible assets is reviewed annually in order to determine whether it is aligned with reasonable assumptions about underlying values to the company.

59


Assets held for sales The disposal of the previous facilities in Jyllinge, Denmark is expected to be realized to an amount lower than the depreciated cost price. The carrying amount has thus been written down in 2010, although the assessment of the sales price is subject to uncertainty. A sale is expected within the next twelve months and the facilities in Jyllinge, Denmark have thus been reclassified to asset held for sale. Tax Management is required to make an estimate of future taxable income related to the recognition of deferred tax assets and liabilities. Management recognizes deferred tax assets when it is probable that they can be set off against future taxable income.

Impact of new International Financial Reporting Standards ORIGIO has adopted all new or amended and revised International Financial Reporting standards (IFRS/IAS) and interpretations (IFRICs) endorsed by the EU effective for the accounting period beginning on January 1, 2010. Accounting policies have been changed regarding acquisition costs in connection with “Business Combinations” which are expensed from January 1, 2010 as a consequence of the revised IFRS 3. Expensed acquisition costs regarding business combinations amount to DKK 0. During 2010, the International Accounting Standard Board (IASB) issued a number of IFRS, amendments and interpretations (IFRICs) of which some have been endorsed by the EU as per December 31, 2010 and are mandatory for the Groups’ accounting period beginning on or after January 1, 2011 and some are not yet adopted by the EU. The Company has assessed the amendments and interpretations and determined that none of them will have a material impact on the consolidated financial statements going forward.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 2. Segment Information (DKK â&#x20AC;&#x2122;000)

Group

2010 2009 Business segments 2010

Dispos- Equip- Fertility ables ment products

Stem Total Dispos- Equip- Fertility Cells ables ment products

Stem Cells

Total

External revenue

260,967 47,021 307,988

0 307,988 237,690 27,993 265,683

0 265,683

Total revenue

260,967

0

0

47,021

307,988

307,988

237,690

27,993

265,683

265,683

Research and Development expenses 0 0 (16,687) (3,038) (19,725) 0 0 (14,181) (3,816) (17,997) EBITDA before special items

0 0 46,859 (3,038) 43,821 0 0 40,012 (3,816) 36,196

EBIT befores special items 0 0 30,788 (3,038) 27,750 0 0 24,902 (3,816) 21,086 Assets

0 0 529,756 172 529,928 0 0 478,600 195 478,795

Liabilities

0 0 336,511 486 336,997 0 0 299,622 678 300,300

Investments in intangible assets

0 0 26,619 0 26,619 0 0 6,611 0 6,611

Property, plant and equipment

0 0 91,721 0 91,721 0 0 57,114 0 57,114

Geographical split 2010 Revenue Assets

Denmark

Europe

Americas

Rest of World

Total

4,998 151,371 87,148 64,471 307,988 255,626

77,929

186,583

9,790 529,928

Investments in: intangible assets

26,316 303 0 0 26,619

Property, plant and equipment

85,996

140

5,175

410

91,721

Denmark

Europe

Americas

Rest of World

Total

Geographical split 2009 Revenue Assets

3,915 138,609 78,625 44,534 265,683 249,866

51,188

177,741

0 478,795

Investments in: intangible assets Property, plant and equipment

4,154 2,457 0 0 6,611 45,308

8,141

3,665

0

57,114

61


Note 3. Expenses Classified by Function (DKK â&#x20AC;&#x2122;000) Costs of sales

Group

Parent

2010 2009 2010 2009 140,596

110,394

46,346

34,446

Sales and Marketing expenses

87,177

74,423

22,590

23,629

Administrative expenses

44,135 46,276 20,031 23,202

Research and Development expenses

21,562

18,644

19,300

16,871

Incl. depreciation, amortization and special items

Note 4. Special Items (DKK â&#x20AC;&#x2122;000)

Group

Parent

2010

Property, Jyllinge (former headquarters)

5,706

0

Former US automation project

6,681

0

845

0

Establishment of ORIGIO LLC (Russia)

2009

2010

2009

5,706

0

845

0

VitroLife/Merck process

0 2,979

0 2,979

Branding process

0 2,161

0 2,161

Total special items

13,232 5,140 6,551 5,140

Special items is charged as: Cost af sales Sales and Marketing Administrative Depreciation and write-down

1,987

0

500

0

0

2,161

0

2,161

1,161 2,979 845 2,979 10,084

0

5,206

0


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 5. Financial Items (DKK ’000)

