Galenica - Geschäftsbericht 2023

1. Group organisation

General information

Galenica is a fully-integrated healthcare service provider in Switzerland. Galenica operates a network of pharmacies, develops and offers own brands and products, exclusive brands and products from business partners as well as a variety of on-site health services and tests for customers. Galenica is also a provider of pre-wholesale and wholesale distribution and database services in the Swiss healthcare market.

The parent company is Galenica Ltd., a Swiss public limited company with its headquarters in Bern. The registered office is at Untermattweg 8, 3027 Bern, Switzerland. Shares in Galenica Ltd. are traded on the SIX Swiss Exchange under securities no. 36067446 (ISIN CH0360674466).

The Board of Directors released the consolidated financial statements 2023 for publication on 7 March 2024. The 2023 consolidated financial statements will be submitted for approval to the Annual General Meeting on 10 April 2024.

2. Accounting principles

Basis of preparation

The consolidated financial statements of Galenica have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standard Board (IASB), as well as the interpretations of the IFRS Interpretations Committee (IFRIC) and the provisions of Swiss law.

The consolidated financial statements are based on the financial statements of the individual companies of Galenica, prepared in accordance with uniform accounting principles. The reporting period comprises twelve months to 31 December.

Galenica's consolidated financial statements are prepared in Swiss francs (CHF) and, unless otherwise indicated, figures are rounded to the nearest CHF 1,000.

Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided. Totals are calculated using the underlying amount rather than the presented rounded number.

Foreign currencies are not material for the consolidated financial statements.

Estimation uncertainty, assumptions and judgments

The preparation of the Group's consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense, and the disclosure of contingent liabilities as at the reporting date. Although these estimates and assumptions are made on the basis of all available information and with the greatest of care, the actual results may differ. This applies primarily to estimates and assumptions made with regard to the items set out below.

Leases (note 16)

IFRS 16 defines the lease term as the non-cancellable period of a lease together with the options to extend or terminate a lease, if the lessee is reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease term, Galenica applies judgment in assessing whether it is reasonably certain that the option will be exercised. This will take into account the length of the time remaining before the option is exercisable, current trading, future trading forecasts as to the ongoing profitability of the point of sale and the level and type of planned future capital investment. A reassessment of the remaining life of the lease could result in a recalculation of the lease liability and a material adjustment to the associated balances.

Goodwill and intangible assets (note 17)

Goodwill and other intangible assets with an indefinite useful life are tested for impairment at least once a year. This involves estimating the value in use of the cash-generating unit (CGU) or group of CGUs to which the goodwill is allocated. It also requires a forecast of expected future cash flows as well as the application of an appropriate discount rate to calculate the present value of these cash flows.

Employee benefit plans and other non-current employee benefits (note 24)

The costs of the employee benefit plans and other long-term employee benefits are determined using actuarial valuations. These valuations involve making assumptions about the discount rate, future salary and pension developments, mortality and the employee turnover rate. Galenica considers the discount rate, the selection of mortality tables and the development of salaries to be key assumptions.

Fair value of contingent consideration liabilities from business combinations (note 26)

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount rate.

Amendments to IFRS Accounting Standards

As at 1 January 2023 Galenica adopted the following amended IFRS Accounting Standards:

Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of accounting policies
Amendments to IAS 8 - Definition of accounting estimates
Amendments to IAS 12 - Deferred tax related to assets and liabilities arising from a single transaction
Amendments to IAS 12 - International tax reform - Pillar Two rules

These changes have no or no material impact on the financial position, financial performance and cash flows of Galenica. The amendments to IAS 1 and IFRS Practice Statement 2 affected the disclosures of the accounting principles in these consolidated financial statements. Galenica has not early adopted any other standard or interpretation that has been issued but is not yet effective.

Future amendments to IFRS Accounting Standards

The IASB has issued various new and amended standards and interpretations with effective dates in the financial year 2024 or later. Galenica has not early adopted any of the following amendments to standards or interpretations that are potentially relevant for Galenica. Galenica intends to apply the new or amended standards for the first time in the financial year beginning on the date shown below:

Amendments to IAS 1 – Classification of liabilities as current or non-current (1 January 2024)
Amendments to IAS 7 and IFRS 7 - Supplier finance arrangements (1 January 2024)
Amendments to IFRS 16 - Lease liability in a sale and leaseback (1 January 2024)

Galenica is currently assessing the impact of these amendments. Based on a preliminary analysis, Galenica does not expect a material impact on the consolidated financial statements.

3. Operating segment information

Galenica operates mainly in Switzerland within two operating segments Products & Care and Logistics & IT. The CEO of Galenica acting as chief operating decision maker (CODM) allocates resources and monitors performance of the Group's operating segments Products & Care and Logistics & IT on the basis of information prepared in accordance with IFRS Accounting Standards with exception of defined benefit plans and long-service awards, which are recognised at Group level.

In the operating segment Products & Care with its large network of pharmacies the accounting for leases is of particular importance. The Group continues to prepare information as if its leases were accounted for as operating leases (e.g. in line with Galenica's accounting policies prior to the adoption of IFRS 16). Those figures are relevant for management incentive and remuneration plans. However, Galenica has determined that the figures including the effects of IFRS 16 are used by the CODM for monitoring and resource allocation decisions and therefore presents its segment reporting as below.

The operating result (EBIT) comprises all operating income generated and expenses incurred in the corresponding segments. Financial income and expenses as well as income taxes are reported at Group level only and not allocated to the segments. The assets and liabilities include all items of the statement of financial position that can be directly or reasonably allocated to a segment.

With the creation of the strategic partnership with Redcare Pharmacy N.V., the business unit Mediservice Ltd. (including Curarex swiss AG) which was part of the Products & Care segment, is presented as discontinued operations. Operating segment information for the previous period has been restated to conform to the new presentation and is in line with the internal reporting. As a result, net sales to third parties has decreased by CHF 425.9 million and EBIT by CHF 10.3 million in 2022. Further information of the discontinued operation can be found in note 4, Discontinued operations.

Products & Care

The Products & Care segment comprises the «Retail» business area with offerings for patients and end customers (B2C) and the «Professionals» business area with offerings for business customers and partners in the healthcare sector (B2B).

The «Retail» business area comprises the two sectors «Local Pharmacies» (point-of-sale) and «Pharmacies at Home» (mail-order and home care). Retail operates at 538 locations Galenica's pharmacy network, the largest in Switzerland. With 369 pharmacies of its own and 169 partner pharmacies, Retail has outlets throughout the country. Galenica's own pharmacies comprise the Amavita brand with 188 branches and the Sun Store brand with 85 branches. Galenica also operates a chain of 89 pharmacies in partnership with Coop under the Coop Vitality brand. Galenica's pharmacy network also covers the speciality pharmacy Mediservice in partnership with Redcare Pharmacy N.V., which is focused on medication for treatment of patients at home, 6 majority interests in pharmacies and 169 Winconcept partner pharmacies.

The «Professionals» business area comprises the «Products & Brands» and «Services for Professionals» sectors. These activities focus on the development and marketing of healthcare services and products via the various sales channels: in-store at pharmacies (point-of-sale), shipments via mail-order pharmacies and e-shops or at home (home care), as well as business customers. Professionals launches and distributes a complete portfolio of consumer health products which is sold to Swiss pharmacies and drugstores. The companies of Professionals launches and distributes pharmaceutical and parapharmaceutical products and offer marketing and sales services to all partners in the healthcare market.

Logistics & IT

The Logistics & IT segment comprises the two sectors «Wholesale» and «Logistics & IT Services». These provide services for all those involved in the healthcare sector – pharmacies, drugstores, doctors, hospitals and care homes, partners and suppliers. Their activities focus on optimising and further developing the logistics services and service offering as well as providing innovative solutions that promote digitalisation in the healthcare market.

Wholesale plays an important role in the pharmaceutical supply chain. As a pharmaceutical wholesaler, Wholesale ensures on-schedule delivery within short deadlines to pharmacies, drugstores, doctors, hospitals and care homes throughout Switzerland.

Logistics & IT Services offers pharmaceutical and healthcare companies a broad range of specialised pre-wholesale services, from storage and distribution of products in Switzerland to debt collection. The companies of the Logistics & IT Services also offer solutions for the healthcare market. They operate comprehensive databases that provide additional knowledge for all service providers in the Swiss healthcare market and develop management solutions tailored specifically to the needs of the healthcare market. Logistics & IT Services is the leading provider of master data systems for Switzerland's entire healthcare market and publishes printed and electronic technical information on pharmaceutical products as well as complete management solutions for pharmacies. Furthermore, Logistics & IT Services provides Group internal IT services.

Group Services

The activities included within Group Services mainly comprise Galenica's central operations, which include Group Management and centralised Corporate functions such as Accounting, Controlling, Tax, Treasury, Corporate Finance, Investor Relations, Insurance, Indirect procurement, Human Resources, Legal & Board Services, Communications and Transformation.

Corporate charges management fees to the group companies for the organisational and financial management services that it provides.

Eliminations

Operating activities involve the sale of goods and services between the operating segments.

Sale of goods and services between the operating segments and resulting unrealised gains are eliminated in the Eliminations column. In addition, Eliminations include adjustments recorded on Group level which mainly consist of costs for IAS 19 from defined benefit plans and long-service awards.

Segment assets and liabilities include loans and current accounts held with respect to other segments. These positions are eliminated in the Eliminations column.

Operating segment information 2023

in thousand CHF	Products & Care	Logistics & IT	Group Services	Eliminations	Galenica Group
Net sales	1,635,633	3,076,988	50,051	–1,016,661	3,746,011
Intersegmental net sales	–106,467	–863,775	–46,418	1,016,661	–
Net sales to third parties	1,529,166	2,213,213	3,633	–	3,746,011
Other income	7,869	7,896	3,736	–2,460	17,040
Share of profit from associates and joint ventures	6,554	17	–	268	6,838
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	222,200	74,313	3,236	2,386 1)	302,135
Depreciation, amortisation and impairment	–68,429	–31,750	–3,058	237	–103,000
Earnings before interest and taxes (EBIT)	153,772	42,563	178	2,623 1)	199,135
Interest income					1,878
Interest expense					–9,466
Other net financial result					3,402
Earnings before taxes (EBT)					194,949
Income taxes					–29,245
Profit from continuing operations					165,704

Assets	1,832,129	1,029,042	600,327	-470,546 2)	2,990,952
Investments in associates and joint ventures	146,718	99	–	–2,832	143,985
Liabilities	591,285	630,139	747,648	-453,317 3)	1,515,755

Investments in property, plant and equipment	27,800	15,070	3,249	–	46,119 4)
Investments in intangible assets	1,483	31,337	–	–121	32,699 5)

Employees as at 31 December (FTE)	4,167	1,498	242	–	5,907

1) Including the effects of IAS 19 from defined benefit plans and long-service awards of CHF 5.8 million

2) Of which elimination of intercompany positions of CHF -472.3 million and other unallocated amounts of CHF 1.7 million

3) Of which elimination of intercompany positions of CHF -472.3 million and other unallocated amounts of CHF 19.0 million

4) Of which non-cash investments of CHF 2.5 million

5) Of which non-cash investments of CHF 2.6 million

Geographic information 2023

in thousand CHF	Switzerland	Other countries	Galenica Group
Net sales to third parties	3,705,756	40,255	3,746,011
Non-current assets 1)	1,711,285	488	1,711,773

1) Without employee benefit assets, financial assets and deferred tax assets

Operating segment information 2022

Operating segment information 2022 (restated)

in thousand CHF	Products & Care	Logistics & IT	Group Services	Eliminations	Galenica Group
Net sales	1,583,959	2,933,318	49,138	–977,960	3,588,456
Intersegmental net sales	–96,579	–834,935	–46,445	977,960	–
Net sales to third parties	1,487,380	2,098,383	2,693	–	3,588,456
Other income	7,112	6,265	3,123	–3,503	12,996
Share of profit from associates and joint ventures	4,255	17	–	–70	4,202
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	212,141	80,518	1,759	-1,794 1)	292,624
Depreciation, amortisation and impairment	–66,114	–31,212	–2,541	294	–99,572
Earnings before interest and taxes (EBIT)	146,027	49,306	–782	-1,500 1)	193,052
Interest income					1,160
Interest expense					–5,239
Other net financial result					641
Earnings before taxes (EBT)					189,614
Income taxes					–32,267
Profit from continuing operations					157,347

Assets	1,784,254	921,458	320,811	-413,699 2)	2,612,825
Investments in associates and joint ventures	33,975	82	–	–1,375	32,682
Liabilities	604,571	524,903	619,655	-385,765 3)	1,363,364

Investments in property, plant and equipment	14,183	24,354	2,507	–	41,044 4)
Investments in intangible assets	1,276	28,469	–	–69	29,676 5)

Employees as at 31 December (FTE)	4,007	1,399	225	–	5,631

1) Including the effects of IAS 19 from defined benefit plans and long-service awards of CHF -0.7 million

2) Of which elimination of intercompany positions of CHF -395.6 million and other unallocated amounts of CHF -18.1 million

3) Of which elimination of intercompany positions of CHF -395.6 million and other unallocated amounts of CHF 9.8 million

4) Of which non-cash investments of CHF 0.9 million

5) Of which non-cash investments of CHF 1.7 million

Geographic information 2022 (restated)

in thousand CHF	Switzerland	Other countries	Galenica Group
Net sales to third parties	3,553,565	34,890	3,588,456
Non-current assets 1)	1,608,886	88	1,608,974

1) Without employee benefit assets, financial assets and deferred tax assets

4. Discontinued operations

On 30 March 2023 Galenica announced the combination of the business activities of the specialty pharmacy Mediservice Ltd. (including Curarex swiss AG) and the online pharmacy shop-apotheke.ch in a strategic partnership with Redcare Pharmacy N.V. The closing of the transaction occurred on 16 May 2023.

