ORIGIO Annual Report 2010

Annual Report 2010

MIDATL ANTICDEVICES

MEDICULTMEDIA

HUMAGENPIPETS

OrigiO Annual report 2010

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

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

Vision: Mission:

Highlights 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover B

Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover C

Letter from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 6

Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 8

Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 11

R&D Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 14

ORIGIO Prepares for the Next Generation of Culture Media . . . . . . . . . . . . . page 18

Financial Guidance and Business Milestones 2011 . . . . . . . . . . . . . . . . . . . . . page 23

New Facilities in Måløv, Copenhagen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 26

Precision Micro Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 27

ORIGIO ScanLab Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 28

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 30

ORIGIO AUSTRALASIA Pty . Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 35

Control and Risk Management Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 36

Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 37

Company Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 38

Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 41

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 42

Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 44

ORIGIO’s Recent Journey – a Corporate Transformation . . . . . . . . . . . . . . . . page 46

Product Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 48

Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 49

Statement by the Board of Directors and Executive Board . . . . . . . . . . . . . . page 79

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 80

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82

Obituary, Professor Kjell Bertheussen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82

ORIGIO offices

Worldwide presence

OrigiO Around the World

DeAr custOMers, cOlleAgues AnD shArehOlDers,

Over thirty years have passed since Professor

Robert Edwards developed human in vitro

fertilization (IVF) therapy . In 2010, he was awarded

the Nobel Prize for his pioneering work that made

it possible to treat infertility . Assisted Reproductive

Technology (ART) has created hope for millions

of infertile couples throughout the world to make

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

more than 4 million babies have been conceived via

ART since 1978 .

The ART market has progressed tremendously

since the inception three decades ago, but it is still

a young and hugely underpenetrated market . At

the same time, several mega-trends support the

continued development and growth of the ART

market .

ORIGIO wants to be in the forefront of the evolution

of the ART industry and again in 2010, the ORIGIO

team secured substantial progress on key targets .

Our pipeline

Most notable was the headline data from the

world’s largest fertility culture media study ever .

The data substantiated a very interesting product

concept named EmbryoGen® – a superior medium

for the commercially attractive subgroup of patients

having had a previous miscarriage . We believe,

by launching a product for this subgroup, we can

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

letter from the ceO

• the patient wins due to a more

gentle and cost-effective fertility process,

• the IVF clinics win, as they can provide improved

treatment options and, in that way, potentially

also attract more patients to their clinics,

• the society at large wins by welcoming more new

world citizens at a lower cost per baby,

• and ultimately, ORIGIO wins by being able to

execute on its vision – to help infertile couples

around the world make their #1 dream come true

– while launching a financially, highly attractive

product .

Our family

We are very happy to have welcomed more new

members into the ORIGIO corporate family during

the year;

• the joint venture of ORIGIO ScanLab Equipment

a/s securing our customers’ high quality IVF

workstations,

• the acquisition of Precision Micro Devices, LLC

further strengthening our already excellent value

proposition for micropipettes for ART,

• our new Russian and Australian colleagues

allowing us to expand faster in these sizeable IVF

markets,

ORIGIO offices

Worldwide presence

MIDATL ANTICDE VICES

MEDICULTMEDIA

HUMAGENPIPETS

5

• also, it was my pleasure to welcome a new

Chairman of the Board of Directors – Mr .

Flemming Pedersen, an experienced healthcare

industry insider – while thanking the previous

Chairman – Mr . Jens Holst – wholeheartedly for

his strong contributions during the past years,

• 2010 was also the year during which ORIGIO’s

new media manufacturing facility and corporate

headquarters in Måløv, Denmark was completed

ensuring adequate space for a continued

expansion in the years to come .

It was with great sadness that we learned of the

passing of Professor Kjell Bertheussen on February

14, 2011 . Professor Bertheussen was one of the

founders of ORIGIO and his deep insight into

biochemistry and cell biology has been of great

value to ORIGIO .

Our financials

Last but not least, ORIGIO secured attractive

progress on the key financial guiding parameters

of organic growth, EBITDA development, and

operating cash flow .

In conclusion, I find that 2010 was a very exciting year

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

again, proved to live out our corporate values of being

aspirational, reliable and caring at the same time .

I would like to take this opportunity to thank, yet

again, my colleagues in ORIGIO globally as well as

our many distribution partners around the world for

their strong contributions to our sustained growth

and development; our customers for their continued

support and inspiration to further innovation; and

our shareholders for their loyalty and patience

towards our cause and corporation .

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

We are confident that we – yet again – during 2011

will pursue an exciting path of continued progress

for the benefit of all stakeholders .

Yours sincerely,

Jesper Funding Andersen

CEO, ORIGIO a/s


MEDICULTMEDIA

HUMAGENPIPETS

Management report

Introduction

ORIGIO is a leader in delivering leading innovative

ART solutions that benefit families . Through

innovation and product advancement, we aim to

help the #1 dream of every infertile couple come

true . ORIGIO currently consists of three product

families; MediCult Media, Humagen Pipets and

MidAtlantic Devices, that cater for the broadest

range of products – from disposables to equipment

– for global ART professionals .

Our market

It is estimated that one in six couples world-wide

experience some kind of infertility problem at

least once during their reproductive lifespan .

Approximately one third of infertility cases is female

factor related infertility, one third is male factor, and

the remaining third involves problems on either side

or unexplained causes .

The development of ART has progressed

significantly over the last three decades . Today,

the global ART market is estimated to be around

1 .4 million cycles per year, and more than 300,000

babies were conceived from ART in 2010 . The

ART market has experienced steady growth but

with big variations from country to country due to

e .g . infrastructure and reimbursement levels . A

number of mega-trends support the growth and the

continued development of the ART industry in the

years to come:

• Thereproductionchallenge.Many developed

countries face a “reproductive challenge” (see

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

not sufficient to sustain the population . In order

to maintain the current population, an average

of 2 .1 children must be born per female . ORIGIO

believes that this population deficit brings

attention to the need for fertility treatment and

that it thus will play an increasingly important

role in the stabilization and demographic

management of a country’s population .

• Increasedwealthcreation.In developing

countries like Brazil, Russia, India and China,

increased wealth leads to a growing middle-

classes making ART affordable for more couples .

• Maternalage.The average age for a mother

at first birth has increased over the last several

decades . This is a consequence of societal

changes, as more women are in the workforce

and many are waiting to further their career

and secure their financial position before

having children . This does not correlate well

with the biological fact that women’s fertility

decreases with age, with a significant drop in

their early thirties, as the quality of women’s

eggs decreases . Developing technologies, such

as cryopreservation for the storage of gametes,

embryos and blastocysts, can extend the natural

fertility period, as it is the age of the eggs – not

the age the of the mother – which is relevant for a

successful reproduction .

• Obesityandotherhealthrelatedproblems.

The rise of health problems like obesity (chart

2), eating disorders and diabetes world-wide

impacts the reproduction capacity negatively .

This together with e .g . Chlamydia, gonococcal,

and other diseases have negative consequences

for fertility rates .

• Lowerspermquality.There has been a genuine

decline in semen quality over the past 50 years .

As male fertility is to some extent correlated

with sperm count, the results reflect an overall

reduction in male fertility . Male infertility is

believed to be on the rise due to among other

things increased environmental contamination .

ART can help couples facing this problem by

either sperm treatment or full ICSI cycles .

Japan

Ko

rea, South

Italy

Russia

Germ

any

Switzerland

Spain

China

Canad

a

Belg

ium

Netherland

s

Australia

United

King

do

m

France

United

States

Turkey

Brazil

Indo

nesia

Mexico

India

0,0

0,5

1,0

1,5

2,0

2,5

3,0

Source: CIA World Fact Book, 2010 estimate

Demographic Balance = 2.1

7

Chart 1: Total fertility rate in Top 20 economies (GDP).

Average number of children born by women in the reproductive age span (age 15-49)

0 10 20 30 40 50

% of population

USA

Argentina

Mexico

Saudi Arabia

Australia

Canada

UK

Germany

South Africa

Turkey

Brazil

Russia

Italy

South Korea

France

China

Indonesia

India

Japan

* Body Mass Index of at least 30 kg/m2Source: Financial Times, September 2010

• Broadeningofmotherhood.Many countries

are experiencing an increasing acceptance of a

broadening of motherhood from the traditional

heterosexual couples to other types of potential

parents (single mothers, donors, surrogacy,

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

happen .

Due to the abovementioned economic, sociological

and medical reasons, ORIGIO believes that the

underlying need for ART will increase in the future .

In addition, the global ART market is massively

underpenetrated (please refer to page 20-21),

supporting the fact that this market is poised for

attractive growth in years to come .

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


MEDICULTMEDIA

HUMAGENPIPETS

9

Revenue for 2010 totaled DKK 308 .0 million,

corresponding to an increase of 16% in floating

currencies . Overall organic growth for the group

amounted to 12% in constant currencies . Sales of

disposables amounted to DKK 261 .0 million and

now represents 85% of the total revenue . The

sales of disposables achieved organic growth of

8% in 2010, particularly as a result of selling direct

in more markets, a successful introduction of the

Cryopette®, and better cross-selling of ORIGIO’s

products in general . In 2010, revenue within

equipment increased by 43% in constant currencies

and totaled DKK 47 .0 million . The high growth in

sales and Marketing

equipment sales was driven by the mini incubator

ORIGIO/Planer BT37, equipment sales in North

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

joint venture, ORIGIO ScanLab Equipment, which

specializes in sales of equipment for IVF laboratories

world-wide .

The strongest geographical growth in 2010 was

seen outside Europe and Americas with organic

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

constant currencies and now represents 51% of total

revenue . In the Americas, organic growth amounted

to 7%, mainly driven by high equipment sales .

Chart 3: Geographical and product sales mix

Sales by Region 2010 Sales by Product Groups 2010

Europe 51%

Americas 28%

Rest of World 21%

IVF pipets 38%

IVF media 38%

IVF other disposables 9%

IVF equipment 15%

ProductsplitofrevenueDKK million Revenue 2009 Revenue 2010 Revenue growth Organic growth*

Disposables 237 .7 261 .0 10% 8%

Equipment 28 .0 47 .0 68% 43%

Total 265.7 308.0 16% 12%

*Constant currency

GeographicalsplitofrevenueDKK million Revenue 2009 Revenue 2010 Revenue growth Organic growth*

Europe 142 .5 156 .4 10% 13%

Americas 78 .6 87 .1 11% 7%

Rest of World 44 .6 64 .5 45% 22%

Total 265.7 308.0 16% 12%

*Constant currency

51%

21%

9%

38%28%

15%

38%

A number of organizational initiatives were taken

during 2010 to further strengthen the sales and

marketing organization .

To broaden the already strong footprint in terms

of sales subsidiaries and distributor networks

around the world, ORIGIO LLC was established in

St . Petersburg, Russia . The company successfully

initiated its operation during the third quarter of

2010 . ORIGIO LLC is owned 51% by ORIGIO and

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

company in Russia and ORIGIO’s long-term partner

in Russia .

In Australia and New Zealand, ORIGIO started

direct sales of all product categories July 1, 2010

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

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

Manager was hired . Also in July, ORIGIO began

direct sales to customers in Finland .

In the US, the ORIGIO sales force was expanded in

April 2010 to take over direct sales to customers in

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

entities were legally merged and are now operating

on the same software platform . The merger enables

an enhanced ability to leverage resources and

product synergies and thereby strengthen the

Group’s leading position in the US .

The strengthening of the sales and marketing

organization world-wide furthermore included the

recruitment of an International Technical Product

Director for equipment support and a new General

Manager for the Nordic & Baltic regions . Extra

resources were also added to the sales teams in

China and Italy to better support the customers .

Finally, ORIGIO ScanLab Equipment a/s, was

established as a joint venture on July 1, 2010

with the objective of selling work stations for IVF

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

A new corporate website was launched in

June 2010. The website embraces all three

brands and has detailed information about

the products and services that ORIGIO

offers. Furthermore, new functionalities like

online ordering and order tracking are in

development.


MEDICULTMEDIA

HUMAGENPIPETS

11

trade exhibitions

ORIGIO also presented a new Product

Catalogue during 2010 containing all

three brands: MediCult Media, Humagen

Pipets and MidAtlantic Devices.

At the annual European Society of Human Reproduction

and Embryology (ESHRE) exhibition 2010 in Rome,

ORIGIO was represented with two exhibition stands,

split into the traditional ORIGIO brands and ORIGIO

ScanLab Equipment . The Cryopette® was presented at

two live demonstration desks, which attracted several

hundreds of embryologists . Also the bench top Incubator

“ORIGIO/Planer BT37” was demonstrated at ESHRE for

the first time – with great interest from many potential

customers .

The 2010 American Society for Reproductive Medicine

(ASRM) annual conference was held in Denver, Colorado,

October 24-27, with approximately 5,000 participants .

Based on numerous comments from customers,

management believes that the ORIGIO brand is an

increasingly recognized and acknowledged brand as the

company of choice in relation to ART needs .


MEDICULTMEDIA

HUMAGENPIPETS

Emerging technologies

The ORIGIO Group possesses a world-leading

pipeline of R&D projects within ART and the related

stem cell field (please see chart 4) .

GM-CSF / EmbryoGen®

In December, 2010, ORIGIO completed the

world’s largest clinical study of IVF culture media,

“The effect of granulocyte-macrophage colony-

stimulating factor (GM-CSF) during in vitro culture

of human embryos on subsequent implantation

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

designed as a multi-center, randomized, parallel

group, double-blinded, placebo-controlled,

efficacy trial of a culture medium (EmbryoAssist™)

containing GM-CSF .

Exposure to GM-CSF showed a statistical significant

improvement of the ongoing implantation rate in

the commercially attractive subgroup comprising

women who have previously experienced

miscarriage, either naturally or in relation to an IVF

cycle . The study documented that exposure to

GM-CSF increased the overall ongoing implantation

rate for this subgroup by 44 .1% (p = 0 .001) in week

7 and by 40 .6% in week 12 (p = 0 .003) compared

to the control group . This improvement correlates

well with the scientific hypothesis that GM-CSF

positively influences the embryo implantation

potential .

ORIGIO plans to start the launch of the new culture

medium during the third quarter of 2011 . The

product will be launched under the product name

EmbryoGen® (for further details please refer to

pages 18-19) .

The patentability of the use of GM-CSF in IVF media

within the EU has been opposed by a UK based

company . On October 20, 2010, oral proceedings

took place at the European Patent Office in Munich

and the result was that the patent integrity for

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

ORIGIO thereby maintains its strong intellectual

property rights position for the use of IVF medium

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

The opposition has appealed the decision .

IGF-II

The research activities on IGF-II, conducted at the

University of Adelaide, Australia, have shown that

treatment of embryos with a combination of three

components, added to ORIGIO’s EmbryoAssist™

and BlastAssist® IVF media improves embryo

development of murine embryos at day 5 and

implantation rates at day 8 compared to controls .

In 2010, the research group demonstrated that

embryo culture in media supplemented with

the combination of insulin-like growth factor-II

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

and plasminogen significantly increased the

percentage of murine mothers pregnant at day 18

by 27 .8% compared to controls . The treatment had

no adverse effects on maternal body composition,

birth weight or postnatal growth .

ORIGIO holds exclusive world-wide rights to any

product concept emanating from the results .

Iloprost

The first part of the safety and efficacy study on

the effect of the prostacyclin analogue, Iloprost,

was completed successfully in March 2010 . This

study has proven that the addition of Iloprost

to Blastocyst culture medium is safe as

evaluated on embryo development .

The second part of the study will,

on a preliminary basis, investigate

the efficacy of Iloprost on

implantation rates . This part

will include approximately

100 patients and is

expected to be

completed by the third

quarter of 2011 .

The study is an

investigator initiated

study taking place in

Houston, USA . ORIGIO

has world-wide rights to the patent

that comprises the application of Iloprost added

to media for ART .

r&D Pipeline

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

13


MEDICULTMEDIA

HUMAGENPIPETS

EmbryoSure™

There is a growing trend within ART towards single

embryo transfer rather than transfer of multiple

embryos in order to reduce the risk of adverse

effects on mother and child . Today, the selection of

embryos is based entirely on visual/morphological

scoring of the embryos . For single embryo

transfer to replace multiple transfers world-wide,

an improved selection of the best embryo(s) by

objective measures is required to achieve similar or

higher success rates .

In Q1, 2009, ORIGIO signed a definitive agreement

with Novocellus Ltd . (Guildford, UK) to license

the non-invasive embryo selection technology,

EmbryoSure™, developed by Professor Henry Leese

at the University of York, UK . The technology is

based on amino acid profiling and is fully patented .

As part of the agreement, ORIGIO will co-fund

a human study program . The purpose of the

clinical program is to investigate the extent to

which EmbryoSure™ is superior to current visual

techniques in selecting the most implantation

competent embryos . The clinical program will imply

an exploratory phase followed by a prospective

efficacy phase . The exploratory phase is to

determine the algorithm for the selection of the

embryos and is expected to take place in 4-6 clinics

and involve 400 patients . Results are expected in

the fourth quarter of 2011 .

By gaining access to this leading-edge technology,

ORIGIO positions itself at the forefront of the

emerging trend of single embryo transfer in ART .

Incept BioSystems, Inc.