Group 2010

Parent 2009

2010

2009

Financial income: Interest income

161 852 118 695

Exchange gains

0

115

5,331

0

Interest income from subsidiaries

0

0

7,682

7,293

Dividend from subsidiaries

0

0

2,691

0

Total

161

967 15,822 7,988

Financial expenses: Interest expenses Fair value adjustments of securities

11,350 7,892 7,580 4,230 0

2,153

0

2,153

Impairment of investments 6,766 0 0 0 Exchange losses Total

223 0 0 1,563 18,339 10,045 7,580 7,946

Note 6. Corporate Tax DKK (‘000)

Group

Parent

2010 2009 2010 2009 Actual corporate tax 6,335 6,529 0 0 Changed in deferred tax

0

(1,053)

0

0

Total corporate tax 6,335 5,476 0 0 Net result before tax

(3,660)

6,868

(4,787)

(9,400)

Computed 25% tax on result

(915)

1,717

(1,196)

(2,350)

Adjustments to previous years

(929)

(1,112)

0

0

Effect of differences in tax rate

1,048

2,138

-

-

Tax effect of:

Tax exempt income 0 0 673 0 Non-deductible costs, incl. warrants

3,422

752

233

449

Deferred tax on entries in equity

874

(317)

0

(12)

Reversal of write-downs 0 0 0 0 Deferred tax asset not recognized

2,853

2,298

1,636

1,913

Total corporate tax 6,335 5,476 0 0 Effective tax rate 25% 25% 25% 25% Components of the deferred tax are as follows: Non-current assets (18,337) (16,896) (15,471) (14,011) Current assets (1,223) (1,252) (29) (137) Tax deductible losses (8,232) (6,831) (3,017) (2,733) Total (27,792) (24,979) (18,517) (16,881) Deferred tax asset recognized

18,977

18,777

15,000

15,000

Tax asset not recognized as asset

9,280

6,667

3,517

1,881

Deferred tax liability

(465)

(465)

0

0

As earnings are expected to increase in future years, it has been decided to maintain a partly capitalized deferred tax asset, corresponding to the expected tax on the parent company’s estimated earnings within a foreseeable future.

63


Note 7. Earnings per Share (DKK ’000)

2010 2009 2008

Profit for the year

(9,995)

Minority interests

1,392

13,508

(582) (243) (584)

Profit for the year to equity holders of the parent

(10,577)

Average number of shares Average number of own shares

1,149

12,924

28,741,736

28,392,897

28,060,229

255,164

317,462

325,000

28,486,572

28,075,435

27,735,229

Average number of shares excluding own shares Average dilution effect of warrants Diluted average number of shares

25,629

0

0

28,537,645

28,075,435

27,735,229

(0.37)

0.04

0.47

Earnings per share (EPS), DKK Earnings per share, adjusted* Earnings per share diluted (EPS), DKK

0.33

0.22

0.47

(0.37)

0.04

0.47

*Adjusted for special items and impairment of investments.

Note 8. Intangible Assets (DKK ’000)