Through the transaction, Galenica sold 51% of the shares of Mediservice Ltd. to Redcare Pharmacy N.V. The total purchase consideration amounted to CHF 215.5 million, consisting of a 6.1% investment in the listed company Redcare Pharmacy N.V., Netherlands with a fair value of CHF 109.5 million and the retained 49% participation in Mediservice Ltd. (including the online pharmacy shop-apotheke.ch) with a fair value of CHF 106.0 million. The remaining 49% participation in Mediservice Ltd. is accounted for as an investment in an associate.

At the date of disposal, the purchase consideration was reduced by an estimated amount of CHF 10.6 million which is contingent on net working capital developments as well as certain market developments and will become due between 2024 and 2026. At year end the remeasurement of the contingent consideration liability resulted in a change in fair value of CHF 7.7 million which was allocated to the net profit from discontinued operations. The transaction resulted in a gain on sale of CHF 119.4 million. As the purchase consideration received are non-cash items, the net cash flow from the disposal amounted to minus CHF 2.1 million which includes CHF 1.3 million cash disposed and CHF 0.8 million transaction costs and is shown as net cash flow from sale of subsidiaries in the consolidated statement of cash flows.

With the transaction Galenica lost control over Mediservice Ltd. (including Curarex swiss AG) and therefore derecognised the assets and liabilities of the business unit. The business of Mediservice Ltd. (including Curarex swiss AG) represented a separate major line of business for Galenica and was therefore classified as discontinued operations and the prior period was restated accordingly.

Gain on sale of discontinued operations

in thousand CHF	2023
Fair value of received equity instruments	109,456
Fair value of retained at equity investment in former subsidiary	106,011
Contingent considerations	–10,594
Total considerations received / interest retained	204,873

Carrying amount of net assets disposed	–86,776
Transaction costs	–813
Income taxes related to the sale of the discontinued operations	–5,515

Gain on sale of discontinued operations as per date of disposal	111,769

Net remeasurement of change in fair value of contingent consideration liabilities related to sale of discontinued operations	7,663
Gain on sale of discontinued operations	119,432

The table below shows the financial performance of the discontinued operations.

Statement of income of discontinued operations

in thousand CHF	1.1.– 16.5.2023	1.1.– 31.12.2022
Net sales	164,487	445,907
Other income	18	44
Expenses	–163,238	–435,939
Earnings before tax (EBT) from discontinued operations	1,266	10,012

Income taxes	–251	–1,500

Net profit from discontinued operations	1,015	8,512

The table below shows the financial position of the discontinued operations at the date of disposal.

Financial position of the discontinued operations at the time of disposal

in thousand CHF	16.5.2023
Cash and cash equivalents	1,330
Trade and other receivables	49,444
Inventories	18,168
Other current assets	2,583
Current Assets	71,525

Property, plant and equipment	681
Right-of-use assets	4,025
Intangible assets	67,517
Other non-current assets	93
Non-current assets	72,316

Total disposed assets	143,841

Financial liabilities	24,143
Lease liabilities	647
Trade and other payables	24,817
Other liabilities	1,999
Current liabilities	51,607

Lease liabilities	3,581
Deferred tax liabilities	1,637
Employee benefit liabilities	240
Non-current liabilities	5,458

Total disposed liabilities	57,065

Disposed net assets	86,776

Accounting principles discontinued operations

A disposal group is classified as a discontinued operation if it represents a separate major line of business or geographical business unit. Discontinued operations are not included in the result from continuing operations and are reported separately in the consolidated statement of income as profit from discontinued operations. The prior period amounts in the income statement and in the consolidated statement of cash flows are adjusted for comparison purposes. The elimination of intercompany transactions between continuing and discontinued operations is adjusted in order to reflect the impact of these transactions in continuing operations going forward. Therefore, intercompany transactions with the discontinued operations are treated as third parties transaction in the continuing operation.

5. Business combinations and disposals

Business combinations 2023

Acquisition of Padma AG. On 30 January 2023, Galenica acquired 100% of the shares in the Swiss company Padma AG. Padma AG is the parent company of the Padma Group with its two operating companies Padma Europe GmbH (Austria based) and Padma Deutschland GmbH (Germany based). Padma specialises in the manufacture and distribution of herbal formulations derived from Tibetan medicine.

The total purchase considerations amounted to CHF 23.3 million, of which CHF 20.9 million was settled in cash. A contingent consideration in the amount of CHF 2.4 million was recognised, which is due in 2026 if certain financial and operational targets are achieved. The fair value of the net identifiable asset amounted to CHF 14.2 million at the acquisition date. The goodwill of CHF 9.1 million was allocated to the operating segment Products & Care and corresponds to added value based on the acquirer-specific synergies expected to arise from the acquisition in expanding its complementary medicine portfolio and expanding its range of reimbursable medicines and the know-how of the employees gained. Transaction costs were not material.

Acquisition of pharmacies. Galenica acquired 100% of the interests in pharmacies in various locations in Switzerland. Upon acquisition, the pharmacies were merged with Galenicare Ltd.

The total purchase consideration amounted to CHF 11.4 million, of which CHF 11.3 million was settled in cash and CHF 0.1 million were recognised as deferred consideration. The fair value of the net identifiable assets amounts to CHF 0.8 million at the acquisition date. The goodwill of CHF 10.6 million was allocated to the operating segment Products & Care and corresponds to the added value of the pharmacies based on their locations and the know-how of the employees gained. Transaction costs were not material.

Business combinations

in thousand CHF	Padma	Pharmacies	2023 Total	2022 Total
Cash and cash equivalents	3,170	791	3,961	6,657
Trade receivables	1,156	251	1,407	4,857
Inventories	3,362	799	4,161	1,116
Property, plant and equipment	177	210	387	238
Right-of-use assets	3,815	1,942	5,756	4,002
Intangible assets	9,333	–	9,333	4,910
Other current and non-current assets	275	92	367	1,353
Trade payables	–418	–19	–437	–1,318
Lease liabilities	–3,815	–1,942	–5,756	–4,002
Net deferred tax liabilities	–1,871	12	–1,859	–1,043
Employee benefit liabilities	–378	–	–378	–396
Other current and non-current liabilities	–596	–1,318	–1,914	–2,218
Fair value of net assets	14,211	818	15,029	14,158
Goodwill	9,074	10,576	19,650	58,600
Non-controlling interests	–	–	–	–1,382
Purchase consideration	23,285	11,394	34,679	71,375
Cash acquired	–3,170	–791	–3,961	–6,657
Deferred consideration	–	–64	–64	–
Contingent consideration	–2,385	–	–2,385	–26,256
Net cash flow from current business combinations	17,730	10,538	28,268	38,462

Pro forma figures for acquisitions made in 2023 for the full 2023 financial year

Since their inclusion in Galenica's scope of consolidation, the businesses acquired contributed net sales of CHF 15.3 million and an operating result (EBIT) of CHF 1.4 million to the Group's results. If these acquisitions had occurred on 1 January 2023, they would have contributed additional net sales of CHF 4.1 million and increased EBIT by CHF 0.1 million.

Business combinations and disposals 2022

Acquisition of Medinform AG. On 5 July 2022, Galenica acquired 50% of the shares in the Swiss company Medinform AG and has a casting vote in the event of a disagreement, hence, Galenica has control over Medinform. Medinform is specialised in offering education and training programmes for pharmacies. The remaining 50% of the shares were retained by the previous owner. Non-controlling interests have been measured at the proportionate share of net identifiable assets. The remaining shareholders have a put option to sell their shares to Galenica which gave rise to a financial liability in the amount of CHF 3.9 million at acquisition date.

The purchase consideration amounted to CHF 4.4 million and was fully settled in cash. The fair value of the net identifiable assets amounted to CHF 2.8 million at the acquisition date of which CHF 1.4 million were recognised as non-controlling interests. The goodwill of CHF 3.0 million was allocated to the operating segment Products & Care and corresponds to the added value based on the synergies expected to arise from the acquisition due to offering various training and education programmes for employees internally in the future and the know-how of the employees gained. Transaction costs were not material.

Acquisition of Aquantic AG. On 11 July 2022, Galenica acquired 100% of the shares in the Swiss company Aquantic AG. The main activity of Aquantic is offering services for pharmaceutical companies and health insurance providers to simplify the reimbursement of the costs for specific medicines.

The total purchase consideration amounted to CHF 8.6 million, of which CHF 5.2 million was settled in cash. The contingent consideration in the amount of CHF 3.3 million was recognised which is due in 2027 if certain financial and operational targets are achieved. The fair value of the net identifiable assets amounted to CHF 1.0 million at the acquisition date. The goodwill of CHF 7.6 million was allocated to the operating segment Products & Care and corresponds to the added value based on the acquirer-specific synergies expected to arise from the acquisition in strengthening its position for business customers and the know-how of the employees gained. Transaction costs were not material.

Acquisition of Bahnhof Apotheke Langnau AG. On 15 November 2022, Galenica acquired 100% of the shares in the Swiss company Bahnhof Apotheke Langnau AG. Apart from operating a pharmacy located in Langnau the company is a leading provider of formulations for medicinal cannabis products.

The total purchase consideration amounted to CHF 48.0 million, of which CHF 25.1 million was settled in cash. The contingent consideration in the amount of CHF 22.9 million was recognised which is due in 2025 respectively in 2028 if certain financial and operational targets are achieved. The fair value of the net identifiable assets amounted to CHF 7.9 million at the acquisition date. The goodwill of CHF 40.1 million was allocated to the operating segment Products & Care and corresponds to the added value based on the acquirer-specific synergies expected to arise from the acquisition in strengthening its position as a leading fully integrated healthcare provider and the know-how of the employees gained. Transaction costs were not material.

Acquisition of pharmacies. Galenica acquired 100% of the interests in pharmacies in various locations in Switzerland. Upon acquisition, the pharmacies were merged with Galenicare Ltd.

The total purchase consideration amounted to CHF 10.4 million and was fully settled in cash. The fair value of the net identifiable assets amounts to CHF 2.5 million at the acquisition date. The goodwill of CHF 7.9 million was allocated to the operating segment Products & Care and corresponds to the added value of the pharmacies based on their locations. Transaction costs were not material.

Disposal of Careproduct AG. On 20 September 2022, Galenica disposed 100% of the shares in the Swiss company Careproduct AG to SAB Management Holding AG. The consideration amounted to CHF 2.2 million and was settled in cash. The carrying amount of the disposed net assets amounted to CHF 1.2 million including cash and cash equivalents of CHF 0.1 million. The net profit from this transaction of CHF 0.9 million has been recognised in other income including transaction costs of CHF 0.1 million.

Accounting principles business combinations

Subsidiaries, associates and joint ventures acquired during the reporting period are included in the financial statements as at the date when control, significant influence or joint control was obtained. Companies sold during the reporting period are included up to the date when control, significant influence or joint control was lost. The profit or loss on deconsolidation is recognised in operating income or other operating costs.

Contingent consideration is measured at fair value at the acquisition date and qualifies as a financial instrument. It is remeasured to fair value and any difference is recognised in other financial income or other financial expenses.

The difference arise from the acquisition of additional non-controlling interests in fully consolidated companies (purchase consideration less proportionate carrying amount of non-controlling interests) is considered to be an equity transaction and is thus taken directly to retained earnings in shareholders' equity.

6. Net sales

Based on the classification of the business unit Mediservice Ltd. (including Curarex swiss AG) as discontinued operation, the disaggregation of net sales has been adjusted accordingly. Net sales information for the previous period has been restated to conform to the new presentation. Further information of the discontinued operation can be found in note 4, Discontinued operations.

