Fresenius SE. Positioned for the next decade INDEPENDENT RESEARCH UPDATE. Healthcare Fair Value EUR87 vs. EUR82 (price EUR79.

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1 INDEPENDENT RESEARCH UPDATE 16th May 2017 Fresenius SE Positioned for the next decade Healthcare Fair Value EUR87 vs. EUR82 (price EUR79.49) BUY Bloomberg Reuters FRE GR FREG.DE 12-month High / Low (EUR) 79.5 / 61.9 Market capitalisation (EURm) 44,010 Enterprise Value (BG estimates EURm) 28,519 Avg. 6m daily volume ('000 shares) 1,027 Free Float 62.2% 3y EPS CAGR 13.0% Gearing (12/16) 0% Dividend yield (12/17e) 0.94% YE December 12/16 12/17e 12/18e 12/19e Revenue (EURm) 29,471 34,472 37,732 40,182 EBIT (EURm) 4,302 5,022 5,484 5,937 Basic EPS (EUR) Diluted EPS (EUR) EV/Sales 1.05x 0.83x 0.82x 0.83x EV/EBITDA 5.6x 4.4x 4.3x 4.3x EV/EBIT 7.2x 5.7x 5.6x 5.6x P/E 28.0x 23.2x 21.2x 19.4x ROCE /11/15 12/02/16 12/05/16 12/08/16 12/11/16 12/02/17 12/05/17 FRESENIUS (XET) SXX EUROPE 600 The recent acquisitions of Akorn and Merck s biosimilar business reinforce Fresenius long-term visibility, strengthening its defensive profile. Akorn will enable KABI to leverage its product portfolio in the US and add a new sales channel while the entry into the biosimilar business, expected to surpass USD20bn towards 2022, positions KABI for the next decade. Quirónsalud is off to a strong start to the year and, despite some volatility in Q3, FY guidance might prove to be conservative. We increase our FV to EUR87 and reiterate our BUY rating. We see significant leverage from the expanded market access with a leveraged portfolio. The acquisition of Akorn for USD4.3bn more than doubles the number of market drugs at KABI (310 vs 137) while nearly multiplying by three the number of molecules in the pipeline (140 vs 55). We anticipate the integration of Akorn to be seamless and even see upside risk on targeted synergies (USD100m) from the consolidation of US sites. The entry into the biosimilar market should not be overlooked as it gives Fresenius access to a market that should be in excess of USD15bn by A phase III trial of Adalimumab (Humira) should readout in H Our conservative estimates of EUR500m in sales towards 2023 compare to a guidance of high triple-digit sales to the same horizon, leaving room for an upside revision to our numbers. Quirónsalud is off to a strong start to the year. The performance of the Spanish hospital business acquired last year positively surprised in Q1. To reach the mid-range of its FY2017 EBIT guidance, Quirónsalud would have to deliver a 4% EBIT margin in Q3 (vs. 15% in Q1). Despite some volatility in Q3, this might prove FY2017 guidance to be conservative. We reiterate our BUY rating on Fresenius SE. 2-3% dilution to our EPS offset by a 3% accretion in 2020 ramping up to a high singledigit in FV increased to EUR sales CAGR of 10% Net income CAGR of 13.5%. Analyst: Sector Analyst Team: Hugo Solvet Eric Le Berrigaud 33(0) Marion Levi hsolvet@bryangarnier.com r r