In January 2011, ORIGIO completed an asset

acquisition of the US-based Incept BioSystems,

Inc . (Incept) . Incept has developed an innovative

and patented microfluidics system ‘SMART Start™‘

that mimics in vivo conditions and thereby delivers

unique control and physiologic conditions ideal for

embryo culture in the assisted reproduction lab .

Incept concluded an investigational human study

evaluating the SMART Start™ system in October

2010 . The study assessed the system’s capacity to

safely support morphological embryo development

and survival rates, in comparison to the existing

practice of growing embryos in a conventional

culture dish . Data from the study showed that

Incept’s SMART Start™ Embryo Culture System

met the primary endpoint of non-inferiority to the

conventional static dish culture .

ORIGIO plans to perform internal studies on bovine

embryos prior to initiating a second phase human

clinical study .

Stem cell media

ORIGIO has developed a superior well defined

growth media for the culture of adult stem cells and

embryonic stem cells . The patented SSRx media

supplement is free of any human or animal derived

components and is broadly applicable to other

stem cell lines or bio-industrial lines . The ORIGIO

technology has shown increased mesenchymal stem

cell growth by 50% compared to serum-free control

media without SSRx .

Based on input from potential partners and to

enable the optimal commercialization path of the

concepts in this area, ORIGIO has in 2010 worked on

three activities in parallel:

1 . continued to develop and document the

performance of the media concepts

2 . performed media tests in collaboration with

potential customers

3 . continued progress on regulatory compliance of

the components

Performance tests of human Embryonic Stem Cells

(hESC) cultured with SSRx have shown promising

results . Furthermore, in-house studies have proved

that SSRx performs well in long-term tests and that

stability is favorable for commercialization .

Material transfer agreements have been signed

with potential partners in order for them to make

their own performance tests and thereby validate

ORIGIO’s results . These external tests are expected

to run during the first half of 2011 .

The business potential (size of market, price point

and speed of adoption) is dependent on the

Chart 4 R&D Pipeline

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

EmbryoGen®

IVF

med

ia

IVF

Stem

cel

ls

Em

bry

o

sele

ctio

nM

icro

flui

dic

sSt

em c

ell

med

ium

Probability of success

Product

0 - 10%

Preclinical

DevelopmentResearch

10 - 20%

Human safety

20 - 40%

Without transfer

Human efficacy

40 - 80%*

With transfer

80 - 100%

next milestone

est. revenue potential***

DKK mill/yearRegulatory

Sequential launch 100+

Pilot impl data 0 - 100+

Update in April 2011 0 - 350+

Exploratory data 0 - 350+

0 - 200+Bovine test

Agreement 0 - significant

Iloprost**

IGF-II

EmbryoSure™*

SMART Start™

Stem cells Different development path

Q3 2011

Q4 2011

Q4 2011

Q3 2011

15

outcome of the external performance tests as well

as the final conclusion on regulatory compliant

components and performance tests hereof . Timing

of a potential product launch or partner agreement

will be decided shortly after the final results are

available (expected Q2 2011) .

Regulatory update 2010

IVF media and related disposables are classified

as medical devices . Regulations on IVF products

continue to intensify and regulatory requirements

will further increase world-wide .

In 2009, the name of the new company group

comprising the previous MediCult, Humagen

Fertility Diagnostics and Mid-Atlantic Diagnostics

was changed to ORIGIO . The name change

required a re-registration of the product portfolio

in more than 50 countries world-wide . Furthermore,

ORIGIO moved to a new facility in Denmark and

changed the content of antibiotics in all media

to gentamicin . All changes required a substantial

additional regulatory effort from Regulatory Affairs

which continued in 2010 .

During 2010, ORIGIO obtained several new product

approvals . In EU, the following products were CE

marked:

• Cryopette®

• ICSI Cumulase®

• MediCult Vitrification Cooling and Warming

• Embryo Thawing Pack

• Biopsy Medium

In the US, the following products have been cleared:

• Cryopette®

• MediCult Vitrification Cooling and Warming

In Australia, the following product was registered:

• Cryopette®

In China, regulatory demands are particularly strict .

ORIGIO is in the process of registering its media

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

standards are in preparation and meetings with the

Chinese authorities (SFDA) have taken place during

the second half of 2010 . The regulation process is

expected to last more than two years .

OrigiO Prepares for the next generation of culture Media

2011 will be the year during which ORIGIO’s largest

media development investment, the GM-CSF

medium, moves from pipeline to product . Project

P-0022 becomes EmbryoGen®, a new option for

couples who experience the greatest challenges in

achieving and maintaining pregnancy .

The idea behind GM-CSF

Granulocyte-Macrophage Colony-Stimulating

Factor was first known to control white blood cell

growth in the body, and thus its nomenclature . The

name of the molecule has no direct connection to

embryology .

Since then, several other roles of GM-CSF have

been discovered in the human body . It is present

throughout the reproductive tract, and specific

GM-CSF receptors are expressed by the embryo .

Several studies have subsequently shown a powerful

positive effect on IVF embryos, both animal and

human .

IVF embryos are still inferior to their in vivo

counterparts showing lower cell numbers and

cleavage rates, higher apoptosis (i .e . programmed

cell death), slower compaction and expansion, and

ultimately lower birth weight . GM-CSF has been

shown to alleviate most of these problems bringing

IVF embryos closer to naturally conceived embryos .

The embryo is evolved to respond to growth factors

such as GM-CSF, and its development is clearly

impaired when such factors are not present during

early development .

The trial

In December 2010, the results from the world’s

largest IVF media trial were announced . More than

1,300 patients in 14 centers received IVF treatment

with either a standard IVF medium or a medium

supplemented with GM-CSF . The study end-point

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

monitored in week 7 of gestation, followed by a

follow-up monitoring in week 12 .

For the entire patient mix, the effect of

EmbryoGen® did not reach statistical significance

by week 7; but further data exploration revealed a

striking effect:

EmbryoGen® beneficiaries

The group of patients who had suffered previous

miscarriages experienced a highly significant

benefit from EmbryoGen® . At week 7 and 12, these

patients were 44 .1% and 40 .6% more likely to have

maintained an implanted embryo .

The study demonstrated that access to GM-CSF

strongly improves the embryo implantation capacity

in women who struggle to maintain ongoing

implantation and pregnancy . These patients, who

must endure repeated IVF attempts and whom IVF

centers struggle to assist, now have an improved

treatment option . Improving success rates in this

group of patients means raising the baseline of IVF

capabilities .

Chart 5: Ongoing implantation rate* in the

subgroup ’previous miscarriage’


MEDICULTMEDIA

HUMAGENPIPETS

17

EmbryoGen® market potential

At the moment, the primary target group for

EmbryoGen® is assessed to be at least 200,000

cycles per year . Clinics offering i .e . multiple

treatment “packages” will see a substantial financial

benefit (and professional satisfaction) in improving

success rates in this group . And clinics under

reimbursement will see the cost of securing live

birth from this group decrease substantially . Having

secured world-wide exclusive rights for the use of

GM-CSF in human ART media, EmbryoGen® poses

a very attractive prospect for commercial value .

ORIGIO is committed to advancing IVF treatment .

The growth factor-enriched EmbryoGen® is a bold

step towards helping women who are capable of

pregnancy and healthy childbirth, but for whom

both natural conception and even standard IVF is

not quite enough . Perfectly in line with ORIGIO’s

vision and mission .

Pending regulatory approvals, EmbryoGen® is

expected to be available in most jurisdictions as

from Q3 2011 .

A Win - Win - Win - Win situation

society• Helpintertilecouples

• LesscostsperIVFbaby

OrigiO• ExecutingonORIGIO’svision

• Increasedrevenue/profit

• Increasedscientficvoice

Patient• Qualityoflife(lesscycles)

• Lesscost

clinic• Bettertreatment

• Increasedpatientintake

Number of treatment cycles needed for life birth (average)

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

= 90 - 240 mill

Size of world population

Percentage being women age 15-44

Women desiring pregnancy during

reproductive age span(estimate)

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

(estimate)

Share of these for which IVF/ICSI

would be optimal treatment option

(estimate)

x x x x x

glObAl iVF – A MAssiVely unDerPenetrAteD MArKet

WHO has defined both male and female infertility

as diseases . The equation above estimates the

world-wide medical need for treatment of these

diseases to correspond to 90-240 million IVF/ICSI

cycles .

Why then is the actual annual number of treatment

cycles only some 1 .4 million per year leading to a

penetration of only some 1% of the medical need?

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

presides the following four ‘I’s:

• Information – the fact that knowledge about

treatment options and outcome in many parts of

the world are insufficiently prevalent . Education

of patient groups is growing but is still a vast

challenge in most jurisdictions .

• Infrastructure – the infrastructure of capable IVF

clinics is in many countries insufficient to meet

demand and develop the market . New clinics are

opening at increased speed in many developing

countries but it will take a long time before the

global infrastructure is fully developed to meet

the medical need .

• Investment – IVF treatment is costly – and in

most countries around the world patients have

to pay all or the majority of the treatment costs

themselves . This severely limits current treatment

levels . Naturally, ongoing wealth creation in

developing countries as well as potential for

increased reimbursement in countries where

governments have demographic imbalances

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

decide to offer public funds for treating this

medical need, will over time alleviate this

obstacle . Several socio-economic calculations

6.9 billion 23%1.6 bn

75%1.2 bn

17%200 mill

15% - 30%30 - 60 mill

3-4


MEDICULTMEDIA

HUMAGENPIPETS

19

Chart 6: Global medical need for IVF versus current penetration

Global medical need for IVF

(100% = 90-240 million cycles)1%

99%

Annual current penetration

(1.4 million cycles)

show that ART treatment clearly adds value to

the society, also from an economic perspective,

as the lifetime societal benefits outweigh the

costs of an ART baby – this calculation supports a

reimbursement policy from the government (see

page 37 for details) .

• Innovation – improving treatment efficacy and

gentleness via innovation will also improve

penetration, as more patients will seek the IVF

treatment option, if success rates are higher and

the overall treatment less stressful for the patient .

While ORIGIO will do its part in relation to the last

mentioned ‘I’ above (Innovation – please refer to

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

anticipate other stakeholders to work gradually more

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

It is a fact that the global IVF market is still

underpenetrated (although the exact levels

of under-penetration can always be debated)

and will be so for many years ahead . ORIGIO is

grateful to serve a market with a clear medical

need and massive room for improvement in

terms of penetration levels and does believe

that penetration will increase going forward . The

company does not anticipate a decrease of the

underlying infertility prevalence or that any good

alternative to IVF treatment will surface in the near

future . From a penetration perspective, it is also

worth noting that just 30 years ago only around

200 IVF cycles were performed globally . It truly is

a young market in which ORIGIO is operating, and

the company feels that there is an ever-increasing

demand for fertility treatments which will support

the growth for many years to come .

Source: ORIGIO estimate based on Demographic and Health Surveys (DHS) Comparative reports No. 9: ”Infecundity,

infertility, and childlessness in developing countries” by ORC Macro and the World Health Organization (2004)

PrOFit AnD lOss 2010

Revenue for 2010 totaled DKK 308 .0 million,

corresponding to an increase of 16% in floating

currencies and 12% organic growth, on a constant

currency basis .

The gross margin was 59 .4% in 2010, which was

slightly higher than in 2009 . In 2010, EBITDA before

special items increased by 21% to DKK 43 .8 million

bringing the EBITDA-margin before special items

to 14 .2% of revenue . The increase in EBITDA before

special items is a result of higher revenue combined

with effective cost management .

Depreciation in 2010 was DKK 7 .1 million . The

increase of DKK 3 .0 million compared to 2009 is

related to depreciation of the newly constructed

media manufacturing and headquarters building in

Denmark . Amortizations of DKK 8 .9 million is DKK

2 .0 million lower than the previous year . A significant

part of the amortizations relates to the acquisitions

of the US business in 2007 and 2008, and the

majority of the intangible assets were amortized

within the first three years .

It has been decided to state a number of items

separately (special items) in the income statement

to give a more transparent view of the ORIGIO

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

items amounted to DKK -13 .2 million in 2010 .

Of this DKK 5 .7 million relates to ORIGIO’s old

headquarters in Jyllinge as management has

assessed the net selling price and decided to

write the book value down . Furthermore, special

items include DKK 6 .7 million as write-down of

the former automation project following the

acquisition in Q2 2010 of the new state-of-the-art

manufacturing technology for micropipettes (PMD) .

ORIGIO succeeded to establish a joint venture

in Russia in 2010, ORIGIO LLC . The associated

expenses amounted to DKK 0 .8 million and are

also included under special items . Special items in

2009 amounted to a total of DKK -5 .1 million, which

relates to the VitroLife/Merck offer process and

corporate re-branding project .

Net financial expenses increased from a net of

DKK 9 .1 million in 2009 to DKK 18 .2 million in 2010

partly due to the increased debt associated with

the new manufacturing and headquarters building .

Impairment test of investments has resultated

in a write-down of DKK 6 .8 million of ORIGIO’s

initial investments from 2005/2008 in Incept

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

that ORIGIO in January 2011 purchased assets

from Incept BioSystems Inc . at a price of which the

corresponding part is substantially lower than the

acquisition cost of ORIGIO’s 10% shareholding in

Incept BioSystems, Inc . The amount is included

under financial expenses .

Corporate tax for 2010 was DKK 6 .3 million

compared to DKK 5 .5 million in 2009 .

Net loss was DKK -10 .0 million in 2010 compared

to a profit of DKK 1 .4 million in 2009 . The decrease

in net profit is due to the negative effect of special

items of DKK -13 .2 million and write-down of the

investment in Incept BioSystems Inc .

cAsh FlOW

Cash flow from operating activities

Cash flow from operating activities increased from

DKK 25 .6 million in 2009 to DKK 27 .5 million in 2010 .

Cash management is a discipline within ORIGIO that

has received increased focus during the past couple

of years . This focus will continue, as management

acknowledge the importance of cash management

supporting the continued growth of the company .

bAlAnce sheet

Assets

Total assets increased from DKK 478 .8 million at

the end of 2009 to DKK 529 .9 million at the end of

2010, predominantly due to the completion of the

building project in Denmark . Total capitalization of

the new building amounted to DKK 161 million .


MEDICULTMEDIA

HUMAGENPIPETS

21

Liabilities

Total liabilities increased from DKK 300 .3 million at

the end of 2009 to DKK 337 .0 million at the end of

2010 . Net equity increased from DKK 178 .5 million

at the end of 2009 to DKK 192 .9 million at the end of

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

Net Interest Bearing Debt (NIBD) as at December

31, 2010 was DKK 233 .2 million . ORIGIO believes

it has sufficient capital reserves to run its daily

business as well as execute on its pipeline projects .

A clear strategy has been defined to reduce NIBD

by consistently growing EBITDA and ensuring that

EBITDA is converted into free cash flow by focused

cash management .

Tax assets

ORIGIO a/s has accumulated significant negative

taxable income . This negative income represents

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

earnings . The accumulated negative taxable income

to be carried forward in Denmark amounted to

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

Denmark of 25%, this asset represents a potential

future (not discounted) value of DKK 19 million at

current taxation rates . Of this, DKK 15 million is

recognized as an asset . ORIGIO has accumulated

negative taxable income in its subsidiaries with a

potential tax value of DKK 9 million of which only

DKK 4 million is recognized as assets .

Own shares

ORIGIO currently holds a total of 213,824 of its

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

connection with the closing of the PMD acquisition,

and in November, 2010, 35,680 shares were

transferred in connection with the deferred payment

to the sellers of Mid-Atlantic Diagnostics, Inc .

the shArehOlDers

ORIGIO aims to increase its shareholder value in

order to make the company an attractive long-

term investment . The company strives to provide

open and trustworthy information to shareholders,

other investors, analysts, the press, and other

Financial guidance and business Milestones 2011Ensuring profitable growth, while furthering ambitions to develop superior products within ART and stem cells,

continues to be the key objective for ORIGIO in 2011 . ORIGIO will strive to ensure a balance between short-

term progress in EBITDA investment in an industry leading product portfolio and R&D pipeline, and a powerful

organization capable of realizing its long-term objectives and vision .

Note: Guidance is based on a USD/DKK rate (average) of 5 .35 for 2011

Financial Milestones

• Revenue of DKK 330-340 million including organic

growth of ~7-10% (constant currencies), excluding

revenue from EmbryoGen®

• EBITDA percentage of 13-15%, excluding

EmbryoGen® launch effect and related costs

• Capital expenditures (capex) of DKK 10-15 million

• Operating cash flow above DKK 25 million

business Milestones

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

Asia and South America (Q3 2011)

• Consolidate US manufacturing of disposables at

one site (Q2 2011)

• Full implementation of PMD workstations for ICSI

pipettes (Q3 2011)

• EmbryoSure: interim exploratory data (Q4 2011)

• Microfluidics: completion of bovine test (Q4 2011)

• Stem cells: partnering agreement (Q2 2011)

stakeholders and thereby give the best possible

basis for assessing the company’s activities,

potential, and risk elements . ORIGIO endeavors to

increase the proportion of institutional investors

amongst its shareholders to further increase the

robustness of its shareholder structure .