Net sales 2023

in thousand CHF	Sale of goods	Sale of services	Total net sales	Intersegmental net sales	Total net sales to third parties	of which sale of goods to third parties	of which sale of services to third parties
Local Pharmacies	1,223,601	83,330	1,306,931	672	1,307,603	1,224,273	83,330
Pharmacies at Home	74,410	4,509	78,918	–283	78,635	74,126	4,509
Retail (B2C) 1)	1,297,725	87,838	1,385,564	674	1,386,237	1,298,399	87,838
Products & Brands	175,674	1,458	177,132	–87,205	89,927	88,522	1,405
Services for Professionals	63,116	15,819	78,934	–25,950	52,984	49,781	3,203
Professionals (B2B) 1)	238,815	17,248	256,064	–113,153	142,911	138,303	4,607
Products & Care 1)	1,534,129	101,504	1,635,633	–106,467	1,529,166	1,436,719	92,446
Wholesale	2,942,635	10,097	2,952,732	–812,965	2,139,767	2,132,506	7,260
Logistics & IT Services	390	143,575	143,965	–70,519	73,446	390	73,056
Logistics & IT 1)	2,943,019	133,968	3,076,988	–863,775	2,213,213	2,132,896	80,316
Group Services	–	50,051	50,051	–46,418	3,633	–	3,633
Eliminations 2)	–907,536	–109,124	–1,016,661	1,016,661	–	–	–
Galenica Group	3,569,612	176,399	3,746,011	–	3,746,011	3,569,612	176,399

1) Including eliminations of intercompany net sales

2) Eliminations of intersegmental net sales

Net sales 2022 (restated)

in thousand CHF	Sale of goods	Sale of services	Total net sales	Intersegmental net sales	Total net sales to third parties	of which sale of goods to third parties	of which sale of services to third parties
Local Pharmacies	1,210,214	76,641	1,286,856	–9	1,286,846	1,210,208	76,638
Pharmacies at Home	69,471	4,562	74,032	–370	73,663	69,101	4,561
Retail (B2C) 1)	1,279,516	81,203	1,360,718	–209	1,360,509	1,279,309	81,200
Products & Brands	155,906	1,782	157,687	–80,460	77,227	75,446	1,781
Services for Professionals	55,857	15,236	71,093	–21,695	49,398	44,775	4,623
Professionals (B2B) 1)	211,802	16,979	228,780	–102,156	126,625	120,221	6,404
Products & Care 1)	1,488,181	95,778	1,583,959	–96,579	1,487,380	1,399,575	87,805
Wholesale	2,810,514	9,845	2,820,359	–791,079	2,029,280	2,022,691	6,588
Logistics & IT Services	359	130,353	130,712	–61,609	69,103	348	68,755
Logistics & IT 1)	2,810,862	122,457	2,933,318	–834,935	2,098,383	2,023,040	75,344
Group Services	–	49,138	49,138	–46,445	2,693	–	2,693
Eliminations 2)	–876,428	–101,531	–977,960	977,960	–	–	–
Galenica Group	3,422,614	165,841	3,588,456	–	3,588,456	3,422,614	165,841

1) Including eliminations of intercompany net sales

2) Eliminations of intersegmental net sales

Accounting principles net sales

Net sales represent revenue from contracts with customers from the sale of goods or services. Revenue is recognised in the amount that reflects the consideration to which Galenica expects to be entitled when the promised goods or services are transferred to customers.

Where invoices are issued, payment terms in Switzerland usually range between 10 and 30 days, for both goods and services.

Sale of goods

For retail pharmacy sales, revenue is recognised at the point in time when the customer takes possession of the products at the point-of-sale and for wholesale transactions upon shipment of the products to the customer.

Galenica has determined that its customer loyalty programs represent separate performance obligations to which revenue is allocated based on relative stand-alone selling prices, which considers historical redemption patterns. Revenue is deferred and recognised when the award credits are redeemed, which is typically 2 to 4 months after the sale of the initial products. At the end of each period, unredeemed credits are reflected as contract liabilities and included in trade and other payables in the consolidated statement of financial position.

Refund liabilities from contracts with customers are estimated based on actual sales volumes for the financial year and refund percentages as agreed with customers. These liabilities are usually settled in the subsequent financial year. Revenue from gift cards purchased by customers is deferred as contract liabilities until goods or services are transferred, which is typically within 12 months after the sale of the gift card. Any amounts not expected to be redeemed are recognised based on historical redemption patterns.

Customer returns are not material.

Sale of services

Revenue from services includes logistics services, healthcare and consultation services, the processing and sale of information and IT services as well as other contractually agreed services.

In the business area “Retail (B2C)“ sale of services mainly includes healthcare services and consultations sales. Most of sale of service in the business area “Professionals (B2B)” are in connection with marketing, purchase and other services for independent pharmacies or associates and joint ventures as well as providing education services for staff in pharmacies and drugstores. Depending on the service the performance obligations are either satisfied over time or at a point in time (i.e. when consultation took place).

In the business area “Logistics & IT Services” sale of services mainly includes pre-wholesale services and group external as well as group internal IT services and in the business area “Wholesale” sale of service mainly includes various logistic services. Depending on the service the performance obligations are either satisfied over time or at a point in time (i.e. when volumes are handled).

7. Other income

Other income

in thousand CHF	2023	2022 (Restated) 1)
Income from own work capitalised	10,011	6,757
Rental income from operating leases	1,690	1,762
Gain on disposal of property, plant and equipment	703	212
Gain on disposal of subsidiaries	–	853
Other operating income	4,636	3,413
Other income	17,040	12,996

1) Figures restated (refer to note 4, Discontinued operations)

8. Personnel costs

Personnel costs

in thousand CHF	2023	2022 (Restated) 1)
Salaries and wages	449,756	425,305
Social security costs and pension expenses	60,040	61,495
Other personnel costs	41,188	38,882
Personnel costs	550,984	525,682

Average number of employees (FTE)	5,770	5,485

1) Figures restated (refer to note 4, Discontinued operations)

Social security costs and pension expenses contain expenses for defined benefit plans of CHF 26.6 million (previous year: expenses of CHF 32.0 million) (refer to note 24). Salaries and wages includes expenses for share-based payments of CHF 4.3 million (previous year: CHF 7.1 million) (refer to note 29).

9. Other operating costs

Other operating costs

in thousand CHF	2023	2022 (Restated) 1)
Maintenance and repairs	29,380	23,315
Transport and shipping costs	42,158	40,846
Other operating and production costs	19,119	18,542
Rental and other lease expenses 2)	10,997	10,998
Administration costs	57,514	47,330
Marketing and sales costs	42,038	34,819
Non-income taxes	1,088	1,575
Loss on disposal of property, plant and equipment	34	6
Other operating costs	202,328	177,432

1) Figures restated (refer to note 4, Discontinued operations)

2) Of which other lease expenses (incidental expenses) of CHF 5.6 million (previous year: CHF 5.8 million)

Research and development

During the reporting period, expenses for research and development totalling CHF 12.7 million were recognised directly in other operating costs (previous year: CHF 13.5 million).

10. Financial result

Financial result

in thousand CHF	2023	2022 (Restated) 1)
Interest income	1,749	940
Net interest income from employee benefit plans	129	220
Net remeasurement of change in fair value of contingent consideration liabilities	10,057	1,077
Other financial income	76	36
Financial income	12,012	2,274

Interest expense	6,515	2,839
Interest expense on lease liabilities	2,951	2,400
Other financial costs	6,343	235
Net loss on foreign exchange	388	237
Financial expenses	16,198	5,711

Net financial expenses	4,186	3,438

1) Figures restated (refer to note 4, Discontinued operations)

11. Earnings per share

Number of outstanding shares

	2023	2022
Total number of shares	50,000,000	50,000,000
Average number of treasury shares	–151,779	–265,164
Average number of outstanding shares	49,848,221	49,734,836
Effect from share-based payments	46,724	68,730
Theoretical average number of outstanding shares (diluted)	49,894,945	49,803,566

Earnings per share

	2023	2022
Earnings per share
Net profit – attributable to shareholders of Galenica Ltd. (in thousand CHF)	285,367	165,132
Earnings per share (in CHF)	5.72	3.32
Diluted earnings per share (in CHF)	5.72	3.32
Earnings per share from continuing operations
Profit from continuing operations - attributable to shareholders of Galenica Ltd. (in thousand CHF)	164,919	156,620
Earnings per share from continuing operations (in CHF)	3.31	3.15
Diluted earnings per share from continuing operations (in CHF)	3.31	3.14
Earnings per share from discontinued operations
Profit from discontinued operations - attributable to shareholders of Galenica Ltd. (in thousand CHF)	120,448	8,512
Earnings per share from discontinued operations (in CHF)	2.42	0.17
Diluted earnings per share from discontinued operations (in CHF)	2.41	0.17

12. Income taxes

Income taxes

in thousand CHF	2023	2022 (Restated) 1)
Current income taxes	29,634	34,023
Income taxes of prior periods	114	–383
Deferred income taxes	–503	–1,373
Income taxes from continuing operations	29,245	32,267
Income taxes related to discontinued operations	5,766	1,500
Total income taxes	35,012	33,767

1) Figures restated (refer to note 4, Discontinued operations)

Tax reconciliation

in thousand CHF	2023	2022
Earnings before taxes from continuing operations	194,949	189,614
Earnings before taxes from discontinued operations	126,214	10,012
Earnings before income taxes	321,163	199,626
Weighted income tax rate in % of accounting profit	17.7%	18.3%
Expected income taxes	56,971	36,579
Effects due to the sale of participation of discontinued operations (not taxable)	–14,116	–
Effects of changes in tax rates	–290	–101
Effects of unrecognised losses in the current year	50	271
Realisation of unrecognised tax losses of prior periods	–668	–536
Recognition of tax losses of prior periods	–1,570	–
Remeasurement contingent consideration liabilities from business combinations (not taxable)	–2,112	–226
Other items and items from prior periods	–3,253	–2,220
Effective income taxes	35,012	33,767
Effective income tax rate in % of accounting profit	10.9%	16.9%
– of which income taxes attributable to continuing operations (reported in the statement of income)	29,245	32,267
– effective income tax rate attributable to continuing operations in % of EBT	15.0%	17.0%
– of which income taxes attributable to discontinued operations	5,766	1,500

Deferred taxes

			2023		2022
in thousand CHF	Deferred tax assets	Deferred tax liabilities	Net carrying amount	Deferred tax assets	Deferred tax liabilities	Net carrying amount
Current assets	3,914	–27,000	–23,086	3,123	–24,716	–21,593
Property, plant and equipment	29	–2,518	–2,489	44	–2,944	–2,900
Right-of-use assets	–	–38,944	–38,944	–	–38,450	–38,450
Intangible assets	6,331	–24,917	–18,587	7,248	–22,223	–14,975
Investments	–	–685	–685	–	–4,823	–4,823
Financial assets	–	–20,211	–20,211	–	–4,020	–4,020
Lease liabilities	40,044	–	40,044	39,568	–	39,568
Provisions	–	–953	–953	46	–1,270	–1,224
Employee benefit plans	3,460	–3,677	–217	3,026	–33	2,993
Other temporary differences	295	–1,856	–1,561	110	–760	–650
Shareholders' equity	734	–	734	779	–	779
Deferred taxes due to temporary differences	54,806	–120,761	–65,956	53,944	–99,238	–45,294
Tax loss carryforwards	1,440	–	1,440	168	–	168
Gross deferred taxes	56,246	–120,761	–64,515	54,112	–99,238	–45,126
Netting of assets and liabilities	–51,300	51,300		–50,854	50,854
Net deferred taxes	4,946	–69,461		3,258	–48,384

Analysis of net deferred taxes

in thousand CHF	2023	2022 (Restated) 1)
1 January	–45,126	–55,324
Recognised as income taxes in profit or loss
– Change in temporary differences	–1,112	1,170
– Fiscal realisation of recognised tax loss carryforwards	–342	–
– Tax loss carryforwards taken into account for the first time	1,666	168
– Effects of changes in tax rates	290	36
Recognised in other comprehensive income	–13,940	10,025
Recognised in shareholders' equity (related to share-based payments)	146	146
Addition to scope of consolidation	–1,859	–1,043
Disposal from scope of consolidation	1,593	30
Discontinued operations	–5,766	–331
Translation differences	–66	–3
31 December	–64,515	–45,126

1) Figures restated (refer to note 4, Discontinued operations)

Temporary differences on which no deferred taxes have been recognised

in thousand CHF	2023	2022
Investments in subsidiaries	399,402	175,950

Tax loss carryforwards and tax credits

		2023		2022
in thousand CHF	Tax loss carryforwards / tax credits	Tax effect	Tax loss carryforwards / tax credits	Tax effect
Tax loss carryforwards and tax credits	6,728	1,491	9,056	2,035
– of which capitalised as deferred tax assets	–6,336	–1,427	–844	–168
– of which netted with deferred tax liabilities	–95	–13	–	–
Unrecognised tax loss carryforwards and tax credits	297	51	8,212	1,868
Of which expire:
– within 1 year	–	–	–	–
– in 2 to 5 years	289	49	2,324	458
– in more than 5 years	9	1	5,888	1,410

OECD Pillar Two model rules

Galenica is within the scope of the OECD Pillar Two model rules. Since the Pillar Two model legislation has been enacted but was not into force in the financial year 2023 in the jurisdiction relevant to Galenica, Galenica has no related current tax exposure. Galenica applies the mandatory exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023. Furthermore, Galenica has reviewed its corporate structure considering the introduction of Pillar Two Model Rules in various jurisdictions. Since the effective tax rate is above 15% in all jurisdictions in which Galenica operates, Galenica does not expect that the Group is subject to Pillar Two "top up" taxes.