2 Simplified Profit & Loss Account 2021e e 2018e 2019e 2020e (EURm) Revenues 27,995 29,471 34,472 37,732 40,182 42,849 45,601 Change (%) 5.7% 5.1% 7.1% 6.5% 6.4% 7.6% 6.4% Adjusted EBITDA 5,058 5,517 6,490 7,169 7,715 8,422 9,146 EBIT 3,934 4,302 5,022 5,484 5,937 6,546 7,168 Change (%) -% 9.4% 16.7% 9.2% 8.3% 10.2% 9.5% Financial results (613) (582) (576) (593) (591) (598) (602) Pre-Tax profits 3,321 3,720 4,446 4,891 5,346 5,948 6,566 Exceptionals NM NM NM NM NM NM NM Tax (977) (1,044) (1,287) (1,447) (1,581) (1,745) (1,919) Profits from associates NM NM NM NM NM NM NM Minority interests (958) (1,116) (1,247) (1,352) (1,480) (1,630) (1,807) Net profit 1,386 1,560 1,912 2,092 2,285 2,573 2,840 Restated net profit 1,386 1,560 1,912 2,092 2,285 2,573 2,840 Change (%) -% 12.6% 22.6% 9.4% 9.2% 12.6% 10.4% Cash Flow Statement (EURm) Operating cash flows 3,349 3,585 3,798 5,039 5,270 5,782 6,318 Change in working capital NM (198) (829) (90.2) (273) (297) (306) Capex, net (1,484) (1,616) (1,890) (2,269) (2,137) (2,244) (2,351) Financial investments, net (1,982) (974) 2,992 (1,854) (4,162) (2,356) (1,875) Dividends (639) (738) (850) (972) (1,030) (1,095) (1,187) Other (14.0) (460) (4,270) (332) (354) (377) (401) Net debt 0.0 (13,201) (15,491) (13,253) (10,565) (7,401) (3,722) Free Cash flow NM 1,771 1,079 2,679 2,861 3,241 3,662 Company description Fresenius is a global healthcare group offering high-quality products and services for dialysis, hospitals, and outpatient treatment. With over 250,000 employees in more than 100 countries around the globe, and annual sales exceeding 25 billion, Fresenius is one of the world s leading healthcare companies. The Fresenius Group includes four independently operated business segments, each one active in a major growth area of healthcare. Fresenius Medical Care is the world leader in treating people with chronic kidney failure. Fresenius Helios is Germany s largest hospital operator. Fresenius Kabi supplies essential drugs, clinical nutrition products, medical devices and services to help critically and chronically ill patients, while Fresenius Vamed plans, develops and manages healthcare facilities. Balance Sheet (EURm) Tangible fixed assets 7,429 8,139 9,008 9,799 10,362 10,925 11,484 Intangibles assets 23,373 24,664 28,708 28,833 28,982 29,164 29,380 Cash & equivalents 1,044 1,579 2,209 2,792 1,410 2,215 3,906 current assets 9,389 10,165 12,285 13,014 13,859 14,779 15,729 Other assets 1,998 2,150 2,158 2,158 2,158 2,158 2,158 Total assets 43,233 46,697 54,368 56,596 56,772 59,241 62,656 L & ST Debt 22,606 23,537 27,797 26,782 23,284 21,547 20,203 Others liabilities 2,174 2,311 2,457 2,457 2,457 2,457 2,457 Shareholders' funds 18,453 20,849 24,101 27,345 31,019 35,225 39,983 Total Liabilities 24,780 25,848 30,253 29,238 25,741 24,004 22,660 Capital employed 33,394 35,305 41,051 41,823 42,328 42,770 43,066 Ratios Operating margin Tax rate (29.42) (28.06) (28.95) (29.59) (29.57) (29.34) (29.23) Net margin ROE (after tax) ROCE (after tax) Gearing Pay out ratio Number of shares, diluted Data per Share (EUR) EPS Restated EPS % change -% 12.2% 20.7% 9.4% 9.2% 12.6% 10.4% BVPS Operating cash flows FCF NM Net dividend Source: Company Data; Bryan, Garnier & Co ests. 2

3 1. Two-in-one deal reinforcing longterm growth prospects 1.1. Akorn reinforcing KABI s generic pipeline Acquisition of Akorn On April 25 th, Fresenius SE announced the acquisition of Akorn for USD4.3bn, implying multiples of 4.6x EV/sales and 12.4x EV/EBITDA. Fully financed by debt instruments (EUR and USD denominated) this raised the company s net debt/ebitda ratio to 3.3x, below levels of 3.6x following the acquisition of APP Pharmaceuticals for USD4.6bn in July te that rating agencies have confirmed investment grade rating of the company following the announcement of the deal. Akorn employed 2,261 FTEs and achieved sales of USD1.1bn at the end of For 2017, Fresenius SE s management reiterated Akorn s FY2017 guidance of revenues in the USD1,035-1,085m range (EUR981m-1,029m; BGe EUR1.006bn). Akorn streams most of its revenues from the US (98% of 2016 sales) where it sells primarily generics, OTC and animal health products other than oral solid dose, i.e. alternative dosage forms (ophthalmic, injectable, oral liquids, otic, topical, inhalants and nasal sprays). Competition is less intense for these products which have fewer competitors and have high barriers to entry with complex development and manufacturing processes, hence they carry a higher profitability. We believe that Akorn s focus on alternative dosage forms complements Fresenius KABI s strategy which is putting emphasis on differentiated products, e.g. the Simplist range (acquired from BD. Fig. 1: Akorn s product portfolio other 9% nasal & oral 17% injectables 35% topicals 14% ophtalmics 25% Source: Akorn. In 2016, Akorn reported an operating margin of 29.3%. Adjusted for amortisation of intangibles and impairments of intangible assets, the operating margin stood at 19.5% which is comparable to Fresenius KABI s levels and >400bp above the group s operating margin. 3