ORIGIO’s shares are listed on the Oslo Stock

Exchange . At the end of 2010, ORIGIO had more

than 29 .0 million shares outstanding . The share

price as at December 31, 2010 was NOK 15 .2,

equivalent to a 25% increase during 2010 . The

market capitalization at the end of 2010 was NOK

441 million .

In previous years, ORIGIO has offered warrant-

based incentive programs to its Executive

Management and other employees, but during

2010, no warrants were issued . Details of

outstanding warrants are provided in the notes

to the financial statements . Warrants are always

offered at exercise prices equaling the share price at

the time of allotment to ensure maximum alignment

of interests between the officers of the company

and its shareholders .

Capital structure

The ORIGIO Group aims to have an adequate

capital structure in relation to the underlying

operating requirements and R&D projects . In this

way, it is always possible for the Group to provide

sufficient and the necessary credit and guarantee

facilities to support its operations and its long-term

growth targets .

risK MAnAgeMent

Key risk elements

The ORIGIO business model involves, as any other

commercial business model, a number of risk

factors that potentially could impact its earning

power and future business life . The most relevant of

these are commented on below:

Profit and loss risk

A number of factors may impact ORIGIO’s future

profitability, among these:

• Theglobaleconomicclimate. Although the

general economic climate in the world economy

does impact ORIGIO, management is of the

opinion that ORIGIO is relatively less exposed

to general economic conditions than many

other industries . However, in markets with

limited reimbursement there will be a short-term

negative impact, as IVF treatment is expensive .

• Radicalinnovationfromcompetition. There

is always a risk that radical innovation from

competition could circumvent a company’s

products or make its segments less valuable .

However, ORIGIO does not foresee any ‘game

changing’ innovation from competition or new

entrants into human IVF in the short to mid-term

future that could render its products or services

irrelevant . Competition can always emerge with

radical innovation, but ORIGIO believes it is well-

positioned in the ART market .

• Competitivepressure. Increasing price

competition is always a risk that could impact

earnings negatively . This could occur because

the buying side increases its bargaining power

or because the selling side becomes more

competitive, e .g . some commoditization of the

products over time . ORIGIO believes that, over

time, the buying side will gain more power, as

clinics will team up in larger entities in certain

markets .

• Pricecompetition.Even without ongoing

incremental or radical innovation, product ranges

will commoditize and be exposed to increased

price competition . If the ORIGIO Group is not

successful in terms of ongoing incremental and

radical innovation, it will be more exposed to

price competition . ORIGIO’s response to this is,

at all times, to increase cost-effectiveness within

its processes while pursuing innovation .

Financial risks

Developments in ORIGIO’s results and equity

are impacted by a number of financial risks,

including foreign exchange risks, interest rate risks,

liquidity and credit risks . ORIGIO has a centralized

management of financial risks in the group’s


MEDICULTMEDIA

HUMAGENPIPETS

23

finance function . The financial risks are presented

and discussed regularly at the Board Meetings .

The strategy has in general been to use the least

complicated type of hedging .

• Exchangeratefluctuations. With a substantial

turnover in non-DKK based currencies, ORIGIO’s

income faces a substantial currency risk exposure

– especially versus the USD and EUR, and to a

smaller extent versus the GBP . While ORIGIO

does not perceive the EUR as carrying a large

negative risk, there is inherent risk particularly

in the USD exposure . However, with a large

part of the cost base denominated in USD,

the net risk decreases . Rather than hedging

EBITDA or balance sheet exposure per se,

ORIGIO has decided to hedge its key covenant

versus the bank – NIBD/EBITDA – by borrowing

approximately USD 14 .2 million denominated

in USD . Apart from this, no currency hedge is

undertaken .

• Interestratefluctuations. As can be seen from

note 14, ORIGIO’s biggest single loan, the real

estate loan of DKK 100 .2 million, is interest-rate

hedged with an interest rate swap fixed at 4 .97%

for 20 years . Details regarding the reminding

interest-bearing debt can be seen in note 14 .

The ORIGIO group does not engage in speculative

transactions .

Financial risks and financial risk management are

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


MEDICULTMEDIA

HUMAGENPIPETS

new Facilities in Måløv, copenhagen

ORIGIO has moved to brand new facilities in the

Copenhagen area in Måløv, Denmark . The new

production site meets all the highest quality and

clean-room standards required by regulatory

authorities, clinics and customers throughout the

world .

On July 12, ORIGIO successfully relocated the

majority of its Danish activities to Måløv . On

November 26, after four months of process

validation and qualification, the ORIGIO MediCult

Media production also relocated to the new state of

the art facilities .

We have done our utmost to make sure that the

only thing customers noticed was the new address

on media bottles . But many changes were made to

further improve our reliability in the quality and the

delivery of our media .

The entire facility has been designed to optimize

material flow and manufacturing processes while

supporting interdepartmental cooperation and

team work .

ORIGIO MediCult Media comprises mixed, sterile

filtered media aseptically filled in ISO classified

clean rooms . To guarantee the quality of the

manufactured media, the clean rooms are divided

into a number of zones classified from ISO 8

to ISO 5, according to a decreasing number of

particles . ISO 5 is the cleanest zone and this is

where filling is performed .

25

The first floor of the building is almost completely

occupied by the clean rooms’ ventilation system .

Running and maintaining a high standard of clean

rooms require very significant investments in

technical installations .

To further improve the robustness of

manufacturing, the new facilities incorporate a

number of new features:

• continuous monitoring of critical parameters,

• access to manufacturing IT systems at all

workstations,

• further automation of filling to improve

reproducibility .

Further to quality improvements, the new facilities

constitute a significant increase in capacity enabling

ORIGIO to service its customers even better .

Quality Control and Research laboratories are

designed for maximum performance and flexibility

and include isolator technology for sterility testing,

bovine research facilities and specialized facilities

for stem cell media research .

The environment also benefits from our new

facilities, as ORIGIO has installed and validated

an innovative ventilation system in its clean

room enabling a significantly reduced energy

consumption compared to traditional technol ogy .

The new facility has been designed to meet the

highest standards for aseptic manufacturing . It was

designed and constructed by NNE-Pharmaplan

contributing with its vast experience in the design

and construction of pharmaceutical manufacturing

plants throughout the world .

An acquisition of PrecisionMicroDevices (PMD)

and thereby its operational assets was completed

in June, 2010 . PMD has developed an automated

workstation for the production of quality specialty

pipettes and microtools for ART .

The new technology enables ORIGIO Humagen

Pipets to substantially increase the productivity

of the micropipette manufacturing process while

further improving ORIGIO Humagen Pipets already

leading and consistent quality .

Precision Micro Devices

OrigiO scanlab equipment

ORIGIO ScanLab Equipment a/s was established

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

49% by LaboGene ApS . The company specializes in

sales of equipment for IVF laboratories world-wide .

The joint venture has been operational as from July

1, 2010 and is located in Måløv, Denmark .

LaboGene ApS is a Danish company that specializes

in the design, development and manufacture of

laboratory and industrial equipment in the fields

of clean air & laminar flow, vacuum & cooling

and centrifugation . Prior to the joint venture

establishment, LaboGene had, for many years, been

in close co-operation with ORIGIO MidAtlantic

Devices regarding laminar flow cabinets to the

Americas IVF market .

The establishment of this joint venture signals

ORIGIO’s desire to become more involved on a

global scale in high quality IVF equipment – both in

order to be able to supply an even broader range

of high-end current products to our customers, i .e .

the IVF labs; but also because ORIGIO expects that

advanced equipment will be part of some emerging

technology concepts in IVF that hold a promise

for an increasing baby-take-home rate within the

coming decade . In preparation for this, ORIGIO

has thus decided to expand its offerings and

capabilities in this area of IVF .

With the introduction of the ORIGIO/Planer

BT37 mini-incubator and now ORIGIO ScanLab

Equipment, this is an important starting point

enabling the ORIGIO sales organization to handle

equipment service and support as well as sales

activities . Sales and technical seminars have

been held in 2010 to educate and develop the

distribution network .

ORIGIO ScanLab Equipment offers highly

specialized laminar air flow cabinets and

centrifuges .

centriFuges:

ScanFuge is a range of low speed centrifuges

of distinction from ORIGIO ScanLab

Equipment comprising ideal centrifuge and

accessories for IVF applications and protocols

from the ScanFuge range:

ScanFuge-Mini “The personal Micro –

Centrifuge of Choice”

ScanFuge Midi “Low Speed with Finesse”

ScanFuge Maxi “Quality with Class”


MEDICULTMEDIA

HUMAGENPIPETS

27

lAMinAr Air FlOW cAbinets

The Fortuna IVF cabinets & Mars IVF Class 2

cabinets utilize a revolutionary new design of digital

electronically commutated fans with 110 mm deep

HEPA filters . Both cabinets can be customized to

suit the needs and preferences of embryologist, for

example by installing a microscope or a monitor .

TheMars-IVFClass2 provides a comfortable

working en vironment with maximum protection

for the operator, the embryo and the laboratory .

It is built and tested according to the EN 12469

Standard .

The Mars-IVF Class 2 provides ultimate clean air

perform ance . A unique laminator system ensures

that the down flow is uniform and balanced, thus

ensuring that embryos are well protected by

turbulent-free laminar flow, clean air, and with

improved anti vibration performance .

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

and has a re-circulated air flow configuration with

70% being re-circulated and 30% exhausted via an

HEPA exhaust filter . The filter is surrounded by an

area of negative pressure to ensure that no leakages

can occur around the seals . An activated charcoal

filter can also be fitted on the exhaust side of the

airflow, facilitating the removal of volatile organic

compounds from both the work chamber and the

laboratory .

TheFortuna-IVF Class1range of cabinets offers

the ultimate in sample protection, operator comfort

and optional fittings to provide the cabinet best

suited for laboratories and laboratory procedures .

Fortuna-IVF Cabinets – vertical flow laminar with

turbulent-free air flow gives a clean, sterile work

chamber environ ment with complete protection of

the procedures against microbiological intrusion or

contamination .

Low energy and noise free electronically

commutated fans and lamina tor technology ensure:

less vibration less heat transmission a turbulent-free

air flow to the chamber .

Advantages

• considerably reduced noise levels

• significantly improved air distribution

and prolonged filter life

• better balanced and uniform down flow

• superior product protection

The Norwegian Corporate Governance Board

issued on October 21, 2010, a revised Code of

Practice for Corporate Governance . The Code

of Practice outlines the corporate governance

guidelines for companies quoted on the Oslo Stock

Exchange . Adherence to the Code of Practice is

based on a ‘comply or explain’ principle whereby

companies must comply with the individual items

or explain why they have chosen an alternative

approach . The below descriptions cover every

section of the Code of Practice .

According to Norwegian company law, a company

with more than 200 employees must elect a

corporate assembly . ORIGIO, being a Danish

company, does not have a corporate assembly .

Implementation and reporting on corporate

governance

It is the responsibility of ORIGIO’s Board of

Directors to define how it wants to exercise

corporate governance . The Board of Directors has

decided that ‘the Norwegian Code of Practice for

Corporate Governance’ is to be observed with only

a few exceptions as per below .

The Board of Directors does not define the

corporate values of ORIGIO, but approves

them after such values have been defined by

management and staff . Guidelines regarding

corporate social responsibility is defined in

accordance with the Board of Directors (for more

details, please see ORIGIO’s stated values on page

38 and its corporate social responsibility on page

37) .

The Board of Directors and the management

have ensured that employees (either directly or

through employee representatives) have direct

access to the Board of Directors, should they find

that management acts illegally or violates ethical

standards .

Business

ORIGIO’s business activities clause in its Articles of

Association reads: “The Objects of the Company

are to develop, produce and sell products for use

within the area of human reproduction and cell

cultures and other related business at the Board of

Directors’ discretion” . The Articles of Association

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

com .

Equity and dividends

The Board of Directors considers the consolidated

equity to be satisfactory . ORIGIO’s need for

financial strength is considered at any given time

in light of its objectives, strategy and risk profile .

ORIGIO focuses on optimizing shareholder

value and believes that for the coming years, this

will mean that the company should not pay out

dividends, but rather re-invest the proceeds from

its operations into future growth . Once its improved

‘pipeline’ products have been launched successfully,

the company believes dividend payments may be

relevant .

A mandate can be given by the Annual General

Meeting to The Board of Directors to increase

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

Directors’ discretion, hereunder for the purpose

of acquiring other companies or parts thereof .

The Board of Directors believes that a mandate

with a wider scope than what the Code of Practice

recommends will provide the necessary flexibility to

act to the best interest of the shareholders and the

company . The mandate is limited in time to the date

of the next Annual General Meeting .

Equal treatment of shareholders and

transactions with close associates

ORIGIO’s share capital consists of shares subject

to public trading and without voting limitations

or special rights . All shares are equal . Neither the

Board of Directors nor Management is aware of

the existence of any shareholders’ agreement

containing pre-emption rights or restrictions in

voting rights .

corporate governance


MEDICULTMEDIA

HUMAGENPIPETS

29

ORIGIO has defined in-house guidelines for trading

in the ORIGIO shares . The rules are in compliance

with applicable legislation and regulations for

primary insiders and insider trading . The in-house

guidelines require, among other things, that primary

insiders must obtain internal clearance from the

company’s Chief Executive Officer prior to trading

in the company’s shares .

The Board of Directors’ mandate to acquire treasury

shares is based on the assumption that purchases

will take place on the market . Acquired shares

may be disposed on the market as payment for

acquisitions .

In the Board of Directors’ opinion there have

been no transactions between the company and

a shareholder, director, member of the executive

management or a party closely related to such

individuals that can be described as significant .

The Board of Directors has appointed the law firm

Plesner as ORIGIO’ key legal council . Plesner is

represented by the Vice Chairman of the Board of

Directors, Mr . Jens Zilstorff . Fees paid to Plesner

in this capacity can be summarized to (amount in

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

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

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

The Board of Directors should always be notified

in the event that a board member or executive

personnel possesses a material interest in a

transaction or other matter entered into by the

company or legally binding on the company . The

Board of Directors will in such event evaluate

the need for a valuation to be obtained from an

independent third party .

Freely Negotiable Shares

ORIGIO’s share capital consists of shares subject

to public trading and without voting limitations or

special rights .

General Meetings

The Annual General Meeting (AGM) ensures the

shareholders’ participation in ORIGIO’s governing

body . The AGM will be held before May 1 each

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

relevant documents are available on ORIGIO’s

website at least 21 days prior to the date of the

General Meeting . The documents will contain the

information necessary for the shareholders to take

a position on agenda items . The final registration

date for attending the AGM is seven days prior to

the date of the General Meeting .

Registration to attend the AGM can be made

by mail, telefax, or electronically via VPS

Investortjenester or www .ORIGIO .com .

The Board of Directors tries to make it possible

for as many shareholders as possible to attend the

General Meeting . Shareholders, who cannot attend

the General Meeting themselves, may choose to

authorize a proxy, which clearly states that the proxy

can be used on each individual item for discussion .

The shareholders may also choose to vote in writing,

including electronic means of communication,

during a specified period in advance of the General

Meeting .

At least one representative of the Board of Directors

participates in the General Meetings . Management

is represented by the Chief Executive Officer and

the Chief Financial Officer . In 2010, 42 .97% of the

aggregate share capital was represented .

The agenda is prepared by the Board of Directors,

and the main items on the agenda are specified in

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

selection of the chairman of the General Meeting .

The Chief Executive Officer will review the status

of ORIGIO . The minutes of the AGM are made

available on ORIGIO’s website .

ORIGIO does not fully comply with ‘the Norwegian

Code of Practice for Corporate Governance’ in

relation to the presence of Auditor, and the entire

Board of Directors does not usually attend the

AGM . The items on the agenda for the AGM do not

require this . The Chairman or the Vice Chairman of

the Board of Directors is always present to respond

to questions .


MEDICULTMEDIA

HUMAGENPIPETS

Nomination Committee

A Nomination Committee was appointed at

the Extraordinary General Meeting on June 10,

2009 . According to the Articles of Association,

the Nomination Committee is tasked with

recommending the General Meeting candidates

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

board members’ fees . The Nomination Committee

shall comprise up to four members, the majority

of whom must be shareholders of the company or

representatives of shareholders of the company,

and they shall be independent of the company’s

Board of Directors and management . The

Chairman of the Nomination Committee must be

a shareholder of the company or a representative

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

vote, the vote of the Chairman of the Nomination

Committee shall count as two votes .

The Nomination Committee currently consists

of the following four members: Janne Flessum

(Chairman, representing Orkla), Kristian Falnes

(representing Skagen Vekst), Nils Vogt (representing

Miami AS), and Jaime Grego-Mayor (representing

Leti Pharma S .L .) .

The Chairman of the Board of Directors shall –

without having any voting right – be convened to

at least one meeting in the Nomination Committee

prior to it submitting its final recommendation to

the General Meeting .

Corporate assembly and Board of Directors:

composition and independence

It is essential that the Board of Directors as a whole

is competent to deal with the board’s work and the

main business activities of ORIGIO .

According to the Articles of Association, four to

six members of ORIGIO’s Board of Directors shall

be external members . At present, the Board of

Directors consists of five external members and

two employee representatives: Flemming Pedersen

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

Grego-Mayor, Flemming Juul Jensen, Jørgen Drejer,

Kirsten Bakbøl, and Bente Jensen . The two latter

have been elected by the employees as employee

representatives . The Chief Executive Officer is not a

member of the Board of Directors .