13. Trade and other receivables

Trade and other receivables

in thousand CHF	2023	2022
Trade receivables	502,036	514,868
Bad debt allowances	–16,044	–9,752
Other receivables	32,301	24,364
Trade and other receivables	518,293	529,479

Change in bad debt allowances for trade receivables

in thousand CHF	2023	2022
1 January	–9,752	–8,609
Addition	–8,053	–2,147
Use	526	521
Reversal	775	450
Disposal from scope of consolidation	454	23
Translation differences	6	10
31 December	–16,044	–9,752

Maturity profile of trade receivables

			2023			2022
in thousand CHF	Gross trade receivables	Bad debt allowances	Net trade receivables	Gross trade receivables	Bad debt allowances	Net trade receivables
Not past due	407,341	–4,752	402,589	440,662	–4,927	435,735
Past due:
– 1 to 30 days	69,219	–994	68,226	48,873	–735	48,138
– 31 to 60 days	7,920	–176	7,744	9,792	–493	9,299
– 61 to 90 days	1,936	–230	1,706	5,149	–462	4,687
– more than 90 days	15,620	–9,892	5,728	10,392	–3,135	7,256
Total	502,036	–16,044	485,992	514,868	–9,752	505,116

Accounting principles trade and other receivables

Trade receivables are initially measured at the transaction price determined in accordance with IFRS 15. Other receivables are carried at original invoice value. Allowances for uncollectable amounts are estimated based on expected credit losses, using life-time expected credit losses for trade receivables (simplified approach).

Any impairment losses are recognised in profit or loss in other operating costs.

14. Inventories

Inventories

			2023			2022
in thousand CHF	Raw material and merchandise 1)	Semi-finished and finished goods 2)	Total inventories	Raw material and merchandise 1)	Semi-finished and finished goods 2)	Total inventories
Gross carrying amount as at 1 January	331,281	4,162	335,443	313,957	4,358	318,315
Change in inventories	50,603	3,725	54,328	16,808	–196	16,611
Addition to scope of consolidation	2,431	1,730	4,161	1,116	–	1,116
Disposal from scope of consolidation	–18,174	–	–18,174	–549	–	–549
Translation differences	–77	–67	–145	–51	–	–51
Gross carrying amount as at 31 December	366,064	9,550	375,614	331,281	4,162	335,443

Allowance as at 1 January	–19,744	–540	–20,283	–22,745	–499	–23,245
Addition	–2,309	–1,085	–3,395	–527	–103	–630
Reversal / use	5,026	109	5,135	3,487	63	3,550
Disposal from scope of consolidation	6	–	6	30	–	30
Translation differences	15	4	19	12	–	12
Allowance as at 31 December	–17,006	–1,512	–18,518	–19,744	–540	–20,283

Net carrying amount as at 31 December	349,058	8,038	357,096	311,538	3,622	315,160

1) Including prepayments to suppliers

2) Including consumables / auxiliary material

Accounting principles inventories

The weighted average method is primarily used to determine cost for raw materials and merchandise. Semi-finished and finished goods are carried at the lower of cost of direct materials and labour and net realisable value.

Inventory allowances are recognised on inventories for slow moving items and excess stock.

Cost of goods mainly include costs of goods and merchandise from the operating segments Products & Care and Logistics & IT. Price discounts, rebates or supplier discounts and other payments received from suppliers that are not payment for distinct goods or services provided by Galenica and thus on the purchase of goods are directly deducted from cost of goods.

15. Property, plant and equipment

Property, plant and equipment

in thousand CHF	Real estate	Assets under construction	Warehouse equipment	Furniture, fittings	Other property, plant and equipment	Total property, plant and equipment
Net carrying amount as at 31.12.2021	142,194	21,464	31,481	23,644	25,767	244,549
Addition	14,682	1,517	12,656	3,434	8,754	41,044
Disposal	–	–	–13	–99	–167	–280
Reclassification	16,681	–21,023	3,637	–30	736	–
Depreciation	–14,108	–	–6,241	–5,124	–10,509	–35,983
Addition to scope of consolidation	96	–	–	59	84	238
Disposal from scope of consolidation	–	–	–54	–6	–14	–74
Net carrying amount as at 31.12.2022	159,544	1,958	41,465	21,877	24,650	249,495
Addition	23,016	1,993	4,949	8,202	7,959	46,119
Disposal	–283	–	–	–	–112	–394
Reclassification	167	–822	206	73	376	–
Depreciation	–14,108	–	–6,354	–5,190	–9,572	–35,224
Addition to scope of consolidation	–	–	64	223	100	387
Disposal from scope of consolidation	–318	–	–333	–31	–	–681
Net carrying amount as at 31.12.2023	168,019	3,129	39,996	25,156	23,402	259,702

Overview as at 31.12.2022
Cost	327,442	1,958	115,959	113,542	67,192	626,094
Accumulated depreciation and impairment	–167,897	–	–74,495	–91,665	–42,542	–376,599
Net carrying amount as at 31.12.2022	159,544	1,958	41,465	21,877	24,650	249,495

Overview as at 31.12.2023
Cost	344,854	3,129	116,950	119,677	71,152	655,763
Accumulated depreciation and impairment	–176,835	–	–76,954	–94,522	–47,750	–396,060
Net carrying amount as at 31.12.2023	168,019	3,129	39,996	25,156	23,402	259,702

Accounting principles property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and impairment. Depreciation is charged on a straight-line basis over the assets' useful lives as follows:

	Years
Land	unlimited
Buildings	10 – 50
Warehouse equipment	5 – 15
Manufacturing equipment	5 – 15
Furniture, fittings	5 – 10
IT equipment	3 – 10
Vehicles	3 – 10

Other property, plant and equipment consists of manufacturing equipment, IT equipment and vehicles.

When items of property, plant and equipment are sold or derecognised, gains are recognised in other income and losses in other operating costs.

16. Leases

Right-of-use assets

in thousand CHF	Real estate	Other right of-use assets	Total right-of-use assets
Net carrying amount as at 31.12.2021	215,239	257	215,496
Addition	23,456	76	23,533
Reassessment of existing lease contracts	35,497	12	35,509
Depreciation	–51,059	–197	–51,255
Impairment	–1,644	–	–1,644
Reversal of impairment	1,492	–	1,492
Addition to scope of consolidation	3,951	52	4,002
Disposal from scope of consolidation	–444	–	–444
Translation differences	–	–4	–4
Net carrying amount as at 31.12.2022	226,489	196	226,685
Addition	22,104	139	22,243
Reassessment of existing lease contracts	31,297	5	31,302
Depreciation	–52,726	–118	–52,844
Impairment	–37	–	–37
Reversal of impairment	508	–	508
Addition to scope of consolidation	5,756	–	5,756
Disposal from scope of consolidation	–4,025	–	–4,025
Translation differences	–	–6	–6
Net carrying amount as at 31.12.2023	229,366	217	229,583

Lease liabilities

in thousand CHF	2023	2022
Net carrying amount as at 1 January	233,178	223,051
Addition	22,243	23,533
Reassessment of existing lease contracts	31,299	35,509
Interest expense on lease liabilities	2,972	2,455
Repayment of lease liabilities (including interest)	–55,173	–54,914
Addition to scope of consolidation	5,756	4,002
Disposal from scope of consolidation	–4,228	–455
Translation differences	–6	–4
Net carrying amount as at 31 December	236,041	233,178
– of which current lease liabilities	50,484	50,173
– of which non-current lease liabilities	185,557	183,005

Leases recognised in profit or loss (restated)

in thousand CHF	2023	2022 (Restated) 1)
Rental income from operating leases (included in other income)	1,690	1,762
Short-term lease expense (included in other operating costs)	–1,282	–1,154
Low-value lease expense (included in other operating costs)	–51	–17
Variable lease expense (included in other operating costs)	–4,045	–4,002
Depreciation of right-of-use assets	–52,580	–50,620
Impairment of right-of-use assets	–37	–1,644
Reversal of impairment of right-of-use assets	508	1,492
Interest expense on lease liabilities	–2,951	–2,400

1) Figures restated (refer to note 4, Discontinued operations)

The total cash outflow for leases including short-term leases, leases of low-value-assets and variable lease expenses was CHF 60.3 million (previous year: CHF 59.4 million).

Maturity profile of undiscounted lease liabilities

in thousand CHF	2023	2022
Up to 3 months	13,477	13,371
In 3 to 12 months	39,648	39,339
In 2 years	47,719	45,869
In 3 years	39,588	37,945
In 4 to 5 years	57,021	54,879
In 6 to 10 years	43,829	45,534
In more than 10 years	5,003	5,303
Total future cash flows from undiscounted lease liabilities	246,284	242,240

Possible future cash outflows related to extension options in an amount of CHF 192.6 million (previous year: CHF 183.1 million) are not included in lease liabilities because it is not reasonably certain that these options will be exercised.

The cash outflows for variable lease expenses in 2024 is expected to be similar to the amount recognised in 2023.

Galenica has entered into various lease contracts that have not yet commenced as at 31 December 2023. The future lease payments for these non-cancellable lease contracts amount to CHF 40.3 million (previous year: CHF 38.9 million).

Accounting principles leases

Galenica has lease contracts for furniture, vehicles and a large number of contracts for real estate, mainly store locations, which include fixed rental payments and variable sales-based components. The significant majority of these lease contracts concerns locations of the pharmacies in the operating segment Products & Care.

Galenica determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain at inception of the contract to be exercised. Galenica has the option, under some of its leases, to lease the assets for additional terms of several (three, five or more) years. Galenica applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. In doing so, Galenica considers all relevant factors including economic incentives. Galenica reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise, or not to exercise, the option to renew (e.g. a change in business strategy of the underlying asset).

Galenica uses the recognition exemptions for lease contracts that have a lease term of 12 months or less and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value (low-value assets).

17. Intangible assets

Intangible assets

in thousand CHF	Intangible assets with finite useful lives 1)	Trademarks with indefinite useful lives	Software	Goodwill	Total intangible assets
Net carrying amount as at 31.12.2021	7,668	82,720	73,616	856,662	1,020,666
Addition	–	–	29,676	–	29,676
Disposal	–41	–	–	–	–41
Amortisation	–2,087	–	–10,997	–	–13,084
Addition to scope of consolidation	4,910	–	–	58,600	63,510
Disposal from scope of consolidation	–28	–	–28	–558	–614
Net carrying amount as at 31.12.2022	10,422	82,720	92,267	914,703	1,100,112
Addition	508	–	32,191	–	32,699
Amortisation	–2,974	–	–12,783	–	–15,757
Addition to scope of consolidation	392	8,940	–	19,650	28,983
Disposal from scope of consolidation	–	–	–4,471	–63,046	–67,517
Translation differences	–16	–	–1	–	–17
Net carrying amount as at 31.12.2023	8,332	91,660	107,204	871,307	1,078,503

Overview as at 31.12.2022
Cost	21,982	82,720	147,680	914,703	1,167,085
Accumulated amortisation and impairment	–11,561	–	–55,413	–	–66,973
Net carrying amount as at 31.12.2022	10,422	82,720	92,267	914,703	1,100,112

Overview as at 31.12.2023
Cost	22,863	91,660	168,294	871,307	1,154,124
Accumulated amortisation and impairment	–14,530	–	–61,090	–	–75,620
Net carrying amount as at 31.12.2023	8,332	91,660	107,204	871,307	1,078,503

1) Including trademarks, patents, licences and customer relationships

Trademarks with indefinite useful lives

This position includes trademarks that are well known nationally and internationally and actively advertised. These acquired trademarks are regarded as having indefinite useful lives for the following reasons: they were created many years ago, they do not expire, and the products sold under the trademarks have a history of strong revenue and cash flow performance. Galenica intends and has the ability to support the trademarks to maintain their values for the foreseeable future.

