BB MEDTECH AG was established as an investment firm in Schaffhausen (Switzerland) in November 1995. 
BB MEDTECH invests in growth companies within the medical technology sector.

Inclusion of BB MEDTECH in TecDAX
The Deutsche Börse announced yesterday that BB MEDTECH will be included in the TecDAX as of March 19, 2007. TecDAX is a select index within the Deutsche Börse, of mid-sized companies (mid caps) from technology sectors. It starts directly below the DAX and has 30 constituents.
BB BIOTECH AG, another investment company under Bellevue Asset Management, has been a member of the TecDAX since 1997. Main inclusion criteria are the market capitalization at the reporting date, based on the free float, and the order book turnover (35/35-rule).
The fiscal year 2006 was a successful year for BB MEDTECH. We reported a profit of CHF 216 mn and a share price increase of +25 %. As of December 31, 2006 the portfolio of BB MEDTECH included the following companies: Nobel Biocare, Synthes, Tecan, Galenica, Fresenius and Phonak.

BB MEDTECH concludes second share buy-back program
On February 14, 2007, BB MEDTECH AG has concluded its second share buy-back program started on August 8, 2006. In this period, a total of 1.6 mn bearer shares were purchased over the second trading line. At the Extraordinary Shareholders' Meeting of September 18, 2006, it was decided to cancel 277 960 shares bought under the second buy-back program. 1 094 000 shares were placed with shareholders in the interest of the company. The remaining 228 040 shares will either be proposed for cancellation at one of the future general meetings or placed with shareholders.
Due to a change of practice by the Swiss Federal Tax Administration whereby repurchased shares can no longer be replaced with shareholders in the interest of the company, BB MEDTECH will not commence a new share buy-back program. Therefore, BB MEDTECH will again actively manage the discount over the first trading line in order to limit the discount to a maximum of 10%. Should the discount deteriorate contrary to our expectations, BB MEDTECH will evaluate further measures

Good development of our holdings - further diversification of the portfolio
This year marks a significant and, we think, very positive change for BB MEDTECH shareholders. At our annual strategy review, and for the first time in five years, we determined to actively strive towards a diversification of our portfolio. This decision was taken since we saw the opportunity to target a more balanced portfolio without sacrificing our goal for an annual accretion of 20%.
The main step in the diversification involved the reduction of the holding in Nobel Biocare from 70% to 47% of the portfolio. This adjustment was achieved not only through the sale of Nobel Biocare shares, but also thanks to a strong performance of the other holdings. The cash generated from the realization of gains were reinvested into our existing holdings as well as into three new holdings, namely Phonak (9% of the portfolio), Qiagen (4%), and Millipore (3%). In addition, the strategic intention was set to endeavor into investments outside of Europe albeit in a focused, sound manner and given that a close relationship to management is established and secured. Finally, we decided to deepen our know-how of the diagnostics sector, a high growth market, in an explicit effort to leverage the expertise and network of our new Board Member Heino von Prondzynski - Qiagen and Millipore are the fruits of these efforts.
Our conviction in Nobel Biocare remains unwavered and we continue to hold 5.7% of the company's shares. Once again, the company delivered thrilling sales growth rates and improved operating margins this year - maintaining our "constant state of amazement" - and despite being confronted with controversy around its product NobelDirect. A highlight was the positive decision from the Swedish authorities that the implant is safe and we were pleased to benefit from the strong jump in the share price.
We have shifted our focus to Tecan where we believe our role as an active investor has the potential to release additional value for our shareholders. This has led us to significantly increase our holding to 11% of the portfolio from 7%. We are now the largest shareholder with a 14% stake in the company. This year Tecan provided a convincing report card on restructuring measures implemented. Now the focus will be on executing the company's new strategy to achieve improved, sustainable growth rates.
Several other changes were made to our portfolio during the course of the year. Synthes was further reinforced (13% of the securities portfolio). We only slightly reduced our holding in Galenica (7%) following a strong performance. Given the more attractive fundamentals for Fresenius AG (7%), we completely shifted our investment from Fresenius Medical Care into the former at the start of the year.
Our new holding, Phonak, the hearing aid manufacturer, had a phenomenal year and was our shining star with a year-to-date performance of +71%. Besides posting higher-than-expected results, management made a bold move to acquire GN Resound to become the new market leader. In Qiagen, a provider of reagents for sample preparation and molecular diagnostics solutions, we like the excellent management and strong market position and believe these criteria will allow the company to benefit from long-term molecular diagnostic growth opportunities. In Millipore, a supplier of products and services to improve productivity in biopharmaceutical manufacturing and laboratories, we see the potential to double the value of the company over four years through the leverage of core competences into other life science markets.
 