The board members are elected for one year at a

time, except for the employee representatives who

according to Danish law are elected for a 4-year

term . Expertise of the elected board members

and information on records of attendance at board

meetings as well as individual shareholdings in

ORIGIO is listed on page 41 .

All shareholder elected members are considered

autonomous and independent of ORIGIO’s

management . The same applies in connection with

important business associates . Laboratories LETI

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

8 .58% at year-end 2010 . The Board of Directors

favors a representation of a long-term shareholder .

The work of the Board of Directors

The Board of Directors has an annual plan for its

work and decides on all matters of substantial

importance pertaining to the ORIGIO group’s

activities . Such matters include decisions on

strategic priorities, approval of periodic plans and

budgets, as well as decisions on major investments

or divestitures . The Board of Directors performs

an annual self-assessment in which it evaluates its

performance and expertise .

In matters of material character in which the

Chairman of the Board of Directors is, or has

been, personally involved, the Board of Directors’

consideration of such matters will be chaired by the

Vice Chairman .

There is a clear division of responsibilities

between the Board of Directors and the executive

management . The Chairman is responsible for

the board’s work being conducted in an efficient,

correct manner . The Chief Executive Officer is

responsible for the operational management of

the ORIGIO group, including the responsibility

for ORIGIO being organized, operated and

further developed in compliance with applicable

legislation, the Articles of Association, and

31

decisions made by the Board of Directors and the

shareholders at the Annual General Meeting .

A key responsibility of the Board of Directors is to

appoint the Chief Executive Officer and participate

in the appointment of other executive management

members, as well as make recommendations to the

General Meeting for the appointment of auditors .

The Board of Directors schedules regular board

meetings each year . There are usually five fixed

board meetings per year, and additional meetings

are held whenever needed, some face to face, and

some as teleconferences . In 2010, there were six

face-to-face meetings, three conference calls and

one board seminar .

All board members receive regular information

about ORIGIO’s operational and financial progress,

and the management seeks to mail the information

to the Board of Directors in sufficient time for its

preparation . The ORIGIO business plan, strategy

and risk management are routinely reviewed

and evaluated by the Board of Directors . Board

members are free to consult the executives of

ORIGIO, if needed .

The Chief Executive Officer usually proposes the

agenda for each board meeting . The final agenda

is completed in consultation between the Chief

Executive Officer and the Chairmanship . Besides

the board members, board meetings are attended

by the executive management, except for non-

Danish resident members, who participate in at

least one board meeting per year or by conference

calls when relevant .

The Danish Public Companies Act stipulates that

large companies must appoint an Audit Committee .

The Audit Committee is charged with the overview

of the financial reporting and disclosure as well as

regulatory compliance and risk management .

The Audit Committee consists of two members:

Flemming Pedersen (Chairman) and Jens Zilstorff .

The auditor participates in at least one annual

meeting with the the Audit Committee .

Risk management and internal control

The executive management consists of seven

individuals, see pages 44-45 . ORIGIO’s executive

management has monthly conferences calls

supplemented by face-to-face meetings on an ad

hoc basis . Subgroups of the executive management

meet on a weekly basis in order to review various

operational issues .

Management provides monthly performance

reports to be reviewed by the board members . The

quarterly financial statements are also reviewed at

board meetings . The Board of Directors undertakes

an annual review in early February . The independent

auditor attends this meeting .

Risk management and internal controls are typically

agenda items for at least one board meeting per

year (for further information on risk management

and internal control, please see page 36) .

Remuneration of the Board of Directors

According to the Articles of Association,

the Nomination Committee is tasked with

recommending the board members’ fees . The

members’ fees are not linked to performance,

warrant programs or the like . Only one board

member, Jens Zilstorff (Vice Chairman), works for

ORIGIO in another capacity, as he is the key legal

counsel of ORIGIO . Fees paid to Plesner in this

capacity are summarized on page 31 .

Remuneration of the Executive Management

Company guidelines for remuneration of the

executive management can be described as follows:

The executive management shall at any point in

time obtain a fully competitive compensation

package reflecting each member’s experience,

capabilities and contributions to the company .

The package shall consist of fixed and variable

components – the latter typically comprising

an annual bonus with an absolute limit, linked

to a realized EBITDA-level as well as the ad hoc

allocation of warrants . Warrants are always allocated

at the market price at the time of the allocation .

The Code of Practice stipulates that the

annual report should provide disclosure of the


MEDICULTMEDIA

HUMAGENPIPETS

remuneration of all members of the company’s

executive management . For privacy reasons,

ORIGIO’s Board of Directors has decided not to

abide by this and only disclose the remuneration of

the Chief Executive Officer in the annual report .

Information and communication

ORIGIO normally presents provisional annual

accounts in late February . The annual report is

available on the company’s website at least 21 days

prior to the Annual General Meeting . In addition to

this, ORIGIO publishes its accounts on a quarterly

basis . The presentations of the annual and quarterly

reports are posted on ORIGIO’s website after they

have been published at the Oslo Stock Exchange .

It is considered essential to keep owners and

investors informed about ORIGIO’s progress and

economic and financial status . Open investor

presentations are conducted in relation to ORIGIO’s

annual and quarterly reports . The Chief Executive

Officer reviews results and comments on markets

and prospects for the future . Other members

of the executive management, the Director of

Investor Relations, and the Chairman of the Board

of Directors participate in these presentations from

time to time .

All shareholders are treated equally as a matter of

principle, thus the same information is released to

the entire equity market at the same time whenever

information is deemed share price sensitive .

The financial calendar for 2011 including an

overview of the financial reporting dates, the date

for the Annual General Meeting, etc . is published

on ORIGIO’s website .

Takeovers

There are no defense mechanisms against takeover

bids in ORIGIO’s Articles of Association, nor

have other measures been implemented to limit

opportunities to acquire shares in ORIGIO .

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

the Board of Directors will arrange for a valuation

by an independent expert and make a statement

containing a well-founded evaluation of the bid,

including a recommendation to shareholders

whether or not to accept the offer . It will be

explained, if any specific board members have

excluded themselves from the Board of Directors’

statement . Furthermore, the Board of Directors

has a responsibility to ensure that the company’s

business activities are not disrupted unnecessarily,

that the shareholders are treated equally, and that

the shareholders are given sufficient information

and time to form a view of the offer .

Auditor

The independent auditor is always present during

the Board of Directors’ discussions of the annual

financial statements . At such meeting, the financial

statements and any issues of particular concern

to the auditor, including any points of contention

between the auditor and the management, are

discussed .

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

the auditor and the Board of Directors without the

presence of the Chief Executive Officer or other

members of the executive management .

In the long-form Audit Report, the independent

auditor reports to the Board of Directors on,

among other things, significant weaknesses in

the procedures and intern controls . Furthermore,

management letters with recommendations are

issued by the independent auditor .

Details of the fee paid for audit work and for other

specific auditor assignments are specified in the

financial statement, note 18 .

33

Michael Henman, General Manager: “After 23 years working as an embryologist in an

IVF laboratory, I saw it as a challenge to develop

ORIGIO’s position in the Australian and New Zealand

ART market. I have been impressed by the way

ORIGIO has strategically expanded the business,

and today has the strongest, full-scale product

portfolio within embryo culture media, pipettes,

devices and equipment for ART labs.”

ORIGIO AUSTRALASIA, representing the MediCult

Media, Humagen Pipets and MidAtlantic Devices

branded products, is now up and running in the

important markets of Australia and New Zealand .

The three brands were previously represented

by MediCult Australasia for culture media and a

local Australian distributor for the Humagen and

MidAtlantic brands . ORIGIO AUSTRALASIA began

its operations in the third quarter of 2010 and is

concentrating on building the foundations for a

sustainable business in this important market .

The Australian and New Zealand markets have

a combined annual number of fresh ART cycles

approaching 40,000 and more than 62,000 fresh and

frozen cycles combined . Although the population

is relatively low when compared to some of the

larger world markets, the uptake of ART services by

the population of reproductive age women (15-45

years), particularly in the larger Australian market, is

very high, being 12 .6 per 1,000 women .

Population growth and favorable demographics

mean that the market is likely to return to its long-

term growth trajectory .

OrigiO AustrAlAsiA Pty. ltd.

Western Australia5 clinics

South Australia3 clinics

Victoria 9 clinics

Tasmania2 clinics

New Zealand7 clinics

Queensland16 clinics

New South Walesincl. Australian Capital Territory20 clinics

Northern Territory1 clinic


MEDICULTMEDIA

HUMAGENPIPETS

The main features of ORIGIO’s internal control and risk

management systems in connection with its financial

reporting are as follows:

Control environment

The Board of Directors has established an auditing

committee . The Audit Committee assists the Board

of Directors in supervising the presentation of the

financial statement and the efficiency of the internal

control and risk management systems regarding the

preparation of the financial statement .

The management has the responsibility for sustaining

an effiencient control environment and an internal

control and risk management system in connection

with the presentation of the financial statement .

Managers at various levels are responsible within their

respective areas .

The Board of Directors approves ORIGIO’s conduct of

business including the currency and interest policies .

Other policies and procedures are approved by the

Executive Management . The daily supervision of

compliance is the responsibility of all managers .

The organisational structure and the internal

guidelines constitute the control environment together

with the international Reporting Standards and the

Danish Financial Statements Act .

Risk assessment

The risk and control overview has been updated for

2010 . The risk assessment in relation to the financial

statement is performed to identify items posing

potential risks . Based on the risk assessment, it is

ORIGIO’s aim to describe and evaluate all business

units’ existing procedures and controls to minimise

or eliminate the potiential risks . Generally, it is the

evaluation that the group has reasonable procedures

and controls .

Control activities

The purpose of the control activities is to prevent,

reveal and correct any errors or irregularities . These

activities are integrated into ORIGIO’s accounting

and reporting procedures and include, among

other things, procedures for producing the financial

statement, procedures for approval and attestation,

reconciliation, analyses and general IT controls .

ORIGIO has introduced internal control standards, i .e .

standards for checks in connection with the financial

reporting from subsidiaries . The purpose of these

standards is to establish and maintain a uniform level

of internal checks and controls in connection with the

financial reporting . A central function is responsible

for controlling the financial reporting from the

subsidiaries .

Information and communication

ORIGIO wil continue to improve its information and

communication systems to ensure the correctness and

completeness of its financial reporting . The reporting

instructions are updated as necessary,

including budgeting and month-end accounting

procedures, and are reviewed at least once a year .

Monitoring

At least once a year, updated risk and control analysies

are presented to the Audit Committee including a

control overview and evaluation of its effectiveness .

The independent auditor reports to the Board of

Directors in the long-form Audit Report, among

others, about significant weaknesses in the procedures

and internal controls . Furthermore, management

letters with recommendations are issued .

Comprehensive monthly data are reported from

all group companies . The data are analysed and

questioned making it possible to identify and

correct any errors and irregularities in the financial

reporting at an early stage to ensure correctness and

completeness .

ORIGIO is in the process of implementing the same

ERP platform – Navision – in all its companies . In 2010,

the Navision ERP system was implemented in ORIGIO

LLC in Russia, and ORIGIO Scanlab Equipment a/s

had already implemented Navision entering the joint

venture with ORIGIO . Using the same platform will

ensure more standardized reporting and transparency .

control and risk Management systems

35

ORIGIO aims to actively contribute with a positive

impact on society through our activities, customer,

colleagues and communities . The company’s core

values of being aspirational,reliableandcaring

form the basis for its decision making, both in terms

of being a social responsible cooperation as well as

being a sound business .

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

dream of every infertile couple come true’ . This

is highly meaningful to us and could per se be

perceived as ORIGIO’s core quest in relation to

Corporate Social Responsibility . In addition to

this very significant endeavor, several national

economic analyses have proven that investing in

reimbursement of human IVF can be a healthy

investment for a government . Chart 8 shows

that e .g . the Danish government after 50 years

has received a 7-16 fold return (dependent of

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

“investment” of an IVF-conceived citizen .

ORIGIO considers it essential to supply high quality

products that are safe for the patient, ensure that

clinicians obtain consistent and optimal results, and

at the same time guarantee that the products are

manufactured in a sustainable manner . ORIGIO has

received CE markings in EU, clearance by the Food

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

Therapeutic Goods Administration (TGA (Australia))

certifications for a large range of its marketed

IVF products . This provides reassurance that the

products comply with the relevant regulatory

authorities’ health and safety legislation . ORIGIO

is pursuing CE markings of the full MediCult Media

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

obtained from products with a CE markings .

0

300.000

600.000

900.000

1.200.000

1.500.000

DKK NPV of net benefit to society 50 years after birth

Cost of IVF-baby

>40 years old mother<40 years old mother

Source: Dr. Mark Connolly, Global market Access Solutions

Chart 8: Cost and net present value of benefit to society per IVF-baby after 50 years

(Danish example)

corporate social responsibility

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

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

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

Aspiration

Reliability

Care

company Values


MEDICULTMEDIA

HUMAGENPIPETS

37

sAFe AnD heAlthy WOrK enVirOnMent

ORIGIO believes that each employee contributes

directly to ORIGIO’s growth and success . It is the

objective of the company to create a place of

employment with a good and challenging working

climate where employees jointly produce results

which are beneficial to the key stakeholders .

Policies

ORIGIO wants to retain its employees and ensure

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

individual skills are developed through continuous

education, in-job-challenges and changes . At the

same time, ORIGIO is committed to creating a safe

and healthy work environment and continuously

improve the physical and psychological work

environment . It is our objective to provide

equal employment opportunities for all persons

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

marital status, national origin, disability, or other

protected categories .

This policy applies to all terms and conditions

of employment, including hiring, promotion,

termination, layoff, recall, transfers, leaves of

absence, benefits, and training .

Actions

Upon joining ORIGIO, the employee participates

in an orientation program during which he/

she receives an introduction to the company, its

mission, vision, values and work expectations . At the

same time, each employee receives an individual

training program regarding his/her specific, new

job function as well as associated work- and safety

procedures .

ORIGIO regularly conducts working climate

surveys among all employees world-wide, in which

employees respond anonymously to a series

of questions . Based on the results, actions are

established to improve the work environment .

Action plans are followed up at appropriate

intervals .

The company has safety representatives, who are

responsible for creating a safe and healthy work

environment . The safety representatives make

suggestions for reducing risks, implementing

preventive actions, and, in that way, ensure that

employee safety is incorporated in the daily routines .

Results

The focused program on building a better

workplace has also resulted in a significant decrease

in the illness rate . The illness rate in Denmark has

for example decreased from 4 .2% in 2008 to 3 .4% in

2010 .

AnticOrruPtiOn

ORIGIO is a global company present, either directly

or through distributors, in a large number of

countries with many different cultures . ORIGIO is in

favor of competition on fair terms and it is important

to ORIGIO to act responsibly . The objective of

the company is therefore always to comply with

legislation and rules in the countries in which it

operates .

Policies

ORIGIO does not tolerate or support any form of

corruption, including but not limited to extortion

and bribery .

Actions

Efforts will be directed to make a specific

policy covering this area and ensure that all

employees know the policy and are aware that

the consequences of non-compliance could have

implications for continued employment . This

obviously applies especially for employees who

have interaction with suppliers, customers or public

authorities .

Results

ORIGIO is not aware of any involvement in anti-

corruption issues .

ORIGIO will continue to work on Corporate Social

Responsibility matters during 2011 .


MEDICULTMEDIA

HUMAGENPIPETS

39

As at December 31, 2010, the share capital

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

of DKK 5 . All shares are subject to public trading

and without voting limitation or special rights .

Shareholders have the ultimate authority over the

company, and exercise their right to make decisions

regarding ORIGIO at general meetings, either in

person or by proxy . Resolutions can be passed by

a simple majority, while resolutions to amend the

articles are subject to adoption by at least two

thirds of votes cast and capital represented unless

stricter requirements are imposed by the Danish

company law . The annual general meeting approves

the annual report and any amendments to the

articles .

On February 22, 2011, the share capital consisted of

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

company’s 20 largest registered shareholders were

as follows:

shareholder information

name shareholding number Of shares Ownership%

Orkla Asa 3,110,100 10 .68%

Leti Pharma S .L . 2,488,000 8 .55%

Skagen Vekst 1,550,000 5 .32%

MP Pensjon 950,000 3 .26%

Storebrand Vekst 769,029 2 .64%

Bio Holding As v/Jens Holst 751,419 2 .58%

Ormestad Tellef 680,272 2 .34%

Danske Bank A/S (Nominee Account) 661,719 2 .27%

Miami As 600,000 2 .06%

Zwilgmeyer Peter Kenneth 500,000 1 .72%

Nordea Bank (Nominee Account) 454,416 1 .56%

Ml Pierce Fenner (Nominee Account) 409,824 1 .41%

SEB Enskilda Asa Egenhandelskonto 400,000 1 .37%

Holst Jens Ulrik 385,445 1 .32%

Hovde Reidar 365,500 1 .26%

Kvam Jan Arvid 325,500 1 .12%

Skjerven Ketil Einar 310,100 1 .07%

Joff Eiendom A/S 309,527 1 .06%

Noer Eiendom A/S 308,500 1 .06%

Debra Bryant 303,701 1 .04%

Other 13,482,643 46 .31%

Total 29,115,695 100 .00%

board of Directors

Flemming Pedersen (Chairman)

Diploma in Business Economics and MSc . in Business

Administration and Auditing from the Copenhagen

Business School . Born 1965 . Joined the Board of

Directors in 2010 . Chief Financial Officer, Executive

Vice President at ALK Abelló A/S (leading allergy

vaccine company) . Possesses an extensive experience

from several board and executive positions involving

general management, acquisitions and finance . Member

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

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

Participated in all board meetings in 2010 after his

election to the Board of Directors in April 2010 .