For impairment testing purposes the trademarks have been allocated to the cash-generating units Verfora, Padma and Spagyros in the operating segment Products & Care. The recoverable amount is determined on the basis of future discounted cash flows. Cash flows beyond the three-year planning period are based on the growth rates and discount rates before tax set out below, as approved in medium-term planning by management:

Trademarks with indefinite useful lives

in thousand CHF	2023	2022
Carrying amount	91,660	82,720
Growth rate	1.0%	1.0%
Pre-tax discount rate	7.0%	6.8%

According to the results of impairment testing for 2023 and 2022 using value in use calculations, no impairment was necessary. Galenica performed a sensitivity analysis taking into account reasonable changes in the assumptions used to calculate the discounted cash flows, such as higher discount rates, lower EBIT margins or lower perpetual growth rates. The sensitivity analysis for 2023 and 2022 did not reveal that a reasonable possible change in assumption would lead to an impairment.

Goodwill

		2023			2022
in thousand CHF	Carrying amount	Growth rate	Pre-tax discount rate	Carrying amount	Growth rate	Pre-tax discount rate
Products & Care	785,760	1.0%	7.1%	829,156	1.0%	7.0%
Logistics & IT	85,547	1.0%	7.1%	85,547	1.0%	7.0%
Total	871,307			914,703

According to the results of impairment testing for 2023 and 2022 using value in use calculations, no impairment was necessary. Galenica performed a sensitivity analysis taking into account reasonable changes in the assumptions used to calculate the discounted cash flows, such as higher discount rates, lower EBIT margins or lower perpetual growth rates. The sensitivity analysis for 2023 and 2022 did not reveal that a reasonable possible change in assumption would lead to an impairment.

Accounting principles intangible assets

Intangible assets include acquired trademarks, patents, licences, customer relationships, purchased or internally developed software and other assets without physical substance. These items are measured at cost less accumulated amortisation and impairment.

Expenditure on internally developed software is capitalised when the capitalisation criteria are met and future economic benefits from use or sale of the software are expected. Software that is not yet available for use is tested for impairment annually or more frequently if there are indications of impairment.

Amortisation is charged on a straight-line basis over the estimated economic or legal useful life, whichever is shorter as follows:

	Years
Trademarks, patents, licences, customer relationships	5 – 20
Software	2 – 15

The amortisation period and the amortisation method are reviewed at least at each financial year-end.

With the exception of trademarks in the business area Products & Brands, all intangible assets are assessed as having a finite useful life. Intangible assets with indefinite useful lives are not amortised but tested for impairment annually in the fourth quarter of the year, or more frequently if there are indications of impairment.

Goodwill is allocated to the cash-generating unit (CGU) or group of CGUs that are expected to benefit from a business combination. Management monitors goodwill at operating segment level.

Goodwill is tested for impairment annually in the fourth quarter of the year, or more frequently if there are indications of impairment. The impairment test is based on the discounted cash flow method. The WACC is used to determine the applicable pre-tax discount rate. The recoverable amount (higher of fair value less costs of disposal and value in use) of each CGU is determined on the basis of the medium-term plans for the next three years approved by management. Cash flows beyond the three-year planning period are extrapolated using a perpetual growth rate. If the recoverable amount is lower than the carrying amount, the carrying amount is reduced to the recoverable amount by recording an impairment charge.

18. Investments in associates and joint ventures

Investments in associates

in thousand CHF	2023	2022
Net carrying amount as at 1 January	3,108	–
Share of profit from associates	1,576	–358
Remeasurement of net defined benefit plans from associates	–1,226	–
Investments	109,511 1)	3,466 2)
Net carrying amount as at 31 December	112,969	3,108

1) Including contribution of fair value of retained at equity investment in former subsidiary of CHF 106.0 million (refer to note 4, Discontinued operations)

2) Including contribution of previously held securities with a fair value of CHF 1.7 million

Mediservice is the only significant associate of Galenica. Mediservice as specialty pharmacy offers a range of services for chronic and rare disease. Furthermore, Mediservice operates the pure online pharmacy Redcare-apotheke.ch and is registered in Zuchwil, Switzerland. Galenica owns 49% of the share capital and voting rights, Redcare Pharmacy N.V., Netherlands owns 51% of the share capital and voting rights.

Condensed financial information of Mediservice

in thousand CHF	2023
Current assets	91,182
Non-current assets	202,811
Current liabilities	66,702
Non-current liabilities	9,432
Equity before appropriation of earnings	217,859
Operating income 1)	295,665
EBIT 1)	4,526
Net profit 1)	4,011
Remeasurement of net defined benefit plans recognised in other comprehensive income 1)	–2,502

1) Figures as from 16 May to 31 December 2023

The net carrying amount of the investment in Mediservice is CHF 106.8 million as at 31 December 2023 (previous year: none). Unrealised profits on inventory are not considered in these amounts.

Investments in joint ventures

in thousand CHF	2023	2022
Net carrying amount as at 1 January	29,574	30,696
Share of profit from joint ventures	5,263	4,559
Remeasurement of net defined benefit plans from joint ventures	–403	–921
Investments	991	2,100
Dividends received	–4,410	–6,860
Net carrying amount as at 31 December	31,016	29,574

Coop Vitality is the only significant joint venture of Galenica. Coop Vitality is registered in Bern, Switzerland. Galenica owns 49% of the share capital and voting rights, Coop Cooperative owns 51% of the share capital and voting rights.

In case Coop Vitality was overindebted, Galenica has an unlimited obligation, in proportion to its equity interest, to restructure the company. At the reporting date, this joint venture is not overindebted.

Condensed financial information of Coop Vitality

in thousand CHF	2023	2022
Current assets	50,922	45,257
Non-current assets	101,604	112,697
– of which right-of-use assets	39,581	52,891
Current liabilities	53,720	49,313
– of which current lease liabilities	10,159	10,103
Non-current liabilities	37,128	50,328
– of which non-current lease liabilities	30,786	44,381
Equity before appropriation of earnings	61,678	58,312
Operating income	277,816	266,542
EBIT	14,625	13,058
Net profit	11,165	10,114
Remeasurement of net defined benefit plans recognised in other comprehensive income	–822	–1,879

The net carrying amount of the investment in Coop Vitality is CHF 30.2 million as at 31 December 2023 (previous year: CHF 28.6 million). Unrealised profits on inventory are not considered in these amounts.

19. Financial assets

Financial assets

in thousand CHF	2023	2022
Loans	11,767	9,120
Rental deposits	4,954	4,780
Other financial assets	926	732
Loans and other financial assets	17,647	14,632
Equity instruments at fair value through profit or loss	2,536	4,500
Equity instruments at fair value through other comprehensive income 1)	200,030	4,561
Financial assets	220,214	23,692

1) Including an investment in the listed company Redcare Pharmacy N.V., Netherlands, with a fair value of CHF 196.1 million (previous year: none)

Accounting principles financial assets

Non-current financial assets comprise loans, time deposits with a term to maturity of more than twelve months, rental deposits, equity instruments and derivative financial instruments with a positive fair value and a residual term to maturity of more than twelve months. Other than the derivatives measured at fair value through profit or loss, the financial assets are held to collect contractual cash flows comprising solely principal and interest payments and are therefore measured at amortised cost subsequent to initial recognition. Any credit losses on financial assets recognised represent 12 month expected losses and are estimated based on the credit risk of the counterparty. Any impairment is recognised in financial expenses.

20. Financial liabilities

Financial liabilities

in thousand CHF	2023	2022
Bank loans	30,000	–
Loans	28,053	6,320
Mortgages	1,229	1,241
Liabilities to pension funds	10,708	12,099
Bonds	419,871	380,194
Contingent consideration liabilities from business combinations	41,507	49,180
Other financial liabilities	7,431	4,279
Financial liabilities	538,799	453,312
– of which current financial liabilities	70,231	218,464
– of which non-current financial liabilities	468,569	234,848

Galenica issued two fixed-interest rate bonds for a nominal amount totalling CHF 420.0 million for the purpose of long-term financing. One bond of CHF 180.0 million was issued in 2017 with an annual coupon of 1.00% and a term of 9½ years, falling due on 15 December 2026 and the other bond of CHF 240.0 million was issued in 2023 with an annual coupon of 2.35 % and a term of 6½ years, falling due on 8 November 2029. The bonds are traded on the SIX Swiss Exchange under securities no. 36720670 (ISIN CH0367206700) and 125592445 (ISIN CH1255924453) respectively. The bonds closed at 98.65% (previous year: 95.55%) and 103.95% (issued in 2023 at 101.3%) respectively as at 31 December 2023.

On 15 June 2023, Galenica redeemed a matured fixed-rate bond for a nominal amount of CHF 200.0 million with an annual coupon of 0.5%, initially issued in 2017. The bond was traded on the SIX Swiss Exchange under securities no. 36720669 (ISIN CH036706692).

Cash flow from financial liabilities and lease liabilities 2023

in thousand CHF	01.01.2023	Proceeds from financial liabilities	Repayment of financial liabilities	Addition to scope of consolidation	Disposal from scope of consolidation	Other changes	31.12.2023
Bank loans	–	60,000	–30,000	–	–	–	30,000
Loans	6,320	22,320	–653	–	–	66	28,053
Mortgages	1,241	–	–12	–	–	–	1,229
Liabilities to pension funds	12,099	5	–1,900	–	–	504	10,708
Private placement (notes)	–	55,000	–55,000	–	–	–	–
Bonds	380,194	239,726	–200,000	–	–	–48	419,871
Contingent consideration liabilities from business combinations	49,180	–	–	–	–	–7,672	41,507
Other financial liabilities	4,279	–	–	–	–	3,152	7,431
Financial liabilities	453,312	377,051	–287,565	–	–	–3,998	538,799
Lease liabilities	233,178	–	–52,201	5,756	–4,228	53,536	236,041
Financial liabilities and lease liabilities	686,490	377,051	–339,766	5,756	–4,228	49,538	774,841

Cash flow from financial liabilities and lease liabilities 2022

in thousand CHF	01.01.2022	Proceeds from financial liabilities	Repayment of financial liabilities	Addition to scope of consolidation	Disposal from scope of consolidation	Other changes	31.12.2022
Loans	5,654	1,607	–986	–	–	45	6,320
Mortgages	1,253	–	–12	–	–	–	1,241
Liabilities to pension funds	37,503	–	–24,895	–	–	–510	12,099
Bonds	380,306	–	–	–	–	–112	380,194
Contingent consideration liabilities from business combinations	24,000	–	–	–	–	25,180	49,180
Other financial liabilities	880	–	–	–	–	3,399	4,279
Financial liabilities	449,596	1,607	–25,893	–	–	28,002	453,312
Lease liabilities	223,051	–	–52,459	4,002	–455	59,038	233,178
Financial liabilities and lease liabilities	672,647	1,607	–78,351	4,002	–455	87,040	686,490

21. Trade and other payables

Trade and other payables

in thousand CHF	2023	2022
Trade payables	384,774	323,345
Contract liabilities	9,500	9,137
Other payables	23,168	22,738
Trade and other payables	417,442	355,220

Contract liabilities are generally recognised in revenue within 12 months.

22. Provisions

Provisions

in thousand CHF	2023	2022
1 January	4,684	3,808
Addition	4,136	3,479
Use	–2,304	–1,619
Reversal	–1,702	–984
Addition to scope of consolidation	745	–
31 December	5,558	4,684
– of which current provisions	4,880	4,487
– of which non-current provisions	678	197

Provisions are recognised for the estimated cost on damage, contractual liabilities, customer complaints, litigation risk and ongoing legal proceedings.

23. Contingent liabilities and commitments

Galenica is subject to a variety of risks. These risks include, but are not limited to, risks regarding product liability, patent law, tax law, competition laws and anti-trust laws. A number of Group companies are currently involved in administrative proceedings, legal disputes and investigations relating to their business activities. The results of ongoing proceedings cannot be predicted with certainty. Management has established appropriate provisions for any expenses likely to be incurred. These projections, however, are also subject to uncertainty. Galenica does not expect the results of these proceedings to have a significant impact on the financial statements.

In March 2017, the Swiss Competition Commission (COMCO) issued a ruling, which imposed a fine of up to CHF 4.5 million on Galenica. The ruling relates to an investigation from 2012. Galenica regards the ruling issued by COMCO as incorrect in fact and in law. Galenica has taken the ruling to the Federal Administrative Court. With a decision delivered in February 2022, the Federal Administrative Court reduced the fine to around CHF 3.8 million. Galenica has taken this case to the Swiss Federal Supreme Court. Although the case is still pending before the Federal Supreme Court, COMCO obliged Galenica to pay the CHF 3.8 million penalty in June 2023 and therefore Galenica expensed the amount. Galenica remains confident of winning the case before the Federal Supreme Court.