Group

Parent

2010 Goodwill Licenses & Development rights projects in progress

Other Licenses & Development intangible rights projects assets in progress

Other intangible assets

Cost as at January 1

131,560

6,280

6,166

47,268

5,983

6,166

148

Additions from business combinations 0 0 0 0 0 0 0 Additions internal cost

0 0 1,575 0 0 1,575 0

Additions in the year

191

1,894

22,959

191

1,894

22,656

Exchange rate adjustments 7,890 0 0 3,808 0 0 0 Cost as at December 31

139,450

6,471

4,263

9,635

74,035

6,174

0

26,090

4,196

9,635

22,804

0

6

Amortization and impairment as at January 1

0

Amortization

0 379

Impairment

0 0 0 0 0 0 0

Exchange rate adjustments

0 0 0 2,111 0 0 0

0 8,555 359

0 980

Amortizations and impairment as at December 31

0

4,642

0

36,756

4,555

0

986

Carrying amount as at December 31 139,450 Remaining life time, years

1,829

9,635

– 1-10

37,279

1,619

9,635

– 8-15 1-10

21,818

– 8-15

Amortization and impairment is charged as: Cost of sales

0

13

0

13

Sales and Marketing

20

164

0

164

Administrative

– 0 – 7,627 0 – 52

Research and Development

– 359

– 751 359

– 751


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

An impairment test regarding goodwill is performed based on the discounted values of future cash flows for each unit. Future cash flows are based on the budget for 2011 and projections for nine years. Important parameters are sales, EBIT, working capital, tangible assets and growth assumptions after the indicated 10-year period. Budgets are based on specific commercial assessments of the business areas while projections that go beyond 2011 are based on general parameters. A major part of the goodwill is related to the business units in the US. The parameters in the projection for the period 20122020 are sales growth of 5-8%, and corresponding EBIT growth. Parameters in projection for the periode 2012-2020 for goodwill related to other business units are sales growth of 5-10%, and corresponding EBIT growth. Applying a decrease of 50% in expected growth rate from 2012 to 2020 will cause a limited need for impairment of the goodwill. The rate of discount is 7.3%. Alternatively, applying an increase of 1 percentage point on the rate of discount will not cause a need for impairment of goodwill. The tax rate is assumed to be between 30-40%. The test did not result in any impairment.

Note 8. Intangible Assets (DKK ’000)

Group

Parent

2009 Goodwill Licenses & Development Other Licenses & Development Other rights projects intangible rights projects intangible in progress assets in progress assets

Cost as at January 1 Additions internal cost Additions in the year Exchange rate adjustments Cost as at December 31

132,925

5,890

946

47,256

5,593

946

0

0

1,537

0

0

1,537

0 0

426

390

3,683

575

390

3,683

148

(1,791)

0

0

(563)

0

0

0

131,560

6,280

6,166

47,268

5,983

6,166

148

0

0

Amortization and impairment as at January 1

0

Amortization

0 345 0 10,583 325 0 6

3,918

0

15,842

3,871

Impairment

0 0 0 0 0 0 0

Exchange rate adjustments

0

0

0

(335)

0

0

0

0

4,263

0

26,090

4,196

0

6

6,166

141

Amortizations and impairment as at December 31

Carrying amount as at December 31

131,560

2,017

6,166

21,178

1,787

Amortization and impairment is charged as: Cost of sales

0

3

0

3

Sales and Marketing

20

3

0

3

Administrative

– 0 – 10,577 0 – 0

Research and Development

325

0

325

0

65


Note 9. Properties, Plant and Equipment (DKK ’000)

Group Parent

2010 Properties Plant and Assets Other Properties Plant and Assets Other equipment under operating equipment under operating construction assets construction assets Cost as at January 1 39,712 11,197 86,637 16,289 25,445 7,241 81,872 12,484 Additions in the year 15 462 85,432 5,812 0 426 80,309 5,261 Reclassifications 147,276 10,552 (164,933) 7,105 147,276 7,763 (162,056) 7,017 Disposals in the year (25,445) (3,922) 0 (4,970) (25,445) (3,922) 0 (4,505) Exchange rate adjustments 1,163 315 378 38 0 0 0 0 Cost as at December 31 162,721 18,604 7,514 24,274 147,276 11,508 125 20,257 Depreciation as at January 1 9,371 6,336 0 8,869 8,090 5,084 0 7,095 Depreciation in the year 8,200 1,592 4,878 2,551 7,648 686 0 2,021 Depreciation on disposals in the year (13,777) (3,595) 0 (4,629) (13,777) (3,595) 0 (4,505) Exchange rate adjustments 103 (319) 0 21 0 0 0 0 Depreciation as at December 31 3,897 4,014 4,878 6,812 1,961 2,175 0 4,611 Carrying amount as at December 31

158,824

14,590

2,636

17,462

145,315

9,333

125

15,646

Capitalized financial items 15,025 0 0 0 15,025 0 0 0 Depreciation etc., charged as: Costs of sales Sales and Marketing Administrative Research and Development Special items

1,898 920 – 784 1,567 651 – 784 221 0 – 549 221 0 – 19 512 637 – 928 291 14 – 928 363 35 – 290 363 21 – 290 5,206 – 4,878 0 5,206 0 – 0

2009 Properties Plant and Assets Other Properties Plant and Assets Other equipment under operating equipment under operating construction assets construction assets Cost as at January 1 39,541 9,589 34,355 13,512 25,445 7,199 31,306 10,371 Additions in the year 381 856 53,234 2,643 0 42 50,691 1,988 Reclassifications 35 803 (963) 125 0 0 (125) 125 Disposals in the year 0 (10) 0 (363) 0 0 0 0 Exchange rate adjustments (245) (41) 11 372 0 0 0 0 Cost as at December 31 39,712 11,197 86,637 16,289 25,445 7,241 81,872 12,484 Depreciation as at January 1 8,201 5,209 0 6,788 7,403 4,602 0 5,860 Depreciation in the year 1,200 1,166 0 1,816 687 482 0 1,235 Depreciation on disposals in the year 0 0 0 (120) 0 0 0 0 Exchange rate adjustments (30) (39) 0 385 0 0 0 0 Depreciation as at December 31 9,371 6,336 0 8,869 8,090 5,084 0 7,095 Carrying amount as at December 31