Jens Zilstorff (Vice Chairman)

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

Directors in 1990 . Partner at Plesner Advokatfirma (Law

Firm) since 1989 . Possesses strong legal expertise in an

international and Scandinavian arena and has an in-depth

knowledge of ORIGIO . Member of the Board of Directors

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

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

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

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

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

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

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

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

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

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

Træindustri A/S . Lives in Copenhagen, Denmark . Owns

50,000 shares and 0 warrants . Participated in all board

meetings in 2010 .

Jaime Grego-Mayor

B .A . Liberal Arts from Brown University, General

Management Program IESE Business School . Born 1964 .

Elected to the Board of Directors in 2007 . Possesses a

strong international expertise within pharma, medtech

and business development areas . Specific experience

within strategy, innovation and corporate finance . Vice

Chairman of the Board of Directors of Laboratorios

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

Chairman of Audit and Election Committees of

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

Directors and Executive Committee in Calzados Royalty,

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

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

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

all board meetings in 2010, except two .

Flemming Juul Jensen

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

in 2000 . Former Executive Vice President, Sales &

Marketing and member of the management at Lundbeck

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

broad expertise in international sales and marketing of

pharmaceutical products and subsidiary management .

Member of the Board of Directors of STT-Condigi

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

shares and 0 warrants . Participated in all board meetings

in 2010 .


MEDICULTMEDIA

HUMAGENPIPETS

41

Kirsten Bakbøl

Born 1955 . Joined the Board of Directors in 2004 as

employee representative . Joined ORIGIO in 1999 as

Assistant, Purchasing department . Has an in-depth

knowledge of ORIGIO business and its organization .

Owns 10,200 shares and 0 warrants . Participated in

all board meetings in 2010, except one .

Jørgen Drejer

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

Board of Directors in 1998 . Executive Vice President

and member of the executive management of

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

Possesses a strong and broad competence within

pharmaceutical research and development as well

as biotechnology in general . Member of the Board

of Directors of NsGene A/S, Atonomics A/S, Delta

and the Danish Council for Independent Research .

Member of the Academy of Technical Sciences . Lives

in Copenhagen, Denmark . Owns 50,000 shares and 0

warrants . Participated in all board meetings in 2010 .

Bente Jensen

Diploma in International Trade . Born 1950 . Joined

the Board of Directors in 2003 as employee

representative . Joined ORIGIO in 2000 as Customer

Service Representative . Has an in-depth knowledge

of ORIGIO business and its organization . Owns

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

meetings in 2010 .

executive Management

Jesper Funding Andersen, CEO – ORIGIO a/s

Master of Business Economics from Copenhagen Business

School . Born 1966 . Appointed Chief Executive Officer of

ORIGIO in November 2005 . Previous experience includes

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

strategy consulting company), Group Vice President at

Maersk Medical A/S (a leading Danish medical device

company), Senior Vice President for International Business

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

Member of the Board of Directors of MissionPharma

A/S (a supplier of generic pharmaceuticals to third world

countries) and Chairman of the Board of Directors of

Ellipse A/S (a Danish supplier of laser and light based

medical equipment) . Owns 88,046 shares and 665,000

warrants .

Susanne Hauschildt Bendz, CSO, EVP Innovation &

Corporate Marketing – ORIGIO a/s

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

Copenhagen . Born 1958 . Appointed Executive Vice

President and Chief Scientific Officer in August 2004 .

Previous experience includes Research Assistant, and

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

Danish allergy vaccine company) and later in Coloplast

A/S in Wound Care Management Group and Corporate

responsible for clinical development (the largest Danish

medical device company) . Owns 75,000 shares and

135,000 warrants .

Søren Østergaard, EVP International Sales – ORIGIO a/s

Bachelor of Science in Medical engineering from

Engineering Academy of Aarhus, Denmark . Born 1959 .

Appointed Executive Vice President of in December

2007 . Previous experience includes more than 20 years of

international sales and marketing experience in the medical

technology sector, latest as Vice President and General

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

company) and as Director of Sales in Europe at Medicotest

(a Danish manufacturer of electrodes for medical

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

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

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

1955 . NIH Postdoctoral Fellow in Molecular Biology, 1980-

1983 . Research Scientist, Oncogen (owned by Bristol

Myers) 1983-1984 . Research Scientist for Humagen Pipets

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

2007, appointed Executive Vice President of ORIGIO a/s

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

shares and 55,000 pre-assigned warrants .


MEDICULTMEDIA

HUMAGENPIPETS

Terry Fortino, EVP Americas Sales – ORIGIO a/s,

CEO – ORIGIO, Inc.

B .S . Marketing, Michigan State University, 1970 . Born

1947 . Diagnostics Sales, Wampole Laboratories 1970-

1973 . Laboratory Equipment & Diagnostics Sales,

Rupp & Bowman Co . 1973-1984 . Eastern U .S . Division

Manager, Rupp & Bowman Co . 1984-1988 . Director

of Sales, Biogen 1988-1989 . Founder & President,

MidAtlantic Diagnostics 1989-2008 . Executive Vice

President, ORIGIO a/s and CEO, ORIGIO, Inc . 2008 .

Owns 85,936 shares and 0 warrants .

Allan Toft Jacobsen, EVP Manufacturing – ORIGIO a/s

M .Sc . in Chemical Engineering from the Technical

University of Denmark, specialized in microbiology and

molecular biology . Born 1971 . Joined ORIGIO in 2005 .

Appointed Executive Vice President Manufacturing in

December 2007 . Previous experience includes Manager

for Manufacturing and QC at ORIGIO, various other QC,

manufacturing and production positions at Colgate

Palmolive in Denmark and France . Owns 10,000 shares

and 85,000 warrants .

Jeannett Hvidkjær, CFO – ORIGIO a/s

Bachelor in Business Economics and Accounting

from Copenhagen Business School . Born 1966 .

Joined ORIGIO in 2005 as Chief Accountant .

Appointed Chief Financial Officer in August 2009 .

12 years of experience as a public accountant at

Ernst & Young and 5 years as Chief Accountant at

a national Danish newspaper . Owns 0 shares and

45,000 warrants .

43


MEDICULTMEDIA

HUMAGENPIPETS

OrigiO’s recent Journey – a corporate transformation

ORIGIO (MediCult Media) was founded in Norway

in 1987 by Doctors Kjell Bertheussen and Nicolai

Holst together with Jens U . Holst after Doctor

Bertheussen, professor of biochemistry at Norway’s

Tromsø University, pioneered the novel serum-free

Synthetic Serum Replacement (SSR™) principle

for media production . In 1988, ORIGIO entered

the fertility market with media applications for IVF

treatments . ORIGIO developed subsequently a full

range of media products covering all processes

within IVF . The company was listed on the Oslo

Stock Exchange in 1996, and its first two sales

subsidiaries were established in the UK and France

during the same period .

Geographical dimension– in terms of ORIGIO’s global

foot-print with direct sales

presence

Product range dimension- in terms of current product range

offered to ART clinics

Innovative dimension- in terms of ORIGIO’s exposure

to emerging and radical new

technologies each with a potentially

substantial impact on the relevant

‘baby-take-home-rate’

In 2005, ORIGIO embarked on a transformative journey along three dimensions

Key milestones on that journey are depicted on the opposite

page – including, the acquisitions of Humagen Pipets and

MidAtlantic Devices . So far, the transformation has created the

largest, focused player on the global ART scene, with a broad

product offering and a leading pipeline of new technologies .

2.

1.

3.

45

Expansion of geographical presence (via own subsidiaries)

•2005 Italy

•2005 Germany

•2005 Australia

•2006 Spain

Current product range•2007 HumagenPipets acquired (quality

specialty pipettes and microtools for IVF) from founder Debra Bryant, Ph .D .

•2008 MidAtlanticDevices acquired (innovative devices and ‘total supplier’ to IVF labs) from founder Terry Fortino

•2009 Exclusive global rights obtained to the Planer/BT37 mini-incubator

•2010 Joint venture, ORIGIOScanLabEquipment, established with a leading manufacturer of equipment for IVF labs

Emerging/innovative technologies•2005 Global exclusive rights obtained to the

patented concept of adding Iloprost to a fertility media

•2005 Global exclusive rights obtained to the patented concept of adding IGF-II to a fertility media

•2005 Initial investment undertaken by Humagen Pipets in IVF microfluidics via InceptBioSystems

•2007 The world’s largest IVF study on culture media enhanced by GM-CSF undertaken by ORIGIO

•2008 Positive interim results published by ORIGIO regarding the GM-CSF study

•2009 Global exclusive rights acquired to the patented embryo selection technology from Novocellus Ltd . (EmbryoSure)

•2010 Positive headline results for the GM-CSF study published by ORIGIO announcing the product launch of EmbryoGen® for a commercially attractive subgroup of IVF patients

•2006 USA

• 2008 Benelux

•2008 China

•2010 Russia

2.

3.

1.

Key MilestOnes On OrigiO’s trAnsFOrMAtiOnAl JOurney

Oocyte retrieval Sperm preparation


MEDICULTMEDIA

HUMAGENPIPETS

Product OfferingselecteD PrODucts

Fertilization

IVF

Embryo

cryopreservation

Embryo transfer

Microtools

ICSI

Oocyte retrieval Sperm preparation

Sperm immobilization

In vitro

maturation

Denudation

Oocyte cryopreservation

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

Embryo biopsy / PGD

Blastocyst transfer

Blastocyst

cryopreservation

ART equipmentEmbryo culture

Financial statement

47

(DKK ’000) Group Parent

Note 2010 2009 2008 2010 2009 2008

Revenue 2 307,988 265,683 203,235 95,238 88,706 89,047

Costs of sales 3 (125,051) (108,664) (75,171) (37,766) (33,279) (31,016)

Gross contribution 182,937 157,019 128,064 57,472 55,427 58,031

Sales and Marketing expenses 3 (85,043) (71,590) (60,049) (22,168) (21,413) (24,300)

Administrative expenses 3 (34,348) (31,236) (24,129) (17,818) (19,357) (17,094)

Research and Development expenses 3 (19,725) (17,997) (18,891) (17,477) (16,224) (18,115)

EBITDA before special items 43,821 36,196 24,995 9 (1,567) (1,478)

Depreciation 3 (7,137) (4,182) (3,152) (5,148) (2,404) (1,939)

EBITA before special items 36,684 32,014 21,843 (5,139) (3,971) (3,417)

Amortization 3 (8,934) (10,928) (11,499) (1,339) (331) (2,793)

EBIT before special items 27,750 21,086 10,344 (6,478) (4,302) (6,210)

Special items 4 (13,232) (5,140) 0 (6,551) (5,140) 0

EBIT 14,518 15,946 10,344 (13,029) (9,442) (6,210)

Financial income 5 161 967 2,882 15,822 7,988 13,116

Financial expenses 5 (18,339) (10,045) (7,491) (7,580) (7,946) (5,596)

Profit/loss before income tax (3,660) 6,868 5,735 (4,787) (9,400) 1,310

Income tax 6 (6,335) (5,476) 7,773 0 0 9,800

Profit/loss for the year (9,995) 1,392 13,508 (4,787) (9,400) 11,110

Distribution of profit/loss

Minority interests 582 243 584 – – –

Transferred to retained earnings (10,577) 1,149 12,924 (4,787) (9,400) 11,110


Earnings per share

Earnings per share (EPS) 7 (0 .37) 0 .04 0 .47

Earnings per share diluted (EPS diluted) 7 (0 .37) 0 .04 0 .47

statement of comprehensive income


Note 2010 2009 2008 2010 2009 2008


Other comprehensive income:

Interest swap (3,624) (44) (10,087) (3,624) (44) (10,087)

Exchange rate adjustment

foreign subsidiaries 4,202 (1,513) 917 – – –

Other comprehensive income 578 (1,557) (9,170) (3,624) (44) (10,087)

Comprehensive income (9,417) (165) 4,338 (8,411) (9,444) 1,023

income statement


Note 2010 2009 2010 2009

Goodwill 139,450 131,560 0 0

Licenses and rights 1,829 2,017 1,619 1,787

Development projects in progress 9,635 6,166 9,635 6,166

Other intangible assets 37,279 21,178 21,818 141

Intangible assets 8 188,193 160,921 33,072 8,094

Properties 158,824 30,341 145,315 17,356

Plant and machinery 14,590 4,861 9,333 2,156

Assets under construction 2,636 86,637 125 81,872

Other fixtures and fittings,

tools and equipment 17,462 7,420 15,646 5,387

Property, plant and equipment 9 193,512 129,259 170,419 106,771

Shares in subsidiaries 10 – – 25,960 25,499

Loan to subsidiaries 10 – – 181,574 183,365

Other investments 10 561 6,747 0 0

Deferred tax asset 6 18,977 18,777 15,000 15,000

Financial non-current assets 19,538 25,524 222,534 223,864

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

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

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

Receivables from group enterprises – – 23,673 14,367

Other receivables 2,409 7,644 169 5,620

Prepayments 2,254 2,996 849 1,923

Receivables, etc. 58,071 53,270 31,386 28,611

Securities 437 63,437 71 63,437

Cash and cash equivalents 18,560 15,551 3,783 6,674

Assets classified as held for sale 13 11,995 0 11,995 0

Total current assets 128,685 163,091 59,079 108,869

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

statement of Financial Position as at December 31 – Assets


MEDICULTMEDIA

HUMAGENPIPETS

49


Note 2010 2009 2010 2009

Share capital 144,976 141,964 144,976 141,964

Translation reserve (1,383) (5,585) 106 106

Retained earnings 47,642 41,131 40,596 28,295

Equity attributable to ORIGIO a/s 191,235 177,510 185,678 170,365

Minority interest in equity 1,696 985 - -

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

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

Other non-current liabilities 529 8,890 0 0

Deferred tax 6 465 465 0 0

Non-current liabilities 204,141 205,368 202,321 195,693

Short-term portion of non-current liabilities 14 26,832 25,916 16,636 15,352

Bank borrowings 20,554 4,502 17,527 3,088

Trade payables 27,097 25,119 9,996 16,859

Payables to group enterprises - - 10,322 19,476

Income taxes 3,252 1,047 0 0

Other payables 43,726 38,348 31,229 26,765

Other current liabilities 121,461 94,932 85,710 81,540

Liabilities associated with assets

held for sale 13 11,395 0 11,395 0

Total current liabilities 132,856 94,932 97,105 81,540

Total liabilities 336,997 300,300 299,426 277,233

Total equity and liabilities 529,928 478,795 485,104 447,598

Financial instruments 15

Contingent assets and liabilities,

security etc . 16

Staff and remuneration 17

Fee to the independent auditor 18

Related parties and transactions 19

statement of Financial Position as at December 31 – equity and liabilities


Note 2010 2009 2010 2009

Profit/loss for the year (9,995) 1,392 (4,787) (9,400)

Depreciation and other adjustments 20 51,406 31,691 4,189 4,751

Changes in net working capital 21 (4,290) (473) (4,670) 4,044

Cash flow from operations before

financial items and tax 37,121 32,610 (5,268) (605)

Financial income 3,780 598 16,301 1,448

Financial expenses (9,080) (3,514) (4,527) (5,444)

Tax (4,363) (4,134) 0 0

Cash flow from operating activities 27,458 25,560 6,506 (4,601)

Investment in intangible assets (5,265) (6,249) (4,963) (4,154)

Investment in property, plant

and equipment (100,167) (49,435) (94,766) (45,308)

Investment in securities (net) 55,495 75,673 55,861 77,826

Investment in group companies – – (461) (4,569)

Loans to group companies – – 1,791 (9,818)

Loans from group companies – – (8,615) 16,846

Interest on loans to group companies – – 7,682 7,293

Investment in associated companies 0 (560) 0 0

Investment deferred payment – – 0 1,091

Cash flow from investment activities (49,937) 19,429 (43,472) 39,207

Cash flow before financing activities (22,479) 44,989 (36,966) 34,606

Loan and credit institutions repayment (16,246) (15,019) (16,246) (14,768)

Deferred payment acquisitions (11,503) (10,292) 0 0

Short-term employee loan 0 1,619 0 1,619

Capital paid by minority 424 173 – –

New loans established 36,376 0 35,857 0

Capital increase including

warrants exercised 3,055 0 3,055 0

Interest paid on acquisition loans (3,052) (2,363) (3,052) (2,363)

Cash flow from financing activities 9,054 (25,882) 19,614 (15,512)

Change in cash and cash equivalents (13,425) 19,107 (17,352) 19,094

Cash and cash equivalents at January 1 11,049 (8,048) 3,586 (15,508)

Exchange rate adjustments 382 (10) (8) 0

Cash and cash equivalents

as at December 31 22 (1,994) 11,049 (13,774) 3,586

statement of cash Flow


MEDICULTMEDIA

HUMAGENPIPETS

51

statement of changes in equity

(DKK ’000) Group

Sharecapital Translationreserve Retainedearnings Minorityinterest Total

Equity as at January 1, 2009 141,964 (4,072) 37,464 569 175,925

Comprehensive income – (1,513) 1,105 243 (165)

Warrants compensation 2,058 2,058

Disposals of own shares 504 504Capital increases 173 173Equity as at December 31, 2009 141,964 (5,585) 41,131 985 178,495

Equity as at January 1, 2010 141,964 (5,585) 41,131 985 178,495

Comprehensive income – 4,202 (14,201) 582 (9,417)

Warrants compensation 738 738

Disposals of own shares 823 823Dividend paid to minority (295) (295)Capital increases 3,012 19,151 424 22,587Equity as at December 31, 2010 144,976 (1,383) 47,642 1,696 192,931

(DKK ’000) Parent

Sharecapital Translationreserve Retainedearnings Total

Equity as at January 1, 2009 141,964 106 35,177 177,247

Comprehensive income – – (9,444) (9,444)

Warrant compensation – – 2,058 2,058

Disposals of own shares – – 504 504

Equity as at December 31, 2009 141,964 106 28,295 170,365

Equity as at January 1, 2010 141,964 106 28,295 170,365

Comprehensive income – – (8,411) (8,411)

Warrant compensation – – 738 738

Disposals of own shares – – 823 823

Capital increase 3,012 – 19,151 22,163

Equity as at December 31, 2010 144,976 106 40,596 185,678

(DKK ‘000) Group

Sharecapital(nominal) 2010 2009 2008 2007 2006 Share capital as at January 1, 2010 141,964 141,964 138,442 113,217 100,124Equity issues 3,012 – 3,522 25,000 10,000Warrants exercised – – – 225 3,093Share capital as at December 31, 2010 144,976 141,964 141,964 138,442 113,217

Total number of shares 28,995,246 28,392,897 28,392,897 27,688,424 22,643,424

Numberof Costsof Nominal %ofshare

Ownshares shares shares value capital Own shares as at January 1, 2010 274,744 3,178 1,374 1 .0%Purchase – – – 0%Sale 60,920 705 305 0 .3%Own shares as at December 31, 2010 213,824 2,473 1,069 0.7%


MEDICULTMEDIA

HUMAGENPIPETS

53

Accounting Policies

The Financial Statement for ORIGIO a/s for 2010 has been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved adopted by the EU, the Oslo Stock Exchange’s requirements for financial reporting by listed companies, and Danish disclosure requirements for listed companies .