In September 2020, the Swiss Competition Commission (COMCO) opened an investigation against Markant Handels- und Industriewaren-Vermittlungs AG and its customers, inter alia Galexis Ltd. The COMCO secretariat presented its preliminary findings at the end of June 2023. On this basis, Galenica estimates the amount of a possible sanction, including legal costs, to be around CHF 3.0 million and has recognised a provision.

Galenica entered into various obligations regarding the purchase of services, goods, and equipment as part of its ordinary business operations.

Galenica signed purchase agreements to acquire property, plant and equipment and intangible assets totalling CHF 17.3 million (previous year: CHF 15.9 million). The payments under these purchase commitments become due in 2024.

Furthermore, there are guarantees of CHF 6.8 million (previous year: CHF 8.6 million) and subordinated loans of CHF 0.9 million (previous year: CHF 1.4 million) to third parties.

There are no unusual pending transactions or risks to be disclosed.

24. Employee benefit plans

The vast majority of the Galenica employees work in Switzerland and participate in the Galenica Pension Fund, which is financed by the employers and the employees. This plan is legally separate from Galenica and qualifies as a defined benefit plan. The pension plan covers the risks of the economic consequences of old age, disability and death in accordance with the Swiss Federal Occupational Retirement, Survivors and Disability Pension Plans Act (BVG/LPP). The pension plan is structured in the legal form of a foundation. All actuarial risks are borne by the foundation and regularly assessed by the Board of Trustees based on an annual actuarial appraisal prepared in accordance with BVG/LPP. The company's liabilities are limited to contributions that are based on a percentage of the insured salary under the Swiss law. Only in cases of a funded status that is significantly below a funded status of 100% as per the BVG/LPP law can Galenica be required to pay additional contributions. The calculations made in these appraisals do not apply the projected unit credit method required by IFRS Accounting Standards. If the calculations made in accordance with the provisions of BVG/LPP reveal a funded status of less than 100%, suitable restructuring measures need to be introduced. The Board of Trustees consists of employee and employer representatives.

The defined benefit plan is funded. Plan assets are managed separately from Galenica's assets by the independent pension fund.

The most recent actuarial valuation was prepared as at 31 December 2023. The pension fund assets are invested in accordance with local investment guidelines. Galenica pays its contributions to the pension fund in accordance with the regulations defined by the fund.

The final funded status pursuant to BVG/LPP is not available until the first quarter of the subsequent year. The projected funded status as at 31 December 2023 for Galenica Pension Fund is 110.8% (unaudited) and as at 31 December 2022 108.3% (final).

Defined benefit plans and long-service awards

			2023			2022
in thousand CHF	Defined benefit plans	Long-service awards 1)	Total	Defined benefit plans	Long-service awards 1)	Total
Plan assets measured at fair value	1,101,802	–	1,101,802	1,044,124	–	1,044,124
Present value of defined benefit obligation	–1,079,958	–14,290	–1,094,248	–975,824	–14,988	–990,812
Surplus / (deficit)	21,844	–14,290	7,554	68,299	–14,988	53,311
Effect of asset ceiling	–6,346	–	–6,346	–69,941	–	–69,941
Net carrying amount recognised in employee benefit assets / liabilities	15,498	–14,290	1,208	–1,642	–14,988	–16,630
of which recognised in assets	20,429	–	20,429	183	–	183
of which recognised in liabilities	–4,931	–14,290	–19,221	–1,825	–14,988	–16,813

1) Long-service awards relate to provisions for jubilee payments

Change in present value of defined benefit obligation

			2023			2022
in thousand CHF	Defined benefit plans	Long-service awards	Total	Defined benefit plans	Long-service awards	Total
1 January	–975,824	–14,988	–990,812	–1,085,962	–16,229	–1,102,191
Current service cost	–25,896	–1,633	–27,529	–31,804	–1,725	–33,529
Past service cost	–112	–	–112	–85	–	–85
Interest on defined benefit obligation	–19,768	–297	–20,066	–3,709	–59	–3,768
Actuarial gain/(loss)	–68,933	889	–68,044	169,856	1,512	171,368
Employee contributions	–20,962	–	–20,962	–19,662	–	–19,662
Benefits/awards paid	8,740	1,500	10,240	–310	1,587	1,277
Change in scope of consolidation	22,797	240	23,037	–4,148	–74	–4,222
31 December	–1,079,958	–14,290	–1,094,248	–975,824	–14,988	–990,812

Change in fair value of plan assets

in thousand CHF	2023	2022
1 January	1,044,124	1,143,224
Interest on plan assets	21,712	3,992
Remeasurement gain/(loss)	17,104	–155,683
Employee contributions	20,962	19,662
Employer contributions	31,634	29,791
Net benefits paid	–8,740	310
Administration cost	–1,051	–999
Change in scope of consolidation	–23,943	3,826
31 December	1,101,802	1,044,124

Net defined benefit cost

in thousand CHF	2023	2022
Current service cost	25,896	31,804
Past service cost	112	85
Net interest on net defined benefit liability	–430	–283
Administration cost	1,051	999
Net defined benefit cost 1)	26,628	32,605

1) Of which continuing operations of CHF 26.3 million (previous year: CHF 31.8 million)

Remeasurement of net defined benefit assets / liabilities

in thousand CHF	2023	2022
Actuarial gain/(loss) due to:
– Changes in financial assumptions	–91,366	190,663
– Experience adjustments	22,433	–20,807
Remeasurement of plan assets	17,104	–155,683
Effect in the change of asset ceiling	64,341	–69,941
Remeasurement of net defined benefit assets / liabilities recognised in other comprehensive income 1)	12,512	–55,768

1) Of which continuing operations of CHF 12.6 million (previous year: CHF -54.8 million)

Change in assumption and in estimate

The experience adjustments of CHF 22.4 million (previous year: CHF -20.8 million) were the result of various elements not expected in the prior year mainly the overall development of the population and other items as calculated by the external actuary.

The decrease of the discount rate from 2.10% to 1.40% (previous year: increase from 0.35% to 2.10%) resulted in a increase of the defined benefit obligation of CHF 91.4 million (previous year: decrease of CHF 190.7 million).

Asset ceiling

in thousand CHF	2023	2022
1 January	–69,941	–
Interest income	–1,514	–
Change in the asset ceiling (recognised in other comprehensive income)	64,341	–69,941
Change in scope of consolidation	768	–
31 December	–6,346	–69,941

Investment structure of plan assets

in thousand CHF		2023		2022
Cash and cash equivalents	4,726	0.4%	5,312	0.5%
Debt instruments	246,256	22.4%	204,473	19.6%
Equity instruments	453,405	41.2%	424,749	40.7%
Real estate	258,636	23.5%	264,509	25.3%
Other investments	138,779	12.6%	145,081	13.9%
Fair value of plan assets	1,101,802	100.0%	1,044,124	100.0%
Current return on plan assets		3.8%		–13.2%

The Board of Trustees is responsible for investing the plan assets. It defines the investment strategy and determines the long-term target asset structure (investment policy), taking into account the legal requirements, objectives set, the benefit obligations and the foundations' risk capacity. The Board of Trustees delegates implementation of the investment policy in accordance with the investment strategy to an investment committee, which also comprises trustees from the Board of Trustees and a general manager. Plan assets are managed by external asset managers in line with the investment strategy.

Cash and cash equivalents are deposited with financial institutions with a credit rating of A or above.

Debt instruments (e.g. bonds) have a credit rating of at least BBB and quoted prices in active markets (level 1 of the fair value hierarchy). They can be investments in funds and direct investments.

Equity instruments are investments in equity funds. These generally have quoted prices in active markets (level 1 of the fair value hierarchy).

Real estate relates to both residential property and offices. These can be investments in quoted real estate funds (level 1 of the fair value hierarchy) or direct investments (level 3 of the fair value hierarchy). If real estate is held directly, it is valued by an independent expert.

Other investments consist of hedge funds, insurance linked securities (ILS), infrastructures, senior loans, private equity and receivables. There are receivables from Group companies amounted to CHF 9.7 million (previous year: CHF 11.2 million). Investments in hedge funds are classified as alternative investments. They are primarily used for risk management purposes. In most cases, quoted prices in an active market are not available for hedge funds investments (level 2 or level 3 of the fair value hierarchy).

The use of derivative financial instruments is only permitted if sufficient liquidity or underlying investments are available. Leverage and short selling are not permitted.

The pension funds manage the assets of 5,829 active members (previous year: 5,629) and 993 pensioners (previous year: 950).

Galenica does not use any pension fund assets.

Basis for measurement

	2023	2022
Discount rate	1.40%	2.10%
Salary development	2.25%	2.25%
Pension development	0.00%	0.00%
Mortality (mortality tables)	BVG 2020 GT (CMI), 1.5%	BVG 2020 GT (CMI), 1.5%
Turnover	BVG 2020 (60% –100%)	BVG 2020 (60% –100%)

Sensitivity analysis

The discount rate, future salary development and mortality were identified as key actuarial assumptions. Changes in these assumptions would affect the defined benefit obligation (DBO) as follows:

Sensitivity analysis

		2023		2022
in thousand CHF	Variations in assumptions	Impact on DBO	Variations in assumptions	Impact on DBO
Discount rate	+0.25%	–35,639	+0.25%	–28,301
	-0.25%	37,808	-0.25%	30,258
Salary development	+0.25%	3,221	+0.25%	2,914
	-0.25%	–3,221	-0.25%	–2,913
Mortality	+1 year	27,849	+1 year	21,281
	-1 year	–27,868	-1 year	–21,921

The sensitivity analysis assumes potential changes in the above parameters as at year end. Every change in a key actuarial assumption is analysed separately. Interdependencies were not taken into account.

The pension obligations have an average duration of 15.7 years (previous year: 14.4 years).

Cash outflows for pension payments and other obligations can be budgeted reliably. The benefit plans collect regular contribution payments. Furthermore, the investment strategies safeguard liquidity at all times.

The employer contributions to the pension fund are estimated at CHF 32.3 million for 2024.

25. Shareholders' equity

25.1 Share capital and number of shares

Galenica has fully paid-up share capital of CHF 5,000,000, divided into 50,000,000 publicly listed shares with a par value of CHF 0.10 each, as at the reporting date. All shares have the same capital rights with the exception of the treasury shares which do not generate any dividends. Voting rights and restrictions on voting rights are described in detail in Galenica's Annual report 2023 in the chapter Corporate Governance (unaudited).

Number of shares

	Total shares Galenica Ltd.	Treasury shares	Outstanding shares
Balance as at 31.12.2021	50,000,000	–361,503	49,638,497
Transactions with treasury shares	–	177,763	177,763
Balance as at 31.12.2022	50,000,000	–183,740	49,816,260
Transactions with treasury shares	–	15,920	15,920
Balance as at 31.12.2023	50,000,000	–167,820	49,832,180

The treasury shares are reserved for share-based payments to employees.

25.2 Changes in consolidated shareholder's equity

On 3 May 2023, the Annual General Meeting approved a dividend payment of CHF 109.8 million for the financial year 2022 (previous year: CHF 104.4 million), corresponding to CHF 2.20 per registered share (previous year: CHF 2.10). For this purpose, CHF 1.10 was taken from the reserves from capital contributions (previous year: CHF 1.05) and CHF 1.10 from retained earnings (previous year: CHF 1.05) of Galenica Ltd. The dividend was paid out to the shareholders on 9 May 2023.

In the reporting period, 156,148 treasury shares (previous year: 7,704 treasury shares) were bought at an average price of CHF 70.51 (previous year: CHF 69.97) and 172,068 treasury shares (previous year: 185,467 treasury shares) were issued as share-based payments.

The expense for share-based payment transactions, allocated over the vesting period, has been recognised in personnel costs and accrued in consolidated shareholders' equity.

The acquisition of non-controlling interests reduced consolidated shareholders' equity by less than CHF 0.1 million (previous year: CHF 4.1 million). In 2022 as a result of business combinations CHF 1.4 million were recognised as non-controlling interests. Remaining Shareholders have a put option to sell their shares to Galenica which gives rise to a financial liability. The changes in the carrying amount of this financial liability reduced consolidated shareholder’s equity by CHF 0.3 million (previous year: CHF 3.9 million).

The Board of Directors will submit a proposal to the Annual General Meeting on 10 April 2024 to pay a dividend of CHF 2.20 per share entitled to receive dividend for the financial year 2023. For this purpose, CHF 1.10 is to be taken from the reserves from capital contributions and CHF 1.10 from the retained earnings. However, no dividend will be paid on treasury shares. Based on the number of treasury shares as at 31 December 2023, the total dividend would amount to CHF 109.2 million.