4 te that on May 2nd, a complaint seeking an injunction in connection with the merger was filed in the circuit court of Cook County (IL). Fresenius intends to defend itself. Such complaints are common in takeovers. We see no merit in the complaint with little or no chances of success in our view Broadening the pipeline More than doubling the number of market drugs, nearly multiplying by three the pipeline The acquisition of Akorn significantly broadens KABI s pipeline with the addition of 85 new molecules to the 55 KABI already had. While reinforcing its injectable generic drug portfolio and pipeline, Akorn gives KABI access to the ophthalmology market through prescription pharmaceuticals and OTC products (e.g. dry eye). We see the Consumer Health and Animal Health businesses as non-core and do not rule out their divestment. Fig. 2: KABI + Akorn s portfolio Source: Company Data. While Akorn only discloses sales depending on whether they are from the Consumer Health or Prescription channels, it does give an indication of the total addressable market of its pipeline (i.e. ANDA) by dosage forms. As of January 2017, Akorn had 94 ANDAs pending or to be filed in its pipeline, representing a total addressable market value of up to USD9.7bn. Fig. 3: Akorn s detailed pipeline (1/2) Source: Akorn (January 2017 presentation, based on IMS data). 4

5 Akorn s pipeline is mainly geared towards ophthalmic and injectables with 39 and 29 molecules respectively. While these two dosage forms represent only 72% of the total molecules in the pipeline, they account for 87% of the potential market addressable by the company s pipeline. This highlights both: 1/ the superior value of these dosage forms, and 2/ the ability of Akorn s management to identify generics with a higher potential return, i.e. competitive situations in which Akorn would be the sole supplier. During the conference call, Fresenius SE s management mentioned that there is little to no overlap between the two companies portfolio and pipelines and that competition in key product areas has been addressed as part of the due diligence process. Fig. 4: Akorn s detailed pipeline (2/2) in USD # ANDA filed # ANDA to be filed # ANDA total Market Value Average Market Value / product Ophthalmic % of total 30% 50% 31% 53% IV % of total 41% 50% 41% 34% Topical % of total 15% 0% 15% 9% Other % of total 13% 0% 13% 4% Total Last column does not take into account the exact market value of products (not disclosed by the company). Source: Company Data; Bryan, Garnier & Co ests. We anticipate a stronger launch pace at Fresenius The Office of Generic Drugs (OGD) has allocated more and more resources to shorten the time to approval as highlighted by the Generic Drug and User Fee Act of 2012 (GDUFA I), under which time to approval was around 36 months on average (ranging from 17 to 89 months, median at 35 months). This compares to months average approval time prior to GDUFA. Under GDUFA II which will take effect in 2018, the ANDA standard review time will theoretically be 10-months from submission (priority review 8 months). While the GOP is likely to put emphasis on accelerated review time for solid forms, we believe this might benefit liquid forms with ANDAs pending for over 36 months. At the time of the FY 2016 results, Fresenius management raised KABI s historical drug launch pace of 6-10 product launches (set in 2011) to over 10 launchesin The potential shortening of the review time and the reduction in the FDA s ANDA backlog might positively influence Akorn s drug launch pace. As depicted in the chart below, 49% of Akorn s pending ANDAs were filed over 36 months ago. For Q1 2017, Akorn expected ANDA approvals. 5