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below . These policies have been consistently applied to all years presented, except for the implementation of IFRS3 (revised in 2009) – please refer to page 62 for a description of the impact on the reporting .

In the Income Statement, a number of items are classified separately in order to give a more transparent view of the ORIGIO Group’s operating profit/(loss) . The comparable figures and key figures for 2009 have consequently been presented accordingly .

The Consolidated Financial StatementsThe consolidated financial statement comprises the parent company, ORIGIO a/s, and subsidiaries in which ORIGIO a/s directly or indirectly owns more than 50% of the voting rights or in other way has control .

The group financial statement is prepared on the basis of the financial statements of the individual companies, compiled according to uniform accounting principles . Eliminations are made for dividends from subsidiaries, all revenue and expenditure items, internal profits and internal-company balances as well as inter-company shares .

Minority interests’ share of the result is included in the net results for the group and the share of the group’s equity is included as a separate item of the group equity

Acquisition and Divestment of CompaniesNewly acquired or newly established companies are recognized in the consolidated financial statement from the date of acquisition . Divested or terminated (closed down) companies are recognized in the consolidated income statement to the date of divestment . Comparative figures are not adjusted for newly acquired, divested or terminated companies .

On acquisition of companies, the purchase method is applied, according to which the newly acquired companies’ identified assets and liabilities are measured at fair value on the date of acquisition . Any excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recognized as goodwill . Any deficiency in the cost of acquisition below the fair value of the identifiable net assets acquired (i .e . discount on acquisition) is credited to profit and loss in the year of acquisition . The interest of minority shareholders is stated at the minority proportion of the fair value of the assets and liabilities recognized . Subsequently, any losses applicable to the minority interest in excess of the minority interests are allocated against the interests of the parent company .

Foreign CurrencyTransactions in foreign currency are stated at the exchange rate on the transaction date . Monetary items in foreign currency are converted at the exchange rates on the balance sheet date .

Financial statements of foreign subsidiaries are converted using the exchange rates on the balance sheet date for balance sheet items and average exchange rate for items of the profit and loss account . All exchange rate adjustments are included in the profit and loss account under financial items, apart from the exchange rate differences arising on:

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

These exchange rate differences are recognized as other comprehensive income .

Derivative Financial InstrumentsOn initial recognition, derivative financial instruments are recognized at cost in the balance sheet and subsequently measured at fair value . Positive and negative fair values of derivative financial instruments are recognized under other receivables or other payables, respectively .

note 1. Accounting Policies and estimates

Changes in the fair value of a derivative financial instrument that meets the criteria for hedging the fair value of a recognized asset or liability are recognized in the income statement with the changes in the value of the hedged asset or liability .

Changes in the fair value of a derivative financial instrument that meets the criteria for hedging the fair value of a future asset or liability are recognized in other comprehensive income . Income and expenses related to such hedging transactions are transferred from other comprehensive income at the realization of the hedged asset or liability and recognized under the same item as the hedged asset or liability .

Changes in the fair value of derivative financial instruments that do not meet the criteria for treatment as hedging instruments are recognized in the income statement .

Warrant ProgramsEquity based warrant programs have been established and are offered to a number of employees, the Executive Board and members of the Board of Directors . Warrant programs were offered in 2005, 2007 and 2008 .

The value of services received as consideration for granted warrants is measured at the fair value of the warrant . The fair value is measured at the allotment date and recognized in the income statement under staff costs over the period in which the final right to the warrants is obtained . The contra entry to this is recognized under equity .

In connection with the initial recognition of the warrants, an estimate is made of the number of warrants that the employees are expected to obtain rights to . Subsequently, an adjustment is made for changes in the estimate of the number of shares that the employees have obtained rights to so that the total recognition is based on the actual number of shares that the employees have obtained rights to .

The fair value of the allotted warrants is estimated by application of the Black and Scholes pricing model .

Segment InformationThe information is based on business segments which the management uses to report on and control the group internally . The segment information complies with the group’s accounting policies, risks and internal controls . Geographical segmentation is provided for revenue and non-current assets of the major individual countries or areas . the incOMe stAteMent

In the income statement, classifications are made according to function . This means that all costs have been transferred to the function to which they relate: costs of sales, sales and marketing, administrative costs or development expenses .

RevenueRevenue related to sales of goods for resale and finished goods is recognized in the income statement provided that delivery and risk transition has taken place before the year-end . Revenue is recognized less VAT and discounts .

Cost of SalesCost of sales comprises raw materials and consumables, trading goods, QC costs and other costs including premises and salaries, which have been incurred in order to obtain the net revenue for the year .

Sales and Marketing ExpensesSales and marketing expenses include expenses for sales and marketing personnel, advertising and exhibition expenses, distribution expenses and premises .

Administrative ExpensesAdministrative expenses comprise the expenses related to the management and administration of the group, including expenses related to the administrative staff, management, office premises as well as office expenses .

Research and Development ExpensesResearch and development expenses comprise regulatory expenses, wages and salaries, clinical and non-clinical testing, external scientific consultancy as well as other expenses, which directly or indirectly can be attributed to the company’s research and development projects, product improvements and development projects which do not fulfil the criteria for capitalization . In addition, the amortization and impairment of capitalized development projects are recognized .

All expenses concerning research activities are recognized as expenses incurred .


MEDICULTMEDIA

HUMAGENPIPETS

55

Special ItemsSpecial items comprise significant income and expenses of an exceptional nature relative to ORIGIO’s operating activities . Significant amounts such as costs of restructuring processes, costs related to investment in or divestment of activities/companies and amounts of a one-off nature such as costs related to take-over offers, corporate branding process and impairment write-down are included in special items .

FinancialsFinancial income and financial expenses include interest, exchange gains and losses on securities, debt and transactions denominated in foreign currencies, amortization of financial assets, etc .

Tax on Results for the YearCalculated tax, comprising tax on the taxable income for the year and the year’s change in deferred tax, is recognized in the income statement with the part that relates to profit and in other comprehensive income with the part that relates to items recognized there .

The Danish corporation tax is allocated to the jointly taxed Danish companies according to their taxable incomes (full division with refund regarding tax losses) . Jointly taxed companies are included in the Danish tax prepayment scheme .

Deferred tax is calculated on all temporary differences between accounting and taxable values . Deferred tax is calculated with the actual tax rate . Deferred tax arising on tax-deductible temporary differences (tax assets) is included in the balance sheet only if there is reasonable certainty that the tax assets can be off set by the company against future taxable income .

stAteMent OF the FinAnciAl POsitiOn

Intangible AssetsLicenses and patent investigating costs related to the license agreements are entered at cost less accumulated amortization . Amortization is made on a straight-line basis over term of the agreement .

Other intangible fixed assets are stated at cost less accumulated amortisation . Amortization of these assets is made according to a declining method over the expected future lifetime of the assets .

The expected lifetimes are:• Licenses: 10 years• Customer relations: 9 years• Technology: 15 years

Goodwill arisen from acquisition of companies and activities is measured at cost price less any impairment as a result of permanent decreases in the earning capacity of the company in question .

Development ExpensesDevelopment projects that are clearly defined and identifiable and where sufficient resources are allocated to complete the project and a potential future market can be proven and where the company intends to produce, market or use the project, are recognized as intangible assets where the expenses of the project can be calculated reliably and there is sufficient certainty that the future earnings or the net selling price can cover the production, selling, administration and development expenses . ORIGIO defines the above criteria for capitalization of development expenses as the point in time when projects have successfully passed the interim data phase in the human efficacy trial . Other development expenses are recognized in the income statement as incurred .

Recognized development expenses are measured at cost less accumulated amortization and impairment losses . The cost comprises salaries and other costs attributable to the company’s development activities .

Upon completion of the development activity, development projects are amortized according to the straight-line method over the estimated useful life as from the point in time when the asset is ready for use . The basis of amortization is reduced by impairment losses, if any .

Properties, Plant and EquipmentProperties, plant and equipment are measured at cost less depreciation on a straight-line basis according to the physical and financial lifetime of the assets . Cost comprises acquisition price and costs directly related to acquisition until the time when the company starts using the asset .

The expected lifetimes are:• Building and building parts: 20-30 years• Plant and machinery: 15-30 years• Other fixtures and fittings, tools and equipment: 3-10 years

The carrying amount of land is not depreciated . The depreciation basis is determined taking into account the scrap value of the asset less any impairment losses . The scrap value is revalued on a regular basis .

Profit and losses arising from disposals are recognized in the income statement under depreciation .

LeasesLeases related to property, plant and equipment where the company assumes all material risks and rewards of ownership (financial leases), are recognized as assets . On initial recognition, the assets are valued at computed cost equal to fair value . Assets held under finance leases are depreciated as other similar tangible assets .

Lease payments under agreements considered as operating leases and other rental agreements are recognized in the income statement over the term of the agreements . The company’s total obligation related to operating leases and rental agreements is stated under contingent assets and liabilities, etc .

Other InvestmentsThe shares in other investments are measured at fair value less any impairment as a result of permanent decreases in the earning capacity of the company in question . Received dividends are included in the financial income .

Investments in Subsidiaries and Associated Companies by the Parent CompanyThe parent company’s shares in subsidiaries and associated companies are measured at cost less write-downs as a result of permanent decreases in the earning capacity of the company in question . For transactions with companies within the group, inter-company profits are eliminated . Received dividends are included in the income statement of the parent company .

Impairment of Non-current AssetsThe carrying amount of intangible assets, property, plant and equipment as well as non-current asset investments is reviewed for impairment when events or changed conditions indicate that the carrying amount may not be recoverable . If there is such an indication, an impairment test is made . An impairment loss is calculated based on the higher of the net present value and the net selling price . In order to assess the impairment, the assets are grouped on the smallest identifiable group of assets that generates cash flows (cash flow generating units) . Impairments are recognized in the income statement under the same items as the related depreciation and amortization .

InventoriesInventories are valued at the lower of historical cost (compiled by the FIFO principle) and net realisation value . Cost of goods for resale as well as raw materials and consumables comprises the purchase costs .

Costs of finished goods and work in progress comprises the cost of raw materials, consumables, direct payroll, manufacturing costs and indirect production costs . Indirect production costs comprise indirect materials and payroll costs as well as maintenance of and depreciation on machinery, plant and equipment used in the production, plant administration and management . Borrowing costs are not capitalized .

The net realizable value of stocks is measured as the selling price less costs related to the completion of the products and costs related to the execution of sales . Furthermore, net realizable value is determined with regard to marketability, obsolescence and development in expected selling price .


MEDICULTMEDIA

HUMAGENPIPETS

57

ReceivablesReceivables are measured after write-offs for individual risks .

Securities – BondsBonds are measured at market value . Both realized and unrealized value adjustments are recognized in the income statement as financial items .

PrepaymentsPrepayments recognized under assets comprise expenses incurred related to the following financial year .

Assets held for saleAssets are classified as assets held for sale when activities to carry out such sale have been initiated and it is probable that the assets will be disposed of within 12 months . They are stated at the lower of carrying amount and fair value less selling costs . Assets held for sale are not depreciated .

EquityOwn shares acquired by the parent company or subsidiaries are recognized directly under equity . Correspondingly, sales fees and dividends are included directly under equity .

Income Tax Payable and Deferred TaxCurrent tax liabilities and current tax receivables are measured as tax calculated on the taxable income for the year adjusted for tax on the previous years’ taxable income and taxes paid on account/prepaid . Deferred tax is measured in respect of temporary differences between the carrying amount and the tax base of assets and liabilities . No deferred tax is recognized for goodwill unless amortization of goodwill for tax purposes is allowed . In cases, e .g . in respect of shares, in which the statement of the tax base can be made according to alternative taxation rules, deferred tax is measured on the basis of the planned use of the asset or settlement of the liability, respectively .

Deferred tax assets, including the tax value of tax loss carried forward, are measured at the expected realizable value, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction .

Adjustment of deferred tax is made as regards elimination of unrealized inter-company profits and losses .

Deferred tax is measured on the basis of the tax rules and tax rates in force in the respective countries at the balance sheet date when the deferred tax is expected to crystallize as current tax . Any changes in deferred tax as a consequence of amendments to tax rates are recognized in the income statement .

Financial LiabilitiesDebt to banks and other credit institutions is recognized initially at the proceeds received net of transaction expenses incurred . In subsequent periods, financial liabilities other than provisions are measured at amortized cost corresponding to the capitalized value using the effective interest method; consequently, the difference between the proceeds and the nominal value is recognized in the income statement over the maturity period of the loan .

The capitalized residual lease commitment on finance leases is recognized under finance leases .

Other liabilities, comprising trade payables and other payables, are measured at amortized cost corresponding to nominal value .

Cash Flow StatementThe cash flow statement shows the cash flow for the year from operating, investment and financing activities, changes in cash and bank borrowings, and cash and bank borrowing position at the beginning and end of the year .

Cash Flow from Operating ActivitiesCash flow from operating activities is presented as the share of the results for the year adjusted for non-cash operating items, changes in the net working capital and income tax paid .

Cash Flow from Investment ActivitiesCash flow from investment activities comprises payments in connection with the purchase and sale of intangible assets, property, plant and equipment and financial fixed assets .

Cash Flow from Financing ActivitiesCash flow from financing activities comprises changes in size or structure of the share capital and related costs, contracting of loans, instalments on interest-bearing debt, payment of dividends to shareholders and paid interest on debt related to acquisitions .

Cash and Cash EquivalentsCash and cash equivalents comprise cash and cash equivalents and bank borrowing with a term not exceeding three months and which can be traded into cash without any difficulties and which are only exposed slightly to changes in value .

Key FiguresKey figures are presented in accordance with the following definitions:

Gross contribution margin, %: Gross contribution divided by revenue .EBITDA before special items margin, %: EBITDA before special items divided by revenue .EBITDA margin, %: EBITDA divided by revenue .EBIT before special items margin, %: EBIT before special items divided by revenue . EBIT margin, %: EBIT divided by revenue .Earnings Per Share: Profit/loss for the year divided by the average number of shares excluding treasury shares .Earnings Per Share after dilution: Profit/loss for the year divided by the diluted average number of shares excluding treasury shares .Cash Flow Per Share: Cash flow from operating activities divided by average number of shares excluding treasury shares .Equity ratio, %: The equity divided by the total amount of assets as per balance sheet day .Return on equity: Profit/loss for the year divided by average equity .

Accounting estimates and Assessments

In the statement of the carrying amounts of certain asset and liability items, estimates are required on how future events will affect the carrying amounts of these assets and liabilities at the balance sheet date . Estimates material to the financial reporting are, among others, made in the statement of depreciation/amortization, write-downs and contingent assets and liabilities .