26. Financial instruments

26.1 Categories of financial instruments

Carrying amounts of financial instruments 2023

in thousand CHF	Financial assets at amortised costs	Financial assets at fair value through OCI	Financial liabilities at fair value through profit or loss	Financial liabilities at amortised costs	Total
Cash and cash equivalents	116,159	–	–	–	116,159
Trade and other receivables	518,293	–	–	–	518,293
Financial assets	20,183 1)	200,030	–	–	220,214
Current financial liabilities	–	–	–	70,231	70,231
Current lease liabilities	–	–	–	50,484	50,484
Trade and other payables	–	–	–	407,943	407,943
Non-current financial liabilities	–	–	41,507	427,061 2)	468,569
Non-current lease liabilities	–	–	–	185,557	185,557
Total	654,635	200,030	41,507	1,141,276

1) Of which CHF 2.5 million are in connection to equity instruments which are designated as Financial asset at fair value through profit or loss

2) Of which CHF 4.3 million are in connection to put options for non-controlling interests. Changes in the liability amount are recognised in equity

Carrying amounts of financial instruments 2022

in thousand CHF	Financial assets at amortised costs	Financial assets at fair value through OCI	Financial liabilities at fair value through profit or loss	Financial liabilities at amortised costs	Total
Cash and cash equivalents	93,927	–	–	–	93,927
Trade and other receivables	529,479	–	–	–	529,479
Financial assets	19,132 1)	4,561	–	–	23,692
Current financial liabilities	–	–	–	218,464	218,464
Current lease liabilities	–	–	–	50,173	50,173
Trade and other payables	–	–	–	346,083	346,083
Non-current financial liabilities	–	–	49,180	185,668 2)	234,848
Non-current lease liabilities	–	–	–	183,005	183,005
Total	642,537	4,561	49,180	983,393

1) Of which CHF 4.5 million are in connection to equity instruments which are designated as Financial asset at fair value through profit or loss

2) Of which CHF 3.9 million are in connection to put options for non-controlling interests. Changes in the liability amount are recognised in equity

Net gain/(loss) on financial instruments 2023

in thousand CHF	Financial assets at amortised costs	Financial assets at fair value through OCI	Financial liabilities at fair value through profit or loss	Financial liabilities at amortised costs	Total
Change in fair value	-2,900 1)	–	10,057	–	7,157
Net gain/(loss) on foreign exchange	137	–	–	–526	–388
Other financial result	76	–	–	–94	–18
Interest income	1,418	–	–	–	1,418
Interest expense	–	–	–	–6,515	–6,515
Interest expense on lease liabilities	–	–	–	–2,951	–2,951
Interest income on impaired trade receivables	331	–	–	–	331
Expected credit losses	–7,124	–	–	–	–7,124
Impairment on financial assets	–3,349	–	–	–	–3,349
Net gain/(loss) recognised in profit or loss	–11,410	–	10,057	–10,086	–11,439
Net gain/(loss) recognised in other comprehensive income 2)	–	55,530	–	–	55,530

1) Related to equity instruments which are designated as Financial asset at fair value through profit or loss

2) Other comprehensive income includes changes in value of strategic investments (publicly and non-publicly traded equity instruments)

Net gain/(loss) on financial instruments 2022 (restated)¹⁾

in thousand CHF	Financial assets at amortised costs	Financial liabilities at fair value through profit or loss	Financial liabilities at amortised costs	Total
Change in fair value	–	1,077	–	1,077
Net gain/(loss) on foreign exchange	–104	–	–133	–237
Other financial result	–144	–	–55	–198
Interest income	639	–	–	639
Interest expense	–	–	–2,839	–2,839
Interest expense on lease liabilities	–	–	–2,400	–2,400
Interest income on impaired trade receivables	301	–	–	301
Expected credit losses	–1,779	–	–	–1,779
Net gain/(loss) recognised in profit or loss	–1,086	1,077	–5,428	–5,437

1) Figures restated (refer to note 4, Discontinued operations)

Accounting principles financial instruments (measurement and categories)

Galenica distinguishes between the following types of financial assets and financial liabilities:

Financial assets at amortised cost

This category includes trade and other receivables as well as loans and other financial assets such as rental deposits. These financial assets are subsequently measured at amortised cost using the effective interest rate method less expected credit losses. Galenica uses the simplified approach to determine its bad debt allowances for trade receivables using lifetime expected credit losses. Expenses for expected credit losses comprise the change in bad debt allowance and receivables directly written off.

Uncollectible loans and receivables are only derecognised if a certificate of loss has been issued.

Financial assets at fair value through other comprehensive income

Financial assets measured at fair value through other comprehensive income includes equity instruments which were irrevocably classified to be strategic in nature.

Financial liabilities at fair value through profit or loss

Financial liabilities classified as at fair value through profit or loss correspond to contingent consideration liabilities from business combinations.

Financial liabilities at amortised costs

Financial liabilities mainly comprise trade and other payables as well as financial liabilities and bonds and are measured at amortised cost using the effective interest rate method.

Put options granted to non-controlling interests to sell their shares to Galenica as part of a business combination represent a contractual obligation to purchase non-controlling interests and give rise to a financial liability if the option does not provide Galenica with a present ownership interest in the shares concerned. This liability is measured at the redemption amount as if the put option had been exercised at the balance sheet date. Galenica accounts for changes in the carrying amount of this financial liability as an equity transaction.

26.2 Fair value measurement

Fair value

		2023		2022
in thousand CHF	Carrying amount	Fair value	Carrying amount	Fair value
Bond (level 1 of the fair value hierarchy)	419,871	427,050	380,194	370,830

With the exception of the bond the carrying amounts of all financial instruments approximate to their fair value or fair value disclosure is not required (lease liabilities).

As at 31 December 2023 Galenica holds equity instruments designated at fair value through other comprehensive income including a 7.9% (previous year: none) investment in the listed (level 1 of the fair value hierarchy) company Redcare Pharmacy N.V., Netherlands, with a fair value of CHF 196.1 million (previous year: none) and other investment in non-listed (level 3 of the fair value hierarchy) companies with a fair value of CHF 3.9 million (previous Year: CHF 4.6 million). These investments were irrevocably designated at fair value through other comprehensive income as Galenica considers these investments to be strategic in nature. Galenica recognised in the consolidated statement of comprehensive income a remeasurement gain of CHF 55.5 million (previous year: none).

Fair value of financial instruments (level 3 of the fair value hierarchy)

Fair value of contingent consideration liabilities from business combinations (level 3 of the fair value hierarchy)

in thousand CHF	2023	2022
1 January	49,180	24,000
Arising from business combinations	2,385	26,256
Change in fair value (recognised in profit or loss)	–10,057	–1,077
31 December	41,507	49,180

Fair value changes of contingent consideration liabilities from business combinations are recognised in profit or loss (financial result) for the relevant reporting period.

Fair value of equity instruments designated at fair value through other comprehensive income (level 3 of the fair value hierarchy)

in thousand CHF	2023	2022
1 January	4,561	–
Addition	1,950	4,561
Change in fair value (recognised in other comprehensive income)	–2,583	–
31 December	3,928	4,561

Fair value and sensitivity analysis of contingent consideration liabilities from discontinued operations

Determining the contingent consideration liability in connection with the sale of Mediservice forecasted gross margin and further development of net working capital of the discontinued operation were identified as key assumptions. Galenica has recorded the amount of CHF 2.9 million as other liability based on the expected future gross margin for the years 2024-2026. The future cash outflows range between zero and CHF 3.1 million.

Furthermore, Galenica has not recorded any amount for a payment related to the further development of net working capital of the discontinued operation as per 31 December 2023 as the development of the net working capital was positive in the second half year of 2023. The relevant period under review was extended to the first half of 2024 and a possible but not expected cash out flow would be due in the second half year of 2024. The future cash outflows range between zero and CHF 2.3 million.

Further information of the discontinued operation can be found in note 4, Discontinued operations.

Sensitivity analysis of contingent consideration liabilities from business combinations (level 3 of the fair value hierarchy)

in thousand CHF	Lifestage Solutions	Bahnhof Apotheke Langnau	Aquantic	Padma
Fair value of contingent considerations as at 31.12.2023	17,287	18,408	3,395	2,418
Minimal payout	–	–	–	–
Maximal payout	24,000	29,000	5,450	4,000
Key assumption	forecasted net sales 1)	forecasted net sales 1)	forecasted EBITDA 1)	forecasted sell out prices 1)
Year of relevance	2024	2026+2027	2025+2026	2025
Sensitivity analysis
Impact on fair value by 5% increase of key assumption	1,864	1,663	388	967
Impact on fair value by 5% decrease of key assumption	–1,864	–1,663	–388	–967

1) of the acquired business

27. Financial risk management

Galenica is exposed to various financial risks and liquidity requirements. Galenica's financing and financial risk management activities are centralised in Group Treasury, which manages financial exposures of Galenica on account of changes in interest rates, currency risks, credit risks and liquidity in a manner that is consistent with underlying business risks and in line with the treasury policy approved by the Board of Directors as well as internal guidelines on cash and liability management. In addition, capital management of Galenica is also mainly exercised and monitored at Group level.

It is Galenica's policy not to enter into any speculative financial arrangements and to ensure matching maturities. Together, the risk management and monitoring measures described below are designed to limit negative impact on the financial statements.

27.1 Liquidity risk

Liquidity risk management

The aim of liquidity risk management is to provide sufficient cash to meet Galenica's financial liabilities on time while maintaining the flexibility to take advantage of market opportunities and optimum investment conditions. Group Treasury is responsible for raising current and non-current loans as well as for decisions on investments. Apart from financing operations, Galenica's credit standing enables it to borrow funds at an advantageous rate. To ensure that Galenica can meet its payment obligations in good time, liquidity is monitored centrally. Group Treasury monitors the cash flows using rolling liquidity planning. This takes into account the maturities of the financial instruments as well as the cash flows from operating activities.

Maturity profile of financial liabilities 2023

in thousand CHF	Carrying amount	Total undiscounted cash flows	up to 3 months	3 to 12 months	1 to 5 years	Maturities more than 5 years
Trade and other payables	407,943	407,943	407,943	–	–	–
Current financial liabilities	70,231	70,231	68,090	2,141	–	–
Current lease liabilities	50,484	53,125	13,477	39,648	–	–
Non-current financial liabilities	48,697	50,336	–	–	50,336	–
Bonds	419,871	459,240	–	7,440	206,160	245,640
Non-current lease liabilities	185,557	193,159	–	–	144,328	48,831
Total	1,182,783	1,234,034	489,510	49,229	400,824	294,471

Maturity profile of financial liabilities 2022

in thousand CHF	Carrying amount	Total undiscounted cash flows	up to 3 months	3 to 12 months	1 to 5 years	Maturities more than 5 years
Trade and other payables	346,083	346,083	345,855	228	–	–
Current financial liabilities	18,431	18,431	18,422	9	–	–
Current lease liabilities	50,173	52,710	13,371	39,339	–	–
Non-current financial liabilities	54,688	57,366	–	–	57,366	–
Bonds	380,194	388,200	–	202,800	185,400	–
Non-current lease liabilities	183,005	189,530	–	–	138,693	50,837
Total	1,032,573	1,052,320	377,648	242,376	381,459	50,837

27.2 Credit risk

Credit risk management

Credit risk arise when a customer or a third party fails to meet its contractual obligations and causes Galenica a financial loss. Credit risk are minimised and monitored by restricting business relations to known, reliable partners.

Corporate policy ensures that credit checks are performed for customers who are supplied on credit. Trade receivables are subject to active risk management procedures. They are continually monitored and credit risk is reviewed in the process of reporting to management. Allowances for expected credit losses are made in accordance with uniform guidelines on the measurement of outstanding receivables.

In addition, credit risk arise in relation to financial assets, comprising cash and cash equivalents, securities and loans. The creditworthiness of the counterparties is regularly monitored and reported to management.

Financial assets subject to credit risk

in thousand CHF	2023	2022
Cash and cash equivalents (without cash on hand)	114,566	92,377
Trade and other receivables	518,293	529,479
Loans and other financial assets	17,647	14,632
Financial assets subject to credit risk	650,506	636,488

The financial assets subject to credit risk are primarily receivables.

Galenica applies internal risk management guidelines to identify concentrations of credit risk.

Galenica's financial assets are not exposed to a concentration of credit risk.

Trade receivables past due are analysed on an ongoing basis. These receivables are accounted for using individual bad debt allowances, adjusted for forward-looking factors specific to the debtors and the economic environment. Based on past experience, Galenica considers the creditworthiness of non-past due trade receivables to be good.

28. Capital management

The capital of Galenica is managed and monitored at Group level. The objective of capital management at Galenica is to ensure the continuity of operations, increase enterprise value on a sustainable basis, provide an adequate return to investors, provide the financial resources to enable investments in areas that deliver future benefits for patients and customers and further returns to investors.

