English - Siegfried

apid change as significant price erosion fuels consolidationand large generics companies seek backward integration.Traditionally we have focused on projects that were demand -ing from a technical or patent point of view. These projectsare increasingly tackled by a diminishing customer basethat will only commit to one of our projects if their internaldevelopment fails. In addition, there will be fewer projectsto pursue as the drop-off in new drugs approved hitsthe generics industry. Against this backdrop we decidedto acquire the rights to an inhalation technology that weare confident can be industrialized at a very competitivecost per unit. Our intention is to initially use this platformto develop specific generic products. However, we willalso explore the possibility of leveraging this platform tosupport innovator companies. This is a long-term endeavorwhere we will see a ramp-up in investments as we meetsuccessive milestones. The initial response from customers,both generic and innovators, has been promising.Parallel to building a new technology platform, we com -pleted the first construction phase of our pharmaceuticallaunch facility in Malta and started a second phase formore demanding technologies. Initially, the focus will be onin-house products that are currently manufactured undercontract by third parties.Although small, our biologic activities delivered a solid performancethis past year. We received a milestone paymentfrom a project we out-licensed four years ago and expectadditional milestone payments in the coming years. Thanksto a large customer order, our mammalian cell facility inKleinmachnow is operating at close to capacity. However,at this time we do not plan to invest in additional capacity.Across all our fields of activity we want to further improveour operational efficiency. By tightly orchestrating activitiesacross functions we continue to optimize key processes.With this in mind, we integrated parts of compliance,purchasing and engineering into those entities where dayto-dayoperational decisions are made, allowing us tobreak down functional barriers and focus on the processesthemselves.With David Pulham, a former national expert at the FDA,who chairs our Compliance Board, and with Peter Kiechle,our Chief Compliance Officer, we have two industryexperts on board who help insure that quality and safetyremain front and center in our considerations. In fact, thisis the first year we have integrated our internal safety,health and environment (SHE) review into our annual report.The numbers show that we made good progress in 2006