The estimates used are based on assumptions assessed by management . However, estimates are inherently uncertain . The assumptions can be incomplete or inaccurate and unexpected events or circumstances might occur . Furthermore, the enterprise is subject to risks and uncertainties that might result in deviations in actual results compared to estimates . As part of the accounting policies applied by the group and besides from estimates, management assesses situations which might influence amounts, recognized in the financial statements materially . Such assessments comprise among others determination of revenue recognition as well as recognition of development costs and share-based transactions .

ORIGIO considers a variety of factors in determining the appropriate method of revenue recognition under these arrangements, such as the degree to which elements of the contract can be separated, their value to ORIGIO, the earnings process associated with each element and the degree of further work required to be completed by ORIGIO under the agreement .

Generally, ORIGIO measures goods or services rendered at the fair value of goods or services received . For the warrants granted to employees, ORIGIO measures their value by reference to the fair value on the date of allocation of equity securities to be issued upon exercise, taking into account the terms and conditions upon which the warrants were granted, including trading conditions and market parameters such as volatility of the shares and vesting aspects .

Recoverable Amount of GoodwillThe assessment of whether goodwill is impaired requires a determination of the value in use of the cash-generating units to which the goodwill amounts have been allocated . The determination of the value in use requires estimates of the expected future cash flows of each cash generating unit and a reasonable discount rate .

Property, Plant and EquipmentThe carrying amount of the tangible assets is reviewed annually in order to determine whether it is aligned with reasonable assumptions about underlying values to the company .


MEDICULTMEDIA

HUMAGENPIPETS

59

Assets held for salesThe disposal of the previous facilities in Jyllinge, Denmark is expected to be realized to an amount lower than the depreciated cost price . The carrying amount has thus been written down in 2010, although the assessment of the sales price is subject to uncertainty .

A sale is expected within the next twelve months and the facilities in Jyllinge, Denmark have thus been reclassified to asset held for sale .

TaxManagement is required to make an estimate of future taxable income related to the recognition of deferred tax assets and liabilities . Management recognizes deferred tax assets when it is probable that they can be set off against future taxable income .

impact of new international Financial reporting standards

ORIGIO has adopted all new or amended and revised International Financial Reporting standards (IFRS/IAS) and interpretations (IFRICs) endorsed by the EU effective for the accounting period beginning on January 1, 2010 .

Accounting policies have been changed regarding acquisition costs in connection with “Business Combinations” which are expensed from January 1, 2010 as a consequence of the revised IFRS 3 . Expensed acquisition costs regarding business combinations amount to DKK 0 .

During 2010, the International Accounting Standard Board (IASB) issued a number of IFRS, amendments and interpretations (IFRICs) of which some have been endorsed by the EU as per December 31, 2010 and are mandatory for the Groups’ accounting period beginning on or after January 1, 2011 and some are not yet adopted by the EU . The Company has assessed the amendments and interpretations and determined that none of them will have a material impact on the consolidated financial statements going forward .

note 2. segment information

(DKK ’000) Group

2010 2009

Business segments Dispos- Equip- Fertility Stem Total Dispos- Equip- Fertility Stem Total 2010 ables ment products Cells ables ment products Cells

External revenue 260,967 47,021 307,988 0 307,988 237,690 27,993 265,683 0 265,683

Totalrevenue 260,967 47,021 307,988 0 307,988 237,690 27,993 265,683 0 265,683

Research and

Development expenses 0 0 (16,687) (3,038) (19,725) 0 0 (14,181) (3,816) (17,997)

EBITDA

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

EBIT

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

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

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

Investments in

intangible assets 0 0 26,619 0 26,619 0 0 6,611 0 6,611

Property, plant

and equipment 0 0 91,721 0 91,721 0 0 57,114 0 57,114

Geographical split 2010 Denmark Europe Americas Rest of World Total

Revenue 4,998 151,371 87,148 64,471 307,988

Assets 255,626 77,929 186,583 9,790 529,928

Investments in:

intangible assets 26,316 303 0 0 26,619

Property, plant and equipment 85,996 140 5,175 410 91,721

Geographical split 2009 Denmark Europe Americas Rest of World Total

Revenue 3,915 138,609 78,625 44,534 265,683

Assets 249,866 51,188 177,741 0 478,795

Investments in:

intangible assets 4,154 2,457 0 0 6,611

Property, plant and equipment 45,308 8,141 3,665 0 57,114


MEDICULTMEDIA

HUMAGENPIPETS

61


2010 2009 2010 2009

Costs of sales 140,596 110,394 46,346 34,446

Sales and Marketing expenses 87,177 74,423 22,590 23,629

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

Research and Development expenses 21,562 18,644 19,300 16,871

Incl . depreciation, amortization and special items

note 3. expenses classified by Function

note 4. special items(DKK ’000) Group Parent

2010 2009 2010 2009

Property, Jyllinge (former headquarters) 5,706 0 5,706 0

Former US automation project 6,681 0

Establishment of ORIGIO LLC (Russia) 845 0 845 0

VitroLife/Merck process 0 2,979 0 2,979

Branding process 0 2,161 0 2,161

Total special items 13,232 5,140 6,551 5,140

Special items is charged as:

Cost af sales 1,987 0 500 0

Sales and Marketing 0 2,161 0 2,161

Administrative 1,161 2,979 845 2,979

Depreciation and write-down 10,084 0 5,206 0

note 6. corporate taxDKK (‘000) Group Parent

2010 2009 2010 2009

Actual corporate tax 6,335 6,529 0 0

Changed in deferred tax 0 (1,053) 0 0

Total corporate tax 6,335 5,476 0 0

Net result before tax (3,660) 6,868 (4,787) (9,400)

Computed 25% tax on result (915) 1,717 (1,196) (2,350)

Tax effect of:

Adjustments to previous years (929) (1,112) 0 0

Effect of differences in tax rate 1,048 2,138 - -

Tax exempt income 0 0 673 0

Non-deductible costs, incl . warrants 3,422 752 233 449

Deferred tax on entries in equity 874 (317) 0 (12)

Reversal of write-downs 0 0 0 0

Deferred tax asset not recognized 2,853 2,298 1,636 1,913

Total corporate tax 6,335 5,476 0 0

Effective tax rate 25% 25% 25% 25%

Components of the deferred tax

are as follows:

Non-current assets (18,337) (16,896) (15,471) (14,011)

Current assets (1,223) (1,252) (29) (137)

Tax deductible losses (8,232) (6,831) (3,017) (2,733)

Total (27,792) (24,979) (18,517) (16,881)

Deferred tax asset recognized 18,977 18,777 15,000 15,000

Tax asset not recognized as asset 9,280 6,667 3,517 1,881

Deferred tax liability (465) (465) 0 0

As earnings are expected to increase in future years, it has been decided to maintain a partly capitalized deferred tax asset,

corresponding to the expected tax on the parent company’s estimated earnings within a foreseeable future .

note 5. Financial items (DKK ’000) Group Parent

2010 2009 2010 2009

Financial income:

Interest income 161 852 118 695

Exchange gains 0 115 5,331 0

Interest income from subsidiaries 0 0 7,682 7,293

Dividend from subsidiaries 0 0 2,691 0

Total 161 967 15,822 7,988

Financial expenses:

Interest expenses 11,350 7,892 7,580 4,230

Fair value adjustments of securities 0 2,153 0 2,153

Impairment of investments 6,766 0 0 0

Exchange losses 223 0 0 1,563

Total 18,339 10,045 7,580 7,946


MEDICULTMEDIA

HUMAGENPIPETS

63

(DKK’000) Group Parent

2010 Goodwill Licenses & Development Other Licenses & Development Other rights projects intangible rights projects intangible in progress assets in progress assets

Cost as at January 1 131,560 6,280 6,166 47,268 5,983 6,166 148

Additions from business combinations 0 0 0 0 0 0 0

Additions internal cost 0 0 1,575 0 0 1,575 0

Additions in the year 191 1,894 22,959 191 1,894 22,656

Exchange rate adjustments 7,890 0 0 3,808 0 0 0

Cost as at December 31 139,450 6,471 9,635 74,035 6,174 9,635 22,804

Amortization and impairment

as at January 1 0 4,263 0 26,090 4,196 0 6

Amortization 0 379 0 8,555 359 0 980

Impairment 0 0 0 0 0 0 0

Exchange rate adjustments 0 0 0 2,111 0 0 0

Amortizations and

impairment as at December 31 0 4,642 0 36,756 4,555 0 986

Carrying amount as at December 31 139,450 1,829 9,635 37,279 1,619 9,635 21,818

Remaining life time, years – 1-10 – 8-15 1-10 – 8-15

Amortization and impairment is

charged as:

Cost of sales – 0 – 13 0 – 13

Sales and Marketing – 20 – 164 0 – 164

Administrative – 0 – 7,627 0 – 52

Research and Development – 359 – 751 359 – 751

note 8. intangible Assets

note 7. earnings per share(DKK ’000)

2010 2009 2008

Profit for the year (9,995) 1,392 13,508

Minority interests (582) (243) (584)

Profit for the year to equity

holders of the parent (10,577) 1,149 12,924

Average number of shares 28,741,736 28,392,897 28,060,229

Average number of own shares 255,164 317,462 325,000

Average number of shares

excluding own shares 28,486,572 28,075,435 27,735,229

Average dilution effect of warrants 25,629 0 0

Diluted average number of shares 28,537,645 28,075,435 27,735,229

Earnings per share (EPS), DKK (0 .37) 0 .04 0 .47

Earnings per share, adjusted* 0 .33 0 .22 0 .47

Earnings per share diluted (EPS), DKK (0.37) 0.04 0.47

*Adjusted for special items and impairment of investments .

note 8. intangible Assets

An impairment test regarding goodwill is performed based on the discounted values of future cash flows for each unit . Future cash flows are based on the budget for 2011 and projections for nine years . Important parameters are sales, EBIT, working capital, tangible assets and growth assumptions after the indicated 10-year period . Budgets are based on specific commercial assessments of the business areas while projections that go beyond 2011 are based on general parameters .

A major part of the goodwill is related to the business units in the US . The parameters in the projection for the period 2012-2020 are sales growth of 5-8%, and corresponding EBIT growth . Parameters in projection for the periode 2012-2020 for goodwill related to other business units are sales growth of 5-10%, and corresponding EBIT growth . Applying a decrease of 50% in expected growth rate from 2012 to 2020 will cause a limited need for impairment of the goodwill . The rate of discount is 7 .3% . Alternatively, applying an increase of 1 percentage point on the rate of discount will not cause a need for impairment of goodwill . The tax rate is assumed to be between 30-40% . The test did not result in any impairment .

(DKK’000) Group Parent

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

Cost as at January 1 132,925 5,890 946 47,256 5,593 946 0

Additions internal cost 0 0 1,537 0 0 1,537 0

Additions in the year 426 390 3,683 575 390 3,683 148

Exchange rate adjustments (1,791) 0 0 (563) 0 0 0

Cost as at December 31 131,560 6,280 6,166 47,268 5,983 6,166 148

Amortization and impairment

as at January 1 0 3,918 0 15,842 3,871 0 0

Amortization 0 345 0 10,583 325 0 6

Impairment 0 0 0 0 0 0 0

Exchange rate adjustments 0 0 0 (335) 0 0 0

Amortizations and

impairment as at December 31 0 4,263 0 26,090 4,196 0 6

Carrying amount as at December 31 131,560 2,017 6,166 21,178 1,787 6,166 141

Amortization and impairment is

charged as:

Cost of sales – 0 – 3 0 – 3

Sales and Marketing – 20 – 3 0 – 3

Administrative – 0 – 10,577 0 – 0

Research and Development – 325 – 0 325 – 0


MEDICULTMEDIA

HUMAGENPIPETS

65

note 9. Properties, Plant and equipment (DKK ’000) Group Parent

2010 Properties Plant and Assets Other Properties Plant and Assets Other equipment under operating equipment under operating construction assets construction assets

Cost as at January 1 39,712 11,197 86,637 16,289 25,445 7,241 81,872 12,484

Additions in the year 15 462 85,432 5,812 0 426 80,309 5,261

Reclassifications 147,276 10,552 (164,933) 7,105 147,276 7,763 (162,056) 7,017

Disposals in the year (25,445) (3,922) 0 (4,970) (25,445) (3,922) 0 (4,505)

Exchange rate adjustments 1,163 315 378 38 0 0 0 0

Cost as at December 31 162,721 18,604 7,514 24,274 147,276 11,508 125 20,257

Depreciation as at January 1 9,371 6,336 0 8,869 8,090 5,084 0 7,095

Depreciation in the year 8,200 1,592 4,878 2,551 7,648 686 0 2,021

Depreciation on disposals

in the year (13,777) (3,595) 0 (4,629) (13,777) (3,595) 0 (4,505)

Exchange rate adjustments 103 (319) 0 21 0 0 0 0

Depreciation as at December 31 3,897 4,014 4,878 6,812 1,961 2,175 0 4,611

Carrying amount as at December 31 158,824 14,590 2,636 17,462 145,315 9,333 125 15,646

Capitalized financial items 15,025 0 0 0 15,025 0 0 0

Depreciation etc., charged as:

Costs of sales 1,898 920 – 784 1,567 651 – 784

Sales and Marketing 221 0 – 549 221 0 – 19

Administrative 512 637 – 928 291 14 – 928

Research and Development 363 35 – 290 363 21 – 290

Special items 5,206 – 4,878 0 5,206 0 – 0

2009 Properties Plant and Assets Other Properties Plant and Assets Other equipment under operating equipment under operating construction assets construction assets

Cost as at January 1 39,541 9,589 34,355 13,512 25,445 7,199 31,306 10,371

Additions in the year 381 856 53,234 2,643 0 42 50,691 1,988

Reclassifications 35 803 (963) 125 0 0 (125) 125

Disposals in the year 0 (10) 0 (363) 0 0 0 0

Exchange rate adjustments (245) (41) 11 372 0 0 0 0

Cost as at December 31 39,712 11,197 86,637 16,289 25,445 7,241 81,872 12,484

Depreciation as at January 1 8,201 5,209 0 6,788 7,403 4,602 0 5,860

Depreciation in the year 1,200 1,166 0 1,816 687 482 0 1,235

Depreciation on disposals

in the year 0 0 0 (120) 0 0 0 0

Exchange rate adjustments (30) (39) 0 385 0 0 0 0

Depreciation as at December 31 9,371 6,336 0 8,869 8,090 5,084 0 7,095

Carrying amount as at December 31 30,341 4,861 86,637 7,420 17,356 2,157 81,872 5,389

Capitalized financial items – – 10,697 – – – 10,697 –

Carrying amount of leased assets 0 0 0 112 0 0 0 112

Depreciation etc., charged as:

Costs of sales 647 717 – 363 339 462 – 363

Sales and Marketing 46 18 – 585 46 2 – 4

Administrative 417 424 – 643 212 11 – 643

Research and Development 90 7 – 225 90 7 – 225

note 10. Financial Assets(DKK ’000) Group Parent

2010 Other Loans to Shares in investments subsidiaries subsidiaries

Cost as at January 1 7,036 183,365 60,175

Additions in the year 0 11,175 461

Disposals in the year 0 (28,296) 0

Exchange rate adjustments 0 15,330 0

Cost at December 31 7,036 181,574 60,636

Adjustments at January 1 (289) 0 (34,676)

Exchange rate adjustments 550 0 0

Adjustments as at December 31 261 0 (34,676)

Amortization and impairment as at January 1 0 0 0

Impairment 6,766 0 0

Exchange rate adjustments (30) 0 0

Amortization and impairment at December 31 6,736 0 0

Carrying amount at December 31 561 181,574 25,960


2009 Other Loans to Shares in investments subsidiaries subsidiaries

Cost as at January 1 6,476 176,417 55,606

Additions from business combinations 0 0 0

Additions in the year 560 11,082 4,569

Disposals in the year 0 (1,264) 0

Exchange rate adjustments 0 (2,870) 0

Cost as at December 31 7,036 183,365 60,175

Adjustments as at January 1 (176) 0 (34,676)

Ajustments on disposals previous years

Exchange rate adjustments (113) - -

Adjustments as at December 31 (289) 0 (34,676)

Carrying amount as at December 31 6,747 183,365 25,499

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

Name Registered office Ownership

ORIGIO US Inc . Delaware, US 100%

ORIGIO MediCult Inc . Delaware, US 100%

ORIGIO Ltd . Hong Kong, China 51%

Aktieselskabet af 20/11 2003 Copenhagen, Denmark 100%


MEDICULTMEDIA

HUMAGENPIPETS

67

note 12. trade receivables(DKK ’000) Group Parent

2010 2009 2010 2009

The aging of trade receivables at

the reporting date was:

Not past due 24,224 22,194 5,319 4,938

Past due up to 3 months 18,180 13,456 1,222 1,631

Past due from 3 to 6 months 4,308 4,828 111 189

Past due more than 6 months 6,847 2,753 158 490

53,559 43,231 6,810 7,248

The changes in the provision

for impairment in respect of trade

receivables during the year were

as follows:

Balance as at January 1 601 1,393 547 1,340

Impairment loss recognized (450) (792) (432) (793)

Balance as at December 31 151 601 115 547

Based on historic default rates, the group believes that no impairment provision is necessary in respect of trade receivables not past due

or past due up to 3 months .