30,341

4,861

86,637

7,420

17,356

2,157

81,872

5,389

Capitalized financial items – – 10,697 – – – 10,697 – Carrying amount of leased assets Depreciation etc., charged as: Costs of sales Sales and Marketing Administrative Research and Development

0 0 0 112 0 0 0 112

647 717 46 18 417 424 90 7

– 363 339 462 – 585 46 2 – 643 212 11 – 225 90 7

– 363 – 4 – 643 – 225


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 10. Financial Assets (DKK â&#x20AC;&#x2122;000)

Group Parent

2010 Other Loans to Shares in investments subsidiaries subsidiaries

Cost as at January 1

7,036

183,365

60,175

Additions in the year

0

11,175

461

Disposals in the year

0

(28,296)

0

Exchange rate adjustments

0

15,330

0

Cost at December 31

7,036

181,574

60,636

Adjustments at January 1

(289)

0

(34,676)

Exchange rate adjustments

550

0

0

Adjustments as at December 31

261

0

(34,676)

Amortization and impairment as at January 1

0

0

0

Impairment 6,766 0 0 Exchange rate adjustments

(30)

0

0

Amortization and impairment at December 31

6,736

0

0

Carrying amount at December 31

561

181,574

25,960

The operational subsidiaries in the group are listed on page 83. In addition, the group comprise the following subsidiaries: Name

Registered office

Ownership

ORIGIO US Inc.

Delaware, US

100%

ORIGIO MediCult Inc.

Delaware, US

100%

ORIGIO Ltd. Aktieselskabet af 20/11 2003

(DKK â&#x20AC;&#x2122;000)

Hong Kong, China

51%

Copenhagen, Denmark

100%

Group Parent

2009 Other Loans to Shares in investments subsidiaries subsidiaries

Cost as at January 1

6,476

176,417

55,606

Additions from business combinations 0 0 0 Additions in the year

560

11,082

4,569

Disposals in the year

0

(1,264)

0

Exchange rate adjustments

0

(2,870)

0

Cost as at December 31

7,036

183,365

60,175

Adjustments as at January 1

(176)

0

(34,676)

Ajustments on disposals previous years Exchange rate adjustments

(113)

-

-

Adjustments as at December 31

(289)

0

(34,676)

Carrying amount as at December 31

6,747

183,365

25,499

67


Note 11. Inventories (DKK ’000)

Group Parent

2010

Raw materials and consumables Manufactured goods Work in progress Inventories Cost of material included in production cost Expensed write-downs on inventories

2009

6,664 7,203 30,553 22,272 2,405 1,358 39,622 30,833

61,506 55,013 143 21

2010

2009

7,443 5,466 4,367 3,857 34 824 11,844 10,147

13,348 12,593 143 21

Note 12. Trade Receivables (DKK ’000)

Group Parent 2010

2009

2010

2009

The aging of trade receivables at the reporting date was: Not past due

24,224

22,194

5,319

4,938

Past due up to 3 months

18,180

13,456

1,222

1,631

Past due from 3 to 6 months

4,308

4,828

111

189

Past due more than 6 months

6,847

2,753

158

490

53,559 43,231

6,810 7,248

The changes in the provision for impairment in respect of trade receivables during the year were as follows: Balance as at January 1 Impairment loss recognized Balance as at December 31

601

1,393

547

1,340

(450)

(792)

(432)

(793)

151

601

115

547

Based on historic default rates, the group believes that no impairment provision is necessary in respect of trade receivables not past due or past due up to 3 months. Credit risks Outstanding receivables are monitored on a regular basis in accordance with the company’s debtor policy which is based on concrete debtor assessments of private customers. Public-sector customers are an important part of the company’s receivables, and it is believed that no credit risks are associated with public-sector customers. In the event of uncertainty regarding a customer’s ability or willingness to pay a receivable and if it is deemed that the claim is subject to risk, a write-down is made. Public-sector customers account for approximately 63% of the outstanding debtors, with a balance past due of more than 6 months, which in spite of slow payment reduces the risk of loss.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 13. Assets Classified As Held For Sale (DKK ’000)

