STADA Arzneimittel AG • Stadastraße 2–18 • 61118 Bad Vilbel

July 29, 2016 Ladies and Gentlemen, These are exciting times for STADA: All around your company, markets, customer requirements and regulatory conditions are changing. New demands on your company are also being placed by activist investors. And a many things have happened in your company over the past months. For this reason, the upcoming Annual General Meeting is of critical importance to you, our shareholders, as well as to our customers, suppliers and employees. Therefore, the Executive Board and the Supervisory Board of STADA cordially invite you to this year's Annual General Meeting of STADA Arzneimittel AG. To facilitate your preparation for the meeting, we are pleased to highlight the key agenda items – with due brevity – as well as the requests for agenda supplements and countermotions that will be presented for discussion and decision at the Annual General Meeting on August 26, 2016. In addition, we would like to take this opportunity to once again explain the main content of the growth program drawn up by the Executive Board and its related operational targets for 2019. As you know, we postponed the Annual General Meeting in order to prepare for a personnel realignment of the Supervisory Board in an orderly, structured and transparent process, this being in your interest – two years earlier than originally intended. The Supervisory Board Nomination Committee formed especially for this purpose a clear requirement profile which we have released on our website in the interests of comprehensive transparency and greater corporate governance. With the support of the renowned personnel consulting company Egon Zehnder, the Committee has in the meantime initiated and completed an intensive search process. The Supervisory Board is convinced that four exceptional candidates have been gained who, in addition to their proven international industry expertise, have shown themselves to be ideally suited in personal terms for service on the Supervisory Board of STADA. Furthermore, the Supervisory Board is confident that these four individuals will ideally complement the remaining shareholder representatives in the Supervisory Board and work together with the company's operational management team to lead STADA to a successful long-range future: The candidates, whose resumés are also available for viewing on our website, will succeed Dr. Eckhard Brüggemann, