Tamro Sweden

• In January–December 2005, the aggregate pharmaceuticals sales amounted to EUR 2,724 million in PPP, a 4% rise on the previous year’s figures.
  
  
• Tamro Sweden’s net sales for the accounting year in 2005/2006 amounted to EUR 1,536 million, down 5% from the previous 13-month financial year.

Operating environment and markets

The growth rate of the Swedish pharmaceuticals market recovered to an average annual pace of 4.3% in 2005, up from its 2.3% level in 2004. Aggregated pharmaceuticals sales for the year 2005 reached EUR 2,724 million in PPP. Of the growth, 3% was attributed to volume increases and 1.3% to price increases. The principal reasons for this growth were fewer patent expirations, price increases and introductions of new products.

In the past two years the sales of parallel imports (PI) have received a particularly strong boost in Sweden. In 2005, PI sales accelerated by as much as 19.4% at CER and reached EUR 325 million in PPP.

Financial performance and operations

Tamro Sweden continued its stable performance throughout the financial year. Tamro’s pharmaceutical sales grew somewhat faster than the Swedish pharmaceutical market on average. The growth was primarily attributed to new distribution agreements and increased sales of generics and parallel imports. Tamro Sweden’s net sales amounted to EUR 1,536 million.

Tamro’s average market share of pharmaceutical sales in Sweden totalled 49.5% in 2005. In January 2006, Tamro started exclusive distribution for Roche and expanded its current distribution agreement with AstraZeneca. The new assignments lifted the market share to over 53%, which further solidified Tamro Sweden’s leading position in the market.

To further improve quality and efficiency in the company, Tamro AB decided to invest EUR 12 million into developing the distribution facilities in Stockholm. The extension and reconstruction are expected to be ready around the turn of the year 2006/2007

In spring 2005 Tamro launched a new Internet-based information service solution for its principals. The new business information service is designed to support and provide principals operating in Sweden, Finland and Denmark with coherent information and statistics related to sales and stocks.

During the year Tamro also conducted two full-scale customer surveys among suppliers and pharmacies to evaluate Tamro’s operational and service performance. While the survey gave valuable information about areas for potential improvement, the feedback was encouraging, with a high degree of overall customer satisfaction.

The European Court of Justice (ECJ) announced on 31 May its position regarding Apoteket AB’s monopoly to sell pharmaceuticals to the public. The ECJ established in its statement that the Swedish retail monopoly for pharmaceuticals contravened European Community law, as the arrangement between the state pharmacy monopoly Apoteket and the Swedish Government could not exclude discrimination against medicinal preparations from other member states.

In order to meet the requirement set out in the ECJ’s ruling, the Swedish Government drew up a new agreement with Apoteket AB in June. The new agreement stipulates Apoteket’s responsibility to provide a transparent procurement procedure that informs producers about the reasons why their products are not selected.

The Swedish Government initiated a parliamentary investigation into whether and how a deregulation of nicotine products should be implemented. The resulting report suggests that nicotine products should be made available outside pharmacies.

Personnel

During the financial year, Tamro Sweden’s payroll averaged 448 (468) employees.

The focus of Tamro Sweden’s personnel development in 2005 was on strengthening leadership capabilities within the company. A comprehensive, uniform leadership development programme was launched in the beginning of the year to develop the leadership skills and practices of all managers. The programme was successfully completed in March 2006.

Tamro completed an employee survey at the end of the year 2005. The overall results were positive and showed a high degree of job satisfaction among our employees. The results are currently being thoroughly analysed and discussed among leaders and employees, with the focus on development issues.

Outlook for 2006

The growth of the pharmaceutical market in Sweden is estimated to remain at the same level as in 2005. Fierce competition will continue to characterise the Swedish pharmaceutical distribution market.

Tamro Sweden aims to defend its market position by promoting cost-effectiveness and operational quality throughout its operations. At the same time it will develop innovative solutions to meet the changing needs of its customers.

The ongoing governmental investigation into the Swedish pharmacy system could result in substantial changes in the Swedish pharmaceuticals market. The outcome of the Swedish parliamentary election in September 2006 may also have an impact on the future of the Swedish pharmacy monopoly.

Tamro is well prepared to respond to potential future changes and new market conditions. However, no significant changes in the market structure are expected to occur in 2006.