Group

2010

Parent 2009

2010

2009

Assets classified as held for sale: Property

11,995 0 11,995 0

Liabilities associated with assets held for sale Credit institutions

11,395 0 11,395 0

Note 14. Non-current Liabilities 2010 2009

Outstanding Interest debt

Market value

Outstanding Interest debt

2010 Principal % p.a. (DKK ‘000) (DKK ’000) Principal Realkredit Danmark (DKK) 100,191,113 3)  Var. 100,191 96,033 107,945,000 Realkredit Danmark (EUR) - - - - 1,295,700 Realkredit Danmark (EUR) - - - - 743,800 Realkredit Danmark (EUR) - - - - 403,800

3)  1)  1)  1) 

Var. 4.5 4.5 4.5

107,945 6,301 3,617 2,446

102,818 6,311 3,623 2,450

Danske Bank (USD) Danske Bank (USD) Danske Bank (DKK) Danske Bank (DKK) Monte Dei Paschi di Siena (EUR) UniCredit Banca d’Impresa (EUR)

2)  2.16 2)  Var. 6.7 - - 5)  2.0

50,545 4,195 - - - 744

50,545 35,894 4,195 744

1) 2) 3) 4) 5)

9,950,000 6,915,868 6,175,000 36,000,000 1,118,160 1,491,000

2)  2.16 4)  Var. 2)  6.7 3.5 5)  2.1 5)  3.9

41,000 38,821 3,830 35,512 979 320

41,000 38,821 4,170 35,512 979 320

9,950,000 6,915,868 6,175,000 - - 1,391,000

% p.a.

Market value

(DKK ‘000) (DKK ’000)

Realkredit Danmark (EUR) is reclassified to Current Liabilities, as the related property is for sale Fixed interest For the first two quarters of 2011, the interest rate is adjusted to 1.55% The interest rate is fixed to 4.97, please refer to note 15 Adjustment of interest every 1 to 6 months. From January 1, 2011, the interest rate is adjusted to 0.26% Adjustment of interest every quarter

(DKK ‘000)

Group

Parent

Leases Credit institutions Leases Credit institutions 2010 2009 2010 2009 2010 2009 2010 2009 Liabilities due after more than 5 years 0 0 134,354 118,684 0 0 134,171 118,683 Liabilities due between 2-5 years 0 0 68,793 77,330 0 0 68,150 77,011 Liabilities due within 1 year 0 111 17,110 15,148 0 111 16,636 14,723

69


Note 15. Financial Instruments From time to time, the ORIGIO Group enters into financial instrument contracts with the aim of minimizing its exposure to interest and currency fluctuations. Currency risks

Generally, the investments in foreign group enterprises are not hedged though in connection with ORIGIO Inc., a partial hedging of the investment has been entered into, by taking up loans of USD 14 million. Adjustments arising on net investments as a result of changes in the exchange rates are recognized in other comprehensive income. An increase in USD currency rate versus DKK of 10% will effect the net profit by approximately DKK 0.4 million and will affect the equity by DKK 7.3 million including effect of translation between USD and DKK. The exposures of the ORIGIO Group to currency fluctuations are mainly related to foreign receivables and payables. (DKK â&#x20AC;&#x2122;000) Currency 2010

Group Securities Receivables Liabilities Net and cash position

USD

26 155,099 89,033 66,092

EUR

2,224 55,452 20,353 37,323

GBP

1

1 124 (122)

DKK

0

0 159 (159)

Other

46 2,602 136 2,513

2009 USD

80 147,479 92,226 55,333

EUR

220 35,812 15,033 20,999

GBP

4

DKK

0 0 0 0

Other

0 405 (401)

528 104 48 586

Of the USD liabilities, USD 14.2 million is regarded as hedge of the equity in the US subsidiary. Credit risks ORIGIO is exposed to credit risks in respect of receivables and bank balances. The maximum credit risk corresponds to the carrying amount. Cash is not deemed to be subject to any credit risks, as the counterparts are banks with good credit ratings. Interest rate risks The exposure of the ORIGIO Group to interest fluctuations mainly relates to cash and securities as well as loans as specified in note 14. ORIGIO has entered into an interest swap agreement as specified below: 2010 Danske Bank A/S

Group Received interest

Paid interest

Principal Maturity amount (DKK)

Cibor6

4.97

107,945,000

December 31, 2027

Cibor6

4.97

107,945,000

December 31, 2027

2009 Danske Bank A/S

The fair value of the interest rate swap has been calculated by the bank according to general accepted valuation principles. The interest rate is recognized as a hedge and consequently fair value adjustments are recognized in equity. From May 2009, the interest rate related to the acquisition loan in Danske Bank of USD 9,950,000 has been fixed at 2.16% plus bank margin.