BB MEDTECH: Quarterly Report as at September 30, 2006
Strong growth of our holdings
All our portfolio companies reported a good business trend during the reporting period as well as a positive outlook.  This supports our optimism for the positive future price development of BB MEDTECH shares. In the third quarter the shares rose by 4% to CHF 61.90. The share performance since the beginning of the year is 7% (including dividends) and the Net Asset Value appreciated 8% to CHF 69.72. On September 18, our shareholders voted to cancel 1.5 mn BB MEDTECH bearer shares at an extraordinary shareholders meeting. We will continue with our efforts to reduce the discount to the Net Asset Value. 
BB MEDTECH intends to continue its successful, focussed strategy by investing with a long term perspective in a select number of companies. To this end, we are constantly looking for additional investment opportunities in areas where we see high growth potential as exemplified by the most recent addition, Qiagen, in the area of molecular diagnostics. Geographically our focus will remain in Europe, however, we are in the process of evaluating individual companies in the USA and Asia. 
The portfolio was adjusted in the third quarter. Qiagen was added with a 2% stake. We expanded our current investments in Phonak (8%), Synthes (16%), Tecan (9%) and Fresenius (6%) and reduced Nobel Biocare (51%) from 9.6% to 7.0%. In the medium term we are striving to create a balanced, even more attractive portfolio structure for our shareholders. Nobel Biocare will continue to play a very important role for BB MEDTECH thanks to its outstanding growth potential. We are convinced that the still low penetration rate of dental implants and the outstanding market position will allow the company to continue to achieve exceptional growth in the future.
Nobel Biocare continues to show impressive growth rates. In the first nine month of the year the company achieved a turnover of EUR 429 mn (+25% in local currency), whilst net profit increased by 34% to EUR 108 mn. In addition, the company entered into various strategic partnerships with universities. The University of Freiburg is the first German education centre to teach implantology to undergraduates. With a new direct subsidiary in China, Nobel Biocare is now even better equipped to exploit the enormous growth potential in this core Asian market.
Qiagen is the global leader in the development and production of innovative products for preanalytical sample preparation and molecular diagnostics. The product portfolio comprises consumable products and automation platforms used for separating, cleansing and handling of nucleic acids (DNA, RNA) and proteins from biological samples. 
Qiagen also markets molecular diagnostic kits and tests, a global market that is estimated at USD 2 bn and growing in the double-digits annually. Thanks to excellent management and strong market position, Qiagen will be able to utilise these growth opportunities.
Synthes continues to invest in the future in order to secure the successful development of the company in the long term. These investments led to a moderate profit growth of 8% in the first half of the year. The company's turnover,
however, grew by a strong 15%. In August, the company received final FDA approval for its artificial intervertebral disc ProDisc-L. The implant will be introduced in a controlled manner in the US market over the coming months. In September, the company completed its purchase of the brand and patent rights from the AO for CHF 1 bn. The AO network continues to be responsible for the training of surgeons and for fundamental clinical research.
Tecan, where we are represented by Heino von Prondzynski in the executive board, also reported further operational progress. During the first six months, turnover increased by 39% to CHF 201 mn, whilst the EBIT margin rose to 11.5% and the profit quadrupled to CHF 18 mn. At 15% the organic growth rate was significantly above market growth. We believe that the company will continue to markedly improve its profitability. Tecan plans to give investors an insight into the future strategic orientation of the company at its "Innovation Day" on November 14.
At the beginning of October, Phonak announced its takeover of the Danish company ReSound for CHF 3.3 bn, which will bring the company to number 1 position in the global market for hearing aids. CEO Valentin Chapero would like to see turnover increase by 10% per year as well as achieve significant cost synergies. In the 2009/10 business year the new group aims to achieve a turnover of CHF 2.2 bn and an EBITDA margin of 27-29%. This significant step opens the doors for additional growth prospects for this excellently managed company.
Galenica continues to grow profitably. The two main products, Venofer and Maltofer, continue to increase their market shares. We anticipate a European approval of the new intravenous iron preparation Ferinject next year, which will be followed by its US approval in 2008. The significantly faster patient administration time for Ferinject opens up new indication areas outside the drug's traditional usage in dialysis. The phosphate binder PA21 could be ready for market launch in 2009/10. 
Fresenius is on course to strengthen its leading position and increase profitability. The ongoing integration of the US dialysis provider Renal Care Group and the German group of private clinics Helios is progressing according to plan.
Our portfolio companies are showing a dynamic turnover and profit development and are attractively valued, therefore, we are highly optimistic about the continued positive development of BB MEDTECH.