Galenica defines the capital that it manages as invested interest-bearing liabilities and equity. Galenica uses a system of financial control based on various key performance indicators. Capital is monitored based on the gearing, for example, which expresses net debt as a percentage of shareholders' equity including non-controlling interests and is communicated regularly to management as part of internal reporting.

Net debt, shareholders' equity and gearing are shown in the table below.

Net debt, shareholder's equity and gearing

in thousand CHF	2023	2022
Current financial liabilities 1)	69,990	218,464
Current lease liabilities	50,484	50,173
Non-current financial liabilities 1)	419,871	181,389
Non-current lease liabilities	185,557	183,005
Cash and cash equivalents	–116,159	–93,927
Interest-bearing receivables	–11,607	–11,347
Net debt	598,137	527,758

Equity attributable to shareholders of Galenica Ltd.	1,471,419	1,245,580
Non-controlling interests	3,777	3,881
Shareholders' equity	1,475,196	1,249,461

Gearing	40.5%	42.2%

1) Excluding non-interest-bearing financial liabilities

Galenica has no covenants requiring a minimum level of equity, nor is Galenica subject to any externally regulated capital requirements as seen in the financial services sector.

29. Share-based payments

Remuneration for members of the Board of Directors

The members of the Board of Directors receive fixed annual remuneration and can choose whether to receive it in full or in part (50%) in shares of Galenica Ltd. The amount settled in shares is paid out with a discount of 25%. The shares may not be traded for the first five years.

The fair value of the shares granted is equivalent to the amount to be paid out in shares plus the discount of 25%.

Share plan for members of senior management

According to the participation plan, members of senior management receive their performance-related bonus partly in cash and partly in shares of Galenica Ltd. The proportion of cash to shares is set out in the regulations and is based on the salary grade of the recipient. In addition, all members of senior management are obliged to hold a number of shares of Galenica. The amount to be settled in shares is paid out in the form of shares of Galenica Ltd. with a discount of 25%. The shares may not be traded for the first five years.

The fair value of the shares granted is equivalent to the amount to be paid out in shares plus the discount of 25%.

Long-term incentive plan (LTI)

Members of the Corporate Executive Committee of Galenica and certain members of senior management participate in a LTI plan for the allocation of performance share units. The number of these performance share units is based on the extent to which defined long-term performance targets such as the Galenica Economic Profit and the relative total shareholders return (TSR) are attained. TSR is measured as a percentile ranking against a peer group of relevant companies. A LTI plan always runs for a vesting period of three years. At the beginning of each financial year a new LTI plan with a new vesting period of three years is issued. At the start of the vesting period a defined number of performance share units are individually allocated. The number of performance share units allocated is dependent on the defined percentage of the annual salary incorporated into the LTI plan as well as the effective share price at the time of the allocation. At the end of the vesting period performance share units are paid out to eligible beneficiaries in the form of shares of Galenica Ltd.

17,607 performance share units (previous year: 19,613 performance share units) were granted to beneficiaries at a fair value of CHF 65.95 (previous year: CHF 58.20) at the beginning of the reporting period for the 2023 LTI plan.

Employee share plan

Employees of Galenica are entitled to buy a fixed number of shares of Galenica Ltd. at a preferential price. All employees who, at the time of the purchase offer, are not under notice and have an employment contract of unlimited duration are entitled to acquire shares.

The purchase price for the shares is calculated at the time of the purchase offer based on the average price for the previous month less a 30% discount. The price discount is borne by the employer. The shares may not be traded for the first three years.

In the reporting period, employees purchased 80,252 shares of Galenica Ltd. (previous year: 75,607 shares) at a price of CHF 49.65 (previous year: CHF 53.50). This includes a discount of CHF 21.29 (previous year: CHF 22.90) per share.

Share-based payment expense

in thousand CHF	2023	2022
Remuneration for members of the Board of Directors	1,013	907
Share plan for members of senior management	904	3,087
Long-term incentive plan (LTI)	692	1,383
Employee share plan	1,709	1,731
Total	4,318	7,109

30. Related party transactions

Related parties include all joint ventures, associates, pension funds, members of the Board of Directors and members of the Corporate Executive Committee.

Related party transactions

The transactions shown in the table below under joint ventures largely concern transactions with Coop Vitality and those under associates mainly concern transactions with Mediservice. In the previous year, the transactions with associates and joint ventures largely concerned transactions with Coop Vitality. All transactions are realised at market-based prices. The invoice payment for the sale of goods and services are due within 30 days and is payable in CHF.

Related party transactions

		2023	2022
in thousand CHF	Joint ventures	Associates	Associates and joint ventures
Sale of goods	169,947	11,787	162,134
Income from services	8,087	1,712	7,900
Other income	17	–	17
Purchase of goods	216	13	346
Other operating costs	–	26	–
Financial income	247	34	106
Financial expenses	26	108	203

Receivables and loans	22,835	20,607	21,288
Trade payables and loans	7,320	21,280	5,633

The financial liabilities to pension funds amounted to CHF 10.7 million (previous year: CHF 12.1 million).

Remuneration of the Board of Directors and the Corporate Executive Committee

in thousand CHF	2023	2022
Remuneration	3,343	4,224
Social security costs and pension expenses	970	1,054
Share-based payments	1,686	2,537
Total	5,999	7,815

31. Subsequent events

The following transactions occurred between 31 December 2023 and 7 March 2024, the date on which the consolidated financial statements 2023 were released for publication.

Acquisition of pharmacies. Galenica acquired 100 % of the interests in pharmacies at various locations in Switzerland.

The purchase consideration was CHF 33.9 million, the fair value of the provisional net assets resulting from these additions was estimated at CHF 8.4 million at the acquisition date. Since the transactions were concluded shortly before the consolidated financial statements were issued, no further information was available to disclose the additional information required by IFRS Accounting Standards.

There were no further significant events after the reporting date.

32. Group companies

Group companies Products & Care

					2023	2022
Group companies	Registered office	Method of consolidation	Currency	Share capital in thousand	Equity interest	Equity interest
Products & Care
Amavita Health Care Ltd.	CH-Niederbipp	full	CHF	100	100%	100%
Bahnhof Apotheke Langnau AG	CH-Langnau im Emmental	full	CHF	100	100%	100%
Bahnhof Apotheken Thun AG	CH-Thun	full	CHF	200	50%	50%
Bichsel AG	CH-Bern	full	CHF	1,000	100%	100%
Bichsel Interlaken Holding AG 1)	CH-Interlaken	full	CHF	100	100%	100%
Coop Vitality AG	CH-Bern	at equity	CHF	5,000	49%	49%
Coop Vitality Health Care GmbH 1)	CH-Niederbipp	at equity	CHF	20	49%	49%
Coop Vitality Management AG	CH-Bern	at equity	CHF	100	49%	49%
curarex swiss AG 1)2)	CH-Zuchwil	at equity	CHF	100	49%	100%
Dr. A.&L. Schmidgall GmbH & Co KG 1)	AT-Vienna	full	EUR	145	100%	100%
Emeda Ltd.	CH-Wangen-Brüttisellen	at equity	CHF	200	50%	50%
GaleniCare Ltd.	CH-Bern	full	CHF	700	100%	100%
GaleniCare Management Ltd.	CH-Bern	full	CHF	500	100%	100%
G-Pharma AG	CH-Niederbipp	full	CHF	100	100%	100%
Grosse Apotheke Dr. G. Bichsel AG 1)	CH-Interlaken	full	CHF	200	100%	100%
Hedoga AG	CH-Villars-sur-Glâne	full	CHF	100	100%	100%
Laboratorium Dr. G. Bichsel AG 1)	CH-Unterseen	full	CHF	200	100%	100%
Lifestage Solutions Ltd.	CH-Otelfingen	full	CHF	152	100%	100%
Medifilm Ltd. 1)	CH-Oensingen	full	CHF	1,300	100%	100%
medinform AG	CH-Zürich	full	CHF	100	50%	50%
MediService Ltd. 2)	CH-Zuchwil	at equity	CHF	363	49%	100%
PADMA Inc.	CH-Wetzikon	full	CHF	160	100%	-
Padma Aktiengesellschaft für tibetische Heilmittel 1)	CH-Freienbach	full	CHF	100	100%	-
PADMA EUROPE GmbH 1)	AT-Vienna	full	EUR	25	100%	-
PADMA Deutschland GmbH 1)	DE-Gräfelfing	full	EUR	35	100%	-
puravita AG	CH-Speicher	at equity	CHF	130	34.34%	23.08%
Schmidgall GmbH 1)	AT-Vienna	full	EUR	36	100%	100%
Spagyros Ltd.	CH-Worb	full	CHF	860	100%	100%
Sun Store Health Care Ltd.	CH-Niederbipp	full	CHF	100	100%	100%
SWISS PHARMA GmbH	DE-Rülzheim	full	EUR	51	100%	100%
Verfora Ltd.	CH-Villars-sur-Glâne	full	CHF	100	100%	100%
Winconcept Ltd.	CH-Bern	full	CHF	100	100%	100%
Zentral Apotheke Heerbrugg AG	CH-Au	full	CHF	100	100%	100%

1) Not directly held by Galenica Ltd.

2) Galenica sold 51% of the company shares as at 16 May 2023 (refer to note 4, Discontinued operations)

Group companies Logistics & IT and Group Services

					2023	2022
Group companies	Registered office	Method of consolidation	Currency	Share capital in thousand	Equity interest	Equity interest
Logistics & IT
1L Logistics Ltd.	CH-Burgdorf	full	CHF	100	100%	100%
Alloga Ltd.	CH-Burgdorf	full	CHF	8,332	100%	100%
Aquantic AG	CH-Zeiningen	full	CHF	100	100%	100%
Dauf SA 1)	CH-Lugano	full	CHF	100	92.92%	92.88%
Galexis Ltd.	CH-Niederbipp	full	CHF	25,000	100%	100%
HCI Solutions Ltd.	CH-Bern	full	CHF	100	100%	100%
Pharma-Info AG 1)	CH-Biel	at equity	CHF	100	49%	49%
PharmaBlist Ltd. 1)	CH-Widnau	full	CHF	100	100%	100%
Pharmapool Ltd. 1)	CH-Widnau	full	CHF	962	100%	100%
Unione Farmaceutica Distribuzione SA	CH-Lugano	full	CHF	2,000	92.92%	92.88%
Group Services
Galenica Finanz Ltd.	CH-Bern	full	CHF	100	100%	100%

1) Not directly held by Galenica Ltd.

Notes to the consolidated financial statements of the Galenica Group

1. Group organisation

General information

2. Accounting principles

Basis of preparation

Estimation uncertainty, assumptions and judgments

Leases (note 16)

Goodwill and intangible assets (note 17)

Employee benefit plans and other non-current employee benefits (note 24)

Fair value of contingent consideration liabilities from business combinations (note 26)

Amendments to IFRS Accounting Standards

Future amendments to IFRS Accounting Standards

3. Operating segment information

Products & Care

Logistics & IT

Group Services

Eliminations

Operating segment information 2023

Operating segment information 2022

4. Discontinued operations

Accounting principles discontinued operations

5. Business combinations and disposals

Business combinations 2023

Pro forma figures for acquisitions made in 2023 for the full 2023 financial year

Business combinations and disposals 2022

Accounting principles business combinations

6. Net sales

Net sales 2023

Net sales 2022 (restated)

Accounting principles net sales

Sale of goods

Sale of services

7. Other income

8. Personnel costs

9. Other operating costs

Research and development

10. Financial result

11. Earnings per share

12. Income taxes

OECD Pillar Two model rules

13. Trade and other receivables

Accounting principles trade and other receivables

14. Inventories

Accounting principles inventories

15. Property, plant and equipment

Accounting principles property, plant and equipment

16. Leases

Accounting principles leases

17. Intangible assets

Trademarks with indefinite useful lives

Goodwill

Accounting principles intangible assets

18. Investments in associates and joint ventures

Investments in associates

Investments in joint ventures

19. Financial assets

Accounting principles financial assets

20. Financial liabilities

21. Trade and other payables

22. Provisions

23. Contingent liabilities and commitments

24. Employee benefit plans

Change in assumption and in estimate

Sensitivity analysis

25. Shareholders' equity

25.1 Share capital and number of shares

25.2 Changes in consolidated shareholder's equity

26. Financial instruments

26.1 Categories of financial instruments

Accounting principles financial instruments (measurement and categories)

Financial assets at amortised cost

Financial assets at fair value through other comprehensive income

Financial liabilities at fair value through profit or loss

Financial liabilities at amortised costs

26.2 Fair value measurement

Fair value of financial instruments (level 3 of the fair value hierarchy)

Fair value and sensitivity analysis of contingent consideration liabilities from discontinued operations

Sensitivity analysis of contingent consideration liabilities from business combinations (level 3 of the fair value hierarchy)

27. Financial risk management

27.1 Liquidity risk