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 15. Financial Instruments (DKK â&#x20AC;&#x2122;000)

Group

Fair Carrying 0-1 year 1-5 years > 5 years Total value amount Credit institution

26,832 68,793 134,354 229,979 225,802 229,979

Bank debt

20,554

0

0 20,554 20,554 20,554

Trade payables

27,097

0

0 27,097 27,097 27,097

Other payables

46,978

0

0 46,978 46,978 46,978

Total financial liabilities

121,461 68,793 134,354 324,608 320,431 324,608

Cash

18,560

0

0 18,560 18,560 18,560

Trade receivables

53,408

0

0 53,408 53,408 53,408

Other receivables Total financial asssets

4,663 76,631

0

0 4,663 4,663 4,663

0

0 76,631 76,631 76,631

Liquidity risk as at December 31, 2010

(44,830)

(68,793)

(134,354)

(247,977)

(243,800)

(247,977)

(26,111)

(77,330)

(118,684)

(222,125)

(217,017)

(222,125)

Liquidity risk as at December 31, 2009

71


Note 16. Contingent Assets and Liabilities, Security etc. (DKK ’000)

Group Parent

2010

2009 2010 2009

Lease obligations

7,479 2,445 1,133 447

Lease obligations falling due within 1 year from the balance date

2,669

1,552

514

410

4,451

893

619

37

359

0

0

0

Lease obligations falling due between 2-5 years from the balance date Lease obligations falling due more than 5 years from balance date Lease expenses

3,227 1,660 558 481

Pledge as security The shares in ORIGIO Inc. have been pledged as security for the USD bank loans as listed in note 14. The property in Jyllinge, Denmark, carrying amount of DKK 12 million, has been pledged as security for the Realkredit Danmark (EUR) loans. The property in Måløv, Denmark, carrying amount of DKK 163.0 million, has been pledged as security for the Realkredit Danmark (DKK) loan on DKK 100.2 million.

Note 17. Staff and Remuneration (DKK ’000)

Group Parent 2010 2009 2010 2009

Total staff salaries, etc., excluding warrants, can be specified as follows: Salaries

100,167 86,878 46,976 43,337

Pension schemes

6,610 9,410 3,887 3,635

Other social security costs

5,075

8,055

478

470

111,852 104,343 51,341 47,442

Remuneration included in above to the: Executive Board Board of Directors

3,752 3,602 3,752 3,602 813

597

813

597

4,565 4,199 4,565 4,199

Warrants, Executive Board 184 480 184 480 Warrants, Board of Directors* Average number of employees

0

84

0

84

4,749 4,763 4,749 4,763 221

* No warrants programmes have been issued to the Board of Directors since 2007

220

90

87


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 17. Staff and Remuneration Outstanding warrants

(number of warrants â&#x20AC;&#x2122;000)

Program Program Program of 2005 of 2007 of 2008

Outstanding as at January 1, 2010

646

413

1,353

Allotted during the year

0

Utilized during the year

0

Cancelled during the year

0

Outstanding as at December 31, 2010

646

294

Total

294

413

Program Program Program of 2005 of 2007 of 2008

1,353

Total

Specified as follows: Board of Directors

0

50

0

50

Executive Board

500 65 100 665

Managers

146 163 291 600

Other employees Total Black & Scholes parameter Term (months) Volatility Exercise price (NOK) Dividend Risk free interest rate

0 16 22 38 646 294 413 1,353 Program Program Program of 2005 of 2007 of 2008 48 48 48 50.9 39.3 57.1 11.9

20.3

16.2

not expected

not expected

not expected

3%

4%

4%

0.0%

0.0%

0.0%

Dilution of year end share capital at year end share price

The expected volatility rate is based on the historical volatility. In 2010, the fair value of warrants recognized in the income statement amounts to DKK 738,000 of which DKK 184,000 relates to the Executive Board. The amount is charged as:

(DKK â&#x20AC;&#x2122;000) Costs of sales

212

Sales and Marketing expenses

129

Administrative expenses

240

Research and Development expenses

157

Total 738

73


Note 18. Fee to the Independent Auditor (DKK ’000)

Group

2010 2009

Fee to the parent company’s independent auditor: Audit fee

370

350

Tax consultancy

47

85

Other assurance services

57

18

Other fees

446

271

Total

920 724

Note 19. Related Parties and Transactions ORIGIO a/s has no related parties with controlling interests. ORIGIO’s related parties with significant influence comprise group enterprises as well as the company’s Board of Directors and Executive Board. No transactions were conducted with the Board of Directors, Executive Board, major shareholders or other related parties in the year, apart from intercompany transactions eliminated in the consolidated financial statement as well as usual remuneration, please refer to note 17, and legal fees of DKK 1,785,000.