6 Fig. 5: Akorn - Ageing of ANDA filings Source: Akorn. Further expansion and potential divestments Following Akorn and Merck s biosimilar business acquisitions (cf 1.2.), we do not believe that another major acquisition would be made before the 2018 year-end. While a 3.3x net debt/ebitda level is acceptable, another major deal would need to be financed by a capital increase to which investors might be sensitive. Beyond 2018, we see room to expand the clinical nutrition portfolio inorganically. By then, the company s footprint in the US clinical nutrition market should have strengthened, enabling Fresenius to leverage better any potential future acquisition in the field. Over the next months, we expect the roll-out of the three-chamber bag (approx. EUR50 sales in 2016, BGe) to accelerate v, benefiting from the presence of Akorn in the Clinic/Physician distribution channels. On the divestment side, we do not rule out the prospect of Fresenius SE divesting both or either the Animal Health and/or Consumer Health businesses. Within these markets, we see critical size as key to success and lacking in Akorn. Recent asset swaps (Sanofi/Boehringer/Eli Lilly) and deals (vartis/eli Lilly) might strengthen the interest by a large player to reinforce its offering further. te that 2016 sales from Akorn s Consumer Health business (including Animal Health) stood at USD63m. Looking at historic transaction multiples in the sector, we estimate a divestment of the business could fetch a USD m deal Synergies of USD100m p.a. Fresenius is guiding on USD100m (EUR95m) of annual synergies before tax to be achieved within a 3 to 4 year timeframe. These synergies are expected to be streamed primarily from: 1/ the integration and the modernisation of Akorn s production network, and 2/an improvement in the supply chain. Seamless integration We would expect the integration of Akorn to be seamless. Fresenius SE headquarters in Lake Zurich (IL, USA) are 20km away from Akorn s headquarters in Lake Forest (IL, USA). Management guided on USD140m of integration costs with the bulk in 2018 (BGe USD70m in 2018, USD55m in 2019 and USD15m in 2020). 6

7 Fig. 6: Location of Akorn s and Fresenius KABI s US sites Source: Company Data. We see further investments to scale-up the production sites as limited. Recall that Fresenius SE closed its manufacturing facility for longer during the 2016 Christmas break to scale-up manufacturing. With Fresenius bringing to Akorn its quality and compliance management processes, small investments might only be made at both the ophthalmic (Somerset NJ, USA; Hettlingen CH) and injectable (Decatur IL, USA) production sites. It is important to note that all Akorn plants are running under the VAI (Voluntary Action Indicated) or NAI ( Action Indicated) status. This implies that during its last inspection, the FDA: 1/ found objectionable conditions or practices that do not meet the threshold of regulatory significance (VAI), or 2/ did not find any objectionable conditions (NAI). Considering the strong overlap in the US between the two companies, we believe that additional synergies might arise from the potential consolidation of US sites. Leveraging market access We believe most of the synergies are to be made from the complementarity of the distribution channels. Akorn s 90 US field and inside sales representatives added to the sales reps from Fresenius KABI (BGe estimated range) should be sufficient to leverage the broadened product portfolio. While the reinforced offering of Fresenius injectable portfolio should put the company s sales rep in an even better position to leverage both clinics/physicians and GPOs channels, we would also expect it to be a door-opener for larger contractors which have not been addressed yet. In 2016, Akorn streamed 79% of volumes and 64% of net sales from three big wholesalers: AmerisourceBergen, Cardinal Health and McKesson. The recent penetration of the retail pharmacy channel by Fresenius KABI with pre-filled syringes (Becton Dickinson deal) should accelerate with the addition of new dosage forms such as ophthalmic (excluding injectable). Moreover, further sales opportunities might come from the inclusion of Akorn s offer in the Becton Dickinson supply agreement. 7