CreditrisksOutstanding receivables are monitored on a regular basis in accordance with the company’s debtor policy which is based on concrete

debtor assessments of private customers .

Public-sector customers are an important part of the company’s receivables, and it is believed that no credit risks are associated with

public-sector customers . In the event of uncertainty regarding a customer’s ability or willingness to pay a receivable and if it is deemed

that the claim is subject to risk, a write-down is made . Public-sector customers account for approximately 63% of the outstanding debt-

ors, with a balance past due of more than 6 months, which in spite of slow payment reduces the risk of loss .


2010 2009 2010 2009

Raw materials and consumables 6,664 7,203 7,443 5,466

Manufactured goods 30,553 22,272 4,367 3,857

Work in progress 2,405 1,358 34 824

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

Cost of material included in

production cost 61,506 55,013 13,348 12,593Expensed write-downs on inventories 143 21 143 21

note 11. inventories

note 13. Assets classified As held For sale(DKK ’000) Group Parent

2010 2009 2010 2009

Assets classified as held for sale:

Property 11,995 0 11,995 0

Liabilities associated with

assets held for sale

Credit institutions 11,395 0 11,395 0

note 14. non-current liabilities Outstanding Market Outstanding Market Interest debt value Interest debt value

2010 Principal %p.a. (DKK‘000)(DKK’000) Principal %p.a. (DKK‘000)(DKK’000)

Realkredit Danmark (DKK) 100,191,113 3) Var . 100,191 96,033 107,945,000 3) Var . 107,945 102,818

Realkredit Danmark (EUR) - - - - 1,295,700 1) 4 .5 6,301 6,311

Realkredit Danmark (EUR) - - - - 743,800 1) 4 .5 3,617 3,623

Realkredit Danmark (EUR) - - - - 403,800 1) 4 .5 2,446 2,450

Danske Bank (USD) 9,950,000 2) 2 .16 41,000 41,000 9,950,000 2) 2 .16 50,545 50,545

Danske Bank (USD) 6,915,868 4) Var . 38,821 38,821 6,915,868 2) Var . 4,195 35,894

Danske Bank (DKK) 6,175,000 2) 6 .7 3,830 4,170 6,175,000 6 .7 - 4,195

Danske Bank (DKK) 36,000,000 3 .5 35,512 35,512 - - - -

Monte Dei Paschi di Siena (EUR) 1,118,160 5) 2 .1 979 979 - - - -

UniCredit Banca d’Impresa (EUR) 1,491,000 5) 3 .9 320 320 1,391,000 5) 2 .0 744 744

1) Realkredit Danmark (EUR) is reclassified to Current Liabilities, as the related property is for sale

2) Fixed interest

3) For the first two quarters of 2011, the interest rate is adjusted to 1 .55% The interest rate is fixed to 4 .97, please refer to note 15

4) Adjustment of interest every 1 to 6 months . From January 1, 2011, the interest rate is adjusted to 0 .26%

5) Adjustment of interest every quarter

(DKK ‘000)

Leases Creditinstitutions Leases Creditinstitutions 2010 2009 2010 2009 2010 2009 2010 2009

Liabilities due after more than 5 years 0 0 134,354 118,684 0 0 134,171 118,683

Liabilities due between 2-5 years 0 0 68,793 77,330 0 0 68,150 77,011

Liabilities due within 1 year 0 111 17,110 15,148 0 111 16,636 14,723

2010 2009

Group Parent


MEDICULTMEDIA

HUMAGENPIPETS

69

From time to time, the ORIGIO Group enters into financial instrument contracts with the aim of minimizing its exposure to interest and currency fluctuations .

Currency risksGenerally, the investments in foreign group enterprises are not hedged though in connection with ORIGIO Inc ., a partial hedging of the investment has been entered into, by taking up loans of USD 14 million . Adjustments arising on net investments as a result of changes in the exchange rates are recognized in other comprehensive income . An increase in USD currency rate versus DKK of 10% will effect the net profit by approximately DKK 0 .4 million and will affect the equity by DKK 7 .3 million including effect of translation between USD and DKK .

The exposures of the ORIGIO Group to currency fluctuations are mainly related to foreign receivables and payables .

note 15. Financial instruments

(DKK ’000) Group

Currency Securities Receivables Liabilities Net 2010 and cash position

USD 26 155,099 89,033 66,092

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

GBP 1 1 124 (122)

DKK 0 0 159 (159)

Other 46 2,602 136 2,513

2009

USD 80 147,479 92,226 55,333

EUR 220 35,812 15,033 20,999

GBP 4 0 405 (401)

DKK 0 0 0 0

Other 528 104 48 586

Group

Received Paid Principal Maturity 2010 interest interest amount (DKK)

Danske Bank A/S Cibor6 4 .97 107,945,000 December 31, 2027

2009

Danske Bank A/S Cibor6 4 .97 107,945,000 December 31, 2027

The fair value of the interest rate swap has been calculated by the bank according to general accepted valuation principles . The interest

rate is recognized as a hedge and consequently fair value adjustments are recognized in equity .

From May 2009, the interest rate related to the acquisition loan in Danske Bank of USD 9,950,000 has been fixed at 2 .16% plus bank margin .

Of the USD liabilities, USD 14 .2 million is regarded as hedge of the equity in the US subsidiary .

Credit risksORIGIO is exposed to credit risks in respect of receivables and bank balances . The maximum credit risk corresponds to the carrying amount . Cash is not deemed to be subject to any credit risks, as the counterparts are banks with good credit ratings .

Interest rate risksThe exposure of the ORIGIO Group to interest fluctuations mainly relates to cash and securities as well as loans as specified in note 14 . ORIGIO has entered into an interest swap agreement as specified below:

note 15. Financial instruments

(DKK ’000) Group

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

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

Bank debt 20,554 0 0 20,554 20,554 20,554

Trade payables 27,097 0 0 27,097 27,097 27,097

Other payables 46,978 0 0 46,978 46,978 46,978

Total financial liabilities 121,461 68,793 134,354 324,608 320,431 324,608

Cash 18,560 0 0 18,560 18,560 18,560

Trade receivables 53,408 0 0 53,408 53,408 53,408

Other receivables 4,663 0 0 4,663 4,663 4,663

Total financial asssets 76,631 0 0 76,631 76,631 76,631

Liquidity risk

as at December 31, 2010 (44,830) (68,793) (134,354) (247,977) (243,800) (247,977)

Liquidity risk

as at December 31, 2009 (26,111) (77,330) (118,684) (222,125) (217,017) (222,125)


MEDICULTMEDIA

HUMAGENPIPETS

71

note 17. staff and remuneration(DKK ’000) Group Parent

2010 2009 2010 2009

Total staff salaries, etc ., excluding

warrants, can be specified as follows:

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

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

Other social security costs 5,075 8,055 478 470

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

Remuneration included in above to the:

Executive Board 3,752 3,602 3,752 3,602

Board of Directors 813 597 813 597

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

Warrants, Executive Board 184 480 184 480

Warrants, Board of Directors* 0 84 0 84

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

Average number of employees 221 220 90 87

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

note 16. contingent Assets and liabilities, security etc.(DKK ’000) Group Parent

2010 2009 2010 2009

Lease obligations 7,479 2,445 1,133 447

Lease obligations falling due

within 1 year from the balance date 2,669 1,552 514 410

Lease obligations falling due

between 2-5 years from the balance date 4,451 893 619 37

Lease obligations falling due more than

5 years from balance date 359 0 0 0

Lease expenses 3,227 1,660 558 481

Pledge as securityThe shares in ORIGIO Inc . have been pledged as security for the USD bank loans as listed in note 14 . The property in Jyllinge, Denmark, carrying amount of DKK 12 million, has been pledged as security for the Realkredit Danmark (EUR) loans . The property in Måløv, Denmark, carrying amount of DKK 163 .0 million, has been pledged as security for the Realkredit Danmark (DKK) loan on DKK 100 .2 million .

note 17. staff and remunerationOutstanding warrants

Program Program Program (number of warrants ’000) of 2005 of 2007 of 2008 Total

Outstanding as at January 1, 2010 646 294 413 1,353

Allotted during the year 0

Utilized during the year 0

Cancelled during the year 0

Outstanding as at December 31, 2010 646 294 413 1,353

Program Program Program of 2005 of 2007 of 2008 Total

Specified as follows:

Board of Directors 0 50 0 50

Executive Board 500 65 100 665

Managers 146 163 291 600

Other employees 0 16 22 38

Total 646 294 413 1,353

Program Program Program Black & Scholes parameter of 2005 of 2007 of 2008

Term (months) 48 48 48

Volatility 50 .9 39 .3 57 .1

Exercise price (NOK) 11 .9 20 .3 16 .2

Dividend not expected not expected not expected

Risk free interest rate 3% 4% 4%

Dilution of year end share capital at

year end share price 0 .0% 0 .0% 0 .0%

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

(DKK ’000)

Costs of sales 212

Sales and Marketing expenses 129

Administrative expenses 240

Research and Development expenses 157

Total 738


MEDICULTMEDIA

HUMAGENPIPETS

73

ORIGIO a/s has no related parties with controlling interests .

ORIGIO’s related parties with significant influence comprise group enterprises as well as the company’s Board of Directors and Executive Board .

No transactions were conducted with the Board of Directors, Executive Board, major shareholders or other related parties in the year, apart from intercompany transactions eliminated in the consolidated financial statement as well as usual remuneration, please refer to note 17, and legal fees of DKK 1,785,000 .

note 19. related Parties and transactions

Trade with group enterprises comprise:

(DKK ‘000) Subsidiaries

2010 2009

Revenue 38,979 32,494

Cost of goods 1,161 331

Reimbursement of operational costs (6,381) 0

Interest income 7,682 7,292

Dividend 2,691 0

Non-current receivables 181,574 183,365

Trade receivables 23,673 14,367

Trade payables 10,322 19,476

note 18. Fee to the independent Auditor(DKK ’000) Group

2010 2009

Fee to the parent company’s independent auditor:

Audit fee 370 350

Tax consultancy 47 85

Other assurance services 57 18

Other fees 446 271

Total 920 724

note 20. Depreciation and Other Adjustments(DKK ’000) Group Parent

2010 2009 2010 2009

Depreciation and amortization 16,071 15,110 6,487 2,735

Depreciation and amortization in special items 10,084 0 5,206 0

Impairment of investments 6,766 0 0 0

Warrant compensation expenses 738 2,058 738 2,058

Miscellaneous provisions 0 (31) 0 0

Financial income (161) (967) (15,822) (7,988)

Financial expenses 11,573 10,045 7,580 7,946

Tax 6,335 5,476 0 0

Total adjustments to cash flows 51,406 31,691 4,189 4,751

note 21. changes in net Working capital(DKK ’000) Group Parent

2010 2009 2010 2009

Increase in inventories and receivables (14,103) (6,906) (6,161) (662)

Decrease/increase in payables and other debt 9,813 6,433 1,491 4,706

Changes in net working capital (4,290) (473) (4,670) 4,044

note 22. cash, cash equivalents and bank borrowings


2010 2009 2010 2009

Cash and cash equivalents 18,560 15,551 3,783 6,674

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

Cash, cash equivalents and bank borrowings (1,994) 11,049 (13,744) 3,586


MEDICULTMEDIA

HUMAGENPIPETS

75


MEDICULTMEDIA

HUMAGENPIPETS

77

statement by the board of Directors and executive board

Today the Board of Directors and Executive Board

have discussed and approved the Annual Report

of ORIGIO a/s for the financial year January 1 –

December 31, 2010 .

The Annual Report has been prepared in

accordance with International Financial Reporting

Standards as adopted by the EU, the Oslo Stock

Exchange´s requirements for financial reporting

by listed companies, and Danish disclosure

requirements for listed companies .

In our opinion the consolidated financial statements

and the parent company financial statements give

a true and fair view of the Group’s and the Parent

Company’s financial position at December 31, 2010,

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

Company’s operations and cash flows for the

financial year January 1 – December 31, 2010 .

In our opinion the management’s review includes

a fair review about the development in the Parent

Company’s and the Group’s operations and

economic conditions, the results for the year and

the Parent Company’s financial position, and the

position as a whole for the entities included in

the consolidated financial statements, as well as a

review of the more significant risks and uncertainty

the Parent Company and the Group face, in

accordance with Danish disclosure requirements for

listed companies .

We recommend that the Annual Report be

approved at the Annual General Meeting .

Måløv, on February 22 2011

Executive Board

Jesper Funding Andersen

Board of Directors

Flemming Pedersen Jens Zilstorff Jørgen Drejer

(Chairman)

Flemming Juul Jensen Jaime Grego-Mayor Bente Jensen

Kirsten Bakbøl

tO the shArehOlDers OF OrigiO a/s

Report on consolidated financial statement and

parent company financial statement

We have audited the consolidated financial

statements and the parent company financial

statements of ORIGIO a/s for the financial year

January 1 to December 31, 2010, which comprise

the income statement, statement of comprehensive

income, statement of financial position, statement

of cash flows, statement of changes in equity

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

Company . The consolidated financial statements

and the parent company financial statements

are prepared in accordance with International

Financial Reporting Standards as adopted by the

EU, the Oslo Stock Exchange´s requirements for

financial reporting by listed companies and Danish

disclosure requirements for listed companies .

Board of Directors’ and Executive Board’s

responsibility for the consolidated financial

statements and parent company financial

statements

The Board of Directors and Executive Board are

responsible for the presentation and preparation

of consolidated financial statements and parent

company financial statements that give a true

and fair view in accordance with International

Financial Reporting Standards as adopted by the

EU, the Oslo Stock Exchange´s requirements for

financial reporting by listed companies and Danish

disclosure requirements for listed companies . This

responsibility includes, designing, implementing

and maintaining internal control relevant for the

presentation and preparation of consolidated

financial statements and parent company financial

statements that give a true and fair view, free

from material misstatement, whether due to

fraud or error, selecting and applying appropriate

accounting policies, and making accounting

estimates that are reasonable in the circumstances .

Auditor’s responsibility and basis of opinion

Our responsibility is to express an opinion on the

consolidated financial statements and the parent

company financial statements based on our audit .

We conducted our audit in accordance with Danish

Standards on Auditing . Those standards require

that we comply with ethical requirements and

plan and perform the audit to obtain reasonable

assurance about whether the consolidated financial


statements are free from material misstatement .

An audit involves performing procedures to obtain

audit evidence about the amounts and disclosures

in the consolidated financial statements and

the parent company financial statements . The

procedures selected depend on the auditor’s

judgment, including the assessment of the risks

of material misstatements in the consolidated

financial statements and the parent company

financial statements, whether due to fraud or error .

In making those risk assessments, the auditor

considers internal control relevant to the entity’s

presentation and preparation of consolidated

financial statements and parent company financial

statements that give a true and fair view in order

to design audit procedures that are appropriate

in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the

entity’s internal control . An audit also includes

evaluating the appropriateness of accounting

policies used and the reasonableness of accounting

estimates made by the Board of Directors and

Executive Board, as well as the overall presentation

independent Auditor’s report


MEDICULTMEDIA

HUMAGENPIPETS

79

of the consolidated financial statements and the

parent company financial statements .

We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a

basis for our opinion .

The audit has not resulted in any qualification .

Opinion

In our opinion, the consolidated financial


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

and the Parent Company’s financial position at

December 31, 2010 and of the results the Group’s

and Parent Company’s operations and cash flow for

the financial year January 1 to December 31, 2010 in

accordance with International Financial Reporting

Standards as adopted by the EU, the Oslo Stock

Exchange´s requirements for financial reporting

by listed companies, and Danish disclosure

requirements for listed companies .

Statement on the management’s review

The Board of Directors and Executive Board are also

responsible for the preparation of a management’s

review that includes a fair review in accordance

with the Danish disclosure requirements for listed

companies .

The audit has not included the management’s

review . Pursuant to the Danish Financial Statements

Act, we have however read the management’s

review . We have not performed any further

procedures in addition to the audit of the

consolidated financial statements and the parent

company financial statements .

On this basis, it is our opinion that the information

provided in the management’s review is consistent

with the consolidated financial statements and the

parent company financial statements .

Copenhagen, on February 22, 2011

Grant Thornton

Incorporated State Authorised Public Accountants

Gert Fisker Tomczyk

State Authorised Public Accountant

Henrik Ødegaard

State Authorised Public Accountant

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

best products to medical professionals to help the #1 dream of every infertile couple come true . ORIGIO currently comprises the three product

families, MediCult Media, Humagen Pipets and MidAtlantic Devices, that cater for the broadest range of ART requirements . ORIGIO, which is

headquartered in Måløv, Denmark and has subsidiaries in 10 countries, is listed on the Oslo Stock Exchange under the symbol ORO . For further

information, please visit www .ORIGIO .com .

MIDATL ANTICDEVICES

MEDICULTMEDIA

HUMAGENPIPETS

”At the end of the day, its all about life; the

opportunity of new life for patients and our

own new life as ORIGIO. Life is everything.

That’s what we stand for.”

for life

Leads the way in the

development and

provision of specialized

and innovative ART media .

Provides innovative

devices, equipment, and

services to ART labs .

Focuses on the creation

of the highest quality

speciality pipets and

microtools for ART .

ORIGIO Annual Report 2010

Documents

Transcript of ORIGIO Annual Report 2010