Trade with group enterprises comprise: (DKK ‘000) Revenue Cost of goods Reimbursement of operational costs

Subsidiaries 2010 2009 38,979 32,494 1,161

331

(6,381)

0

Interest income

7,682

7,292

Dividend

2,691 0

Non-current receivables

181,574

183,365

Trade receivables

23,673

14,367

Trade payables

10,322

19,476


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Note 20. Depreciation and Other Adjustments (DKK ’000)

Group Parent 2010 2009

2010 2009

Depreciation and amortization

16,071

15,110

6,487

Depreciation and amortization in special items

10,084

0

5,206

0

6,766

0

0

0

738

2,058

738

2,058

Impairment of investments Warrant compensation expenses Miscellaneous provisions Financial income Financial expenses Tax Total adjustments to cash flows

2,735

0

(31)

0

0

(161)

(967)

(15,822)

(7,988)

11,573

10,045

7,580

7,946

6,335 5,476 51,406

31,691

0 4,189

0 4,751

Note 21. Changes in Net Working Capital (DKK ’000) Increase in inventories and receivables Decrease/increase in payables and other debt Changes in net working capital

Group Parent 2010 2009 2010 2009 (14,103)

(6,906)

(6,161)

(662)

9,813

6,433

1,491

4,706

(4,290)

(473)

(4,670)

4,044

Note 22. Cash, Cash Equivalents and Bank Borrowings (DKK ’000) Cash and cash equivalents

Group Parent 2010 2009 2010 2009 18,560

15,551

3,783

6,674

Bank borrowings

(20,554) (4,502) (17,527) (3,088)

Cash, cash equivalents and bank borrowings

(1,994)

11,049

(13,744)

3,586

75


M ED I C U LT M ED I A

H U M AGEN PI PE T S

M I DAT L A N T I C DEVICES

Statement by the Board of Directors and Executive Board Today the Board of Directors and Executive Board

Company’s operations and cash flows for the

have discussed and approved the Annual Report

financial year January 1 – December 31, 2010.

of ORIGIO a/s for the financial year January 1 – December 31, 2010.

In our opinion the management’s review includes a fair review about the development in the Parent

The Annual Report has been prepared in

Company’s and the Group’s operations and

accordance with International Financial Reporting

economic conditions, the results for the year and

Standards as adopted by the EU, the Oslo Stock

the Parent Company’s financial position, and the

Exchange´s requirements for financial reporting

position as a whole for the entities included in

by listed companies, and Danish disclosure

the consolidated financial statements, as well as a

requirements for listed companies.

review of the more significant risks and uncertainty the Parent Company and the Group face, in

In our opinion the consolidated financial statements

accordance with Danish disclosure requirements for

and the parent company financial statements give

listed companies.

a true and fair view of the Group’s and the Parent Company’s financial position at December 31, 2010,

We recommend that the Annual Report be

and of the results of the Group’s and the Parent

approved at the Annual General Meeting.

Måløv, on February 22 2011

Executive Board

Jesper Funding Andersen

Board of Directors

Flemming Pedersen

Jens Zilstorff

Jørgen Drejer

Jaime Grego-Mayor

Bente Jensen

(Chairman)

Flemming Juul Jensen

Kirsten Bakbøl 77


Independent Auditor’s Report To the Shareholders of ORIGIO a/s

fraud or error, selecting and applying appropriate accounting policies, and making accounting

Report on consolidated financial statement and

estimates that are reasonable in the circumstances.

parent company financial statement We have audited the consolidated financial

Auditor’s responsibility and basis of opinion

statements and the parent company financial

Our responsibility is to express an opinion on the

statements of ORIGIO a/s for the financial year

consolidated financial statements and the parent

January 1 to December 31, 2010, which comprise

company financial statements based on our audit.

the income statement, statement of comprehensive

We conducted our audit in accordance with Danish

income, statement of financial position, statement

Standards on Auditing. Those standards require

of cash flows, statement of changes in equity

that we comply with ethical requirements and

and notes, for the Group as well as for the Parent

plan and perform the audit to obtain reasonable

Company. The consolidated financial statements

assurance about whether the consolidated financial

and the parent company financial statements

statements and the parent company financial

are prepared in accordance with International

statements are free from material misstatement.