8 Fig. 7: Combined market access Source: Company Data. Before the acquisition of Akorn, KABI s injectable average selling price (ASP) per vial was approx. USD5. We would not expect the broadening of the offer to increase the average ASP but instead slightly lower it. Indeed, having a lower average ASP per vial might enable Fresenius to include more products in its bundled offers to GPOs and significantly expand volumes A word on the US tax rate From 2018 onwards, we estimate Fresenius SE should stream approx. 60% of its EBIT from the US. Lowering the tax rate applicable to this country from 35% to 15% would increase our EPS sequence by >20%. On the Akorn acquisition conference call, management stated that it is prepared for a potential cut in the US tax rate. It is important to note that, while the GOP is likely to finance this tax cut by a repeal (or major amendments to ObamaCare), we do not anticipate any significant impact from the latter reform on Fresenius SE at a group level Entry into biosimilars should not be overlooked Acquisition of Merck s biosimilar business Alongside the acquisition of Akorn, Fresenius announced the acquisition of Merck KGaA s biosimilar business. Fresenius SE agreed to pay an upfront of EUR170m to Merck KGaA, the latter being eligible for up to EUR500m in development milestones as well as high single-digit tiered royalties on net sales (BGe 7%). With Fresenius SE already having access to generics, we believe that entering the biosimilar space is an interesting move. This should enable Fresenius SE to significantly leverage its three identified business channels (GPOs, Clinics/Physicians and Retail pharmacies) and stay outside the drug discovery business model while entering into a market which should be in excess of USD15bn by

9 Fig. 8: Fresenius KABI s business segments and biosimilar market Source: Fresenius SE, Merck KGaA. Out of the high single-digit number of molecules included in the transaction, two are in late stage development: Adalimumab: Phase III trial of a biosimilar of adalimumab (Humira, MSB11022) in psoriatic arthritis (AURIEL-PsO; NCT ). Results from the non-inferiority trial of MSB11022 vs. adalimumab (PASI 75 at 16 weeks) conducted in 443 patients (US and Europe) are expected in H Humira totalled USD16.1bn sales in While sales in the Rheumatoid Arthritis indication amounted for roughly 50% of total sales, Humira is indicated in nine other indications which should lower the penetration of biosimilars in our view. Pelfilgrastim. A phase III trial for the biosimilar of Neulasta is about to be initiated. This oncology drug, indicated to prevent neutropenia in patients receiving chemotherapy, is commercialised by Amgen. Branded sales of the product reached USD4.6bn in Further synergies with the injectable portfolio are likely. An interesting feature of the deal is the agreement under which Merck KGaA is responsible for manufacturing and supplying the molecule to Fresenius for clinical trials and commercialisation upon approval. This should not be overlooked as it will enable Fresenius to benefit from the synergies Merck KGaA already put in place with is Life Science division regarding the manufacturing of monoclonal antibodies (e.g. single-use process solutions, PEGylation with the Celares GmbH partnership). This might yield a higher gross margin. Detailed deal terms were undisclosed but we believe that Fresenius KABI might have already secured key emerging markets which might be a good add-on on top of the key regions of the US and Europe. Indeed, we do not rule out that the agreement signed by Merck KGaA with Bionovis might have been included in the Fresenius SE/Merck KGaA transaction. As part of this agreement signed in April 2014, Merck KGaA has committed to transferring the manufacturing of eight biosimilars to Bionovis through a governmental programme to promote Productive Development Partnerships (PPD). In return, the Brazilian government will become the largest customer of the laboratory (now Fresenius SE) producing the drugs in the territory, enabling it to secure 50% to 60% of the market. 9

10 Risk-reward skewed to the upside Fresenius management expects the first biosimilar sales in 2019 to ramp up to high triple-digit from 2023 onwards. We have preferred to take a cautious approach in our model by only ramping up our sales estimates to EUR500m sales towards 2023e, ramping up to high triple-digit towards 2030e. We appreciate Fresenius putting a ceiling on the investments that are to be made (R&D and M&S) until 2022 in the biosimilar business. We have integrated the EUR1.4bn in cumulative investment that management guided for towards 2022 (including EUR170m upfront and EUR500m in milestones). In our model, this translates into EUR m in R&D expenses p.a. and M&S ramping-up from EUR5m in 2017 to EUR65m by 2022, when EBITDA breakeven is reached. 10

11 2. Despite Q3 volatility, FY guidance might prove to be conservative Integration of Quirónsalud is well on track as highlighted by a strong Q1 (consolidation as of February 1st). Quirónsalud surprised in Q1 with sales and EBIT of EUR490m and EUR74m respectively. This represents 20% and 26% of the FY2017 group s guidance in the mid-range, i.e. EUR2475m in sales and EBIT of EUR m. The EBIT margin was 15.1% in the first quarter. This is a strong start to the year. Q2 should be softer due to the timing effect of the Easter holidays and Q3 even softer because of the summer holidays; Q4, however, is expected to be a normal quarter, concentrating most of FY revenues (BGe 30%). Taking Easter into account for Q2, we estimate sales of EUR698m and EBIT of EUR104m. For Q4, we anticipate EUR733m in sales and EBIT of EUR106m. This implies that to reach the mid-range of its annual EBIT guidance (i.e. EUR310m), Quirónsalud would have to deliver an EBIT margin of 4% in Q3 (approx. EUR20m). This might appear low in the light of a 15% margin delivered in Q1 and despite the summer holidays effect. Fig. 9: Quirónsalud s P&L (BGe) (2) P&L QUIRONSALUD 2016 Q1 17 Q2 17 Q3 17 Q TOTAL SALES QUIRONSALUD % same market 6,0% 2,5% 3,5% 3,5% % organic (incl. Price effect) 5,0% 6,0% 5,9% % reported (inc. Bolt-on) 7,1% 5,0% 6,0% 5,9% Synergies on EBIT EBIT AFTER SYNERGIES % sales 8,2% 15,1% 14,9% 6,0% 15,5% 13,2% 13,9% 14,5% % growth 54,1% 21,9% 9,9% bp growth Source: Bryan, Garnier & Co ests. Our estimates point to the high end of the group s guidance at EUR323m for the FY. We would wait for the Q2 results to get a sense of what volatility might look like at Quirónsalud during a softer quarter (impact of the Easter Holidays) before revising our estimates. 11

12 3. Fair Value up to EUR87 vs EUR82 We have updated our model to reflect the change in reporting from US-GAAP to IFRS. The integration of both Akorn and Merck s biosimilars business to our model adds EUR4 per share. Our new fair value from a blend of a DCF (EUR95/share) and peers multiples (EUR78/share) stands at EUR87 per share vs. EUR82 previously. In our DCF, we estimate total group sales should grow 10% p.a. over the period while net income is estimated to grow 13.5% p.a. over the same period. Fig. 10: Changes in EPS (BG estimates) EPS BEFORE AKORN EPS AFTER AKORN + BIOSIMILAR % difference -1.7% -3.2% -1.9% 3.0% 5.9% 6.8% 7.7% 8.4% 8.7% Source: Company Data; Bryan, Garnier & Co ests. Fig. 11: Fresenius group, updated sales and EBIT contribution from the divisions 100% 80% 4% 4% 3% 3% 3% 20% 25% 24% 24% 23% VAMED % of FRE sales 60% 20% 19% 21% 21% 21% HELIOS % of FRE sales 40% KABI % of FRE sales 20% 56% 53% 52% 52% 53% FMC % of FRE sales 0% % 80% 60% 2% 1% 1% 1% 1% 16% 21% 21% 21% 20% 27% 24% 25% 26% 27% VAMED % of FRE EBIT HELIOS % of FRE EBIT 40% 20% 56% 54% 53% 53% 52% KABI % of FRE EBIT FMC % of FRE EBIT 0% Source: Company Data; Bryan, Garnier & Co ests. 12

13 Price Chart and Rating History Fresenius SE /11/15 12/02/16 12/05/16 12/08/16 12/11/16 12/02/17 12/05/17 FRESENIUS (XET) Fair Value Achat Neutre Vente Ratings Date Ratings Price 14/07/15 BUY EUR /12/14 NEUTRAL EUR41.7 Target Price Date Target price 16/05/17 EUR87 05/01/17 EUR82 07/09/16 EUR78 04/05/16 EUR73 06/04/16 EUR70 05/01/16 EUR68 16/07/15 EUR64 14/07/15 EUR62 04/05/15 EUR57 30/04/15 EUR54 18/12/14 EUR42 26/02/14 EUR40 13