Financial Reporting Standards as adopted by the EU, the Oslo Stock Exchange´s requirements for

An audit involves performing procedures to obtain

financial reporting by listed companies and Danish

audit evidence about the amounts and disclosures

disclosure requirements for listed companies.

in the consolidated financial statements and the parent company financial statements. The

Board of Directors’ and Executive Board’s

procedures selected depend on the auditor’s

responsibility for the consolidated financial

judgment, including the assessment of the risks

statements and parent company financial

of material misstatements in the consolidated

statements

financial statements and the parent company

The Board of Directors and Executive Board are

financial statements, whether due to fraud or error.

responsible for the presentation and preparation

In making those risk assessments, the auditor

of consolidated financial statements and parent

considers internal control relevant to the entity’s

company financial statements that give a true

presentation and preparation of consolidated

and fair view in accordance with International

financial statements and parent company financial

Financial Reporting Standards as adopted by the

statements that give a true and fair view in order

EU, the Oslo Stock Exchange´s requirements for

to design audit procedures that are appropriate

financial reporting by listed companies and Danish

in the circumstances, but not for the purpose of

disclosure requirements for listed companies. This

expressing an opinion on the effectiveness of the

responsibility includes, designing, implementing

entity’s internal control. An audit also includes

and maintaining internal control relevant for the

evaluating the appropriateness of accounting

presentation and preparation of consolidated

policies used and the reasonableness of accounting

financial statements and parent company financial

estimates made by the Board of Directors and

statements that give a true and fair view, free

Executive Board, as well as the overall presentation

from material misstatement, whether due to


M ED I C U LT M ED I A

H U M AGEN PI PE T S

of the consolidated financial statements and the

Statement on the management’s review

parent company financial statements.

The Board of Directors and Executive Board are also

M I DAT L A N T I C DEVICES

responsible for the preparation of a management’s We believe that the audit evidence we have

review that includes a fair review in accordance

obtained is sufficient and appropriate to provide a

with the Danish disclosure requirements for listed

basis for our opinion.

companies.

The audit has not resulted in any qualification.

The audit has not included the management’s review. Pursuant to the Danish Financial Statements

Opinion

Act, we have however read the management’s

In our opinion, the consolidated financial

review. We have not performed any further

statements and the parent company financial

procedures in addition to the audit of the

statements give a true and fair view of the Group’s

consolidated financial statements and the parent

and the Parent Company’s financial position at

company financial statements.

December 31, 2010 and of the results the Group’s and Parent Company’s operations and cash flow for

On this basis, it is our opinion that the information

the financial year January 1 to December 31, 2010 in

provided in the management’s review is consistent

accordance with International Financial Reporting

with the consolidated financial statements and the

Standards as adopted by the EU, the Oslo Stock

parent company financial statements.

Exchange´s requirements for financial reporting by listed companies, and Danish disclosure

Copenhagen, on February 22, 2011

requirements for listed companies. Grant Thornton Incorporated State Authorised Public Accountants

Gert Fisker Tomczyk

Henrik Ødegaard

State Authorised Public Accountant

State Authorised Public Accountant

79


for life ”At the end of the day, its all about life; the opportunity of new life for patients and our own new life as ORIGIO. Life is everything. That’s what we stand for.”

MEDICULT MEDIA

HUM AGEN PIPE TS

MIDATL ANTIC DE V ICES

Leads the way in the development and provision of specialized and innovative ART media.

Focuses on the creation of the highest quality speciality pipets and microtools for ART.

Provides innovative devices, equipment, and services to ART labs.

ORIGIO is a world leader in Assisted Reproductive Technology (ART) solutions. Through research and innovation, ORIGIO aims to provide the best products to medical professionals to help the #1 dream of every infertile couple come true. ORIGIO currently comprises the three product families, MediCult Media, Humagen Pipets and MidAtlantic Devices, that cater for the broadest range of ART requirements. ORIGIO, which is headquartered in Måløv, Denmark and has subsidiaries in 10 countries, is listed on the Oslo Stock Exchange under the symbol ORO. For further information, please visit www.origio.com.

ORIGIO Annual Report 2010  

ORIGIO is a world leader in Assisted Reproductive Technology (ART) solutions. Through research and innovation, ORIGIO aims to provide the be...

Read more
Read more
Similar to
Popular now
Just for you