14 Intentionally left blank 14

15 BUY NEUTRAL SELL Bryan Garnier stock rating system For the purposes of this Report, the Bryan Garnier stock rating system is defined as follows: Stock rating Positive opinion for a stock where we expect a favourable performance in absolute terms over a period of 6 months from the publication of a recommendation. This opinion is based not only on the FV (the potential upside based on valuation), but also takes into account a number of elements that could include a SWOT analysis, momentum, technical aspects or the sector backdrop. Every subsequent published update on the stock will feature an introduction outlining the key reasons behind the opinion. Opinion recommending not to trade in a stock short-term, neither as a BUYER or a SELLER, due to a specific set of factors. This view is intended to be temporary. It may reflect different situations, but in particular those where a fair value shows no significant potential or where an upcoming binary event constitutes a high-risk that is difficult to quantify. Every subsequent published update on the stock will feature an introduction outlining the key reasons behind the opinion. Negative opinion for a stock where we expect an unfavourable performance in absolute terms over a period of 6 months from the publication of a recommendation. This opinion is based not only on the FV (the potential downside based on valuation), but also takes into account a number of elements that could include a SWOT analysis, momentum, technical aspects or the sector backdrop. Every subsequent published update on the stock will feature an introduction outlining the key reasons behind the opinion. Distribution of stock ratings BUY ratings 47.9% NEUTRAL ratings 36.8% SELL ratings 15.3% 1 Bryan Garnier shareholding in Issuer 2 Issuer shareholding in Bryan Garnier Research Disclosure Legend Bryan Garnier & Co Limited or another company in its group (together, the Bryan Garnier Group ) has a shareholding that, individually or combined, exceeds 5% of the paid up and issued share capital of a company that is the subject of this Report (the Issuer ). The Issuer has a shareholding that exceeds 5% of the paid up and issued share capital of one or more members of the Bryan Garnier Group. 3 Financial interest A member of the Bryan Garnier Group holds one or more financial interests in relation to the Issuer which are significant in relation to this report 4 Market maker or liquidity provider A member of the Bryan Garnier Group is a market maker or liquidity provider in the securities of the Issuer or in any related derivatives. 5 Lead/co-lead manager In the past twelve months, a member of the Bryan Garnier Group has been lead manager or co-lead manager of one or more publicly disclosed offers of securities of the Issuer or in any related derivatives. 6 Investment banking agreement A member of the Bryan Garnier Group is or has in the past twelve months been party to an agreement with the Issuer relating to the provision of investment banking services, or has in that period received payment or been promised payment in respect of such services. 7 Research agreement A member of the Bryan Garnier Group is party to an agreement with the Issuer relating to the production of this Report. 8 Analyst receipt or purchase of shares in Issuer The investment analyst or another person involved in the preparation of this Report has received or purchased shares of the Issuer prior to a public offering of those shares. 9 Remuneration of analyst The remuneration of the investment analyst or other persons involved in the preparation of this Report is tied to investment banking transactions performed by the Bryan Garnier Group. 10 Corporate finance client In the past twelve months a member of the Bryan Garnier Group has been remunerated for providing corporate finance services to the issuer or may expect to receive or intend to seek remuneration for corporate finance services from the Issuer in the next six months. 11 Analyst has short position The investment analyst or another person involved in the preparation of this Report has a short position in the securities or derivatives of the Issuer. 12 Analyst has long position The investment analyst or another person involved in the preparation of this Report has a long position in the securities or derivatives of the Issuer. 13 Bryan Garnier executive is an officer A partner, director, officer, employee or agent of the Bryan Garnier Group, or a member of such person s household, is a partner, director, officer or an employee of, or adviser to, the Issuer or one of its parents or subsidiaries. The name of such person or persons is disclosed above. 14 Analyst disclosure The analyst hereby certifies that neither the views expressed in the research, nor the timing of the publication of the research has been influenced by any knowledge of clients positions and that the views expressed in the report accurately reflect his/her personal views about the investment and issuer to which the report relates and that no part of his/her remuneration was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. 15 Other disclosures Other specific disclosures: Report sent to Issuer to verify factual accuracy (with the recommendation/rating, price target/spread and summary of conclusions removed). Summary of Investment Research Conflict Management Policy is available Yes 15

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This report is prepared by Bryan Garnier & Co Limited, registered in England Number and its MIFID branch registered in France Number Bryan Garnier & Co Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference Number ) and is a member of the London Stock Exchange. Registered address: Beaufort House 15 St. Botolph Street, London EC3A 7BB, United Kingdom This Report is provided for information purposes only and does not constitute an offer, or a solicitation of an offer, to buy or sell relevant securities, including securities mentioned in this Report and options, warrants or rights to or interests in any such securities. This Report is for general circulation to clients of the Firm and as such is not, and should not be construed as, investment advice or a personal recommendation. account is taken of the investment objectives, financial situation or particular needs of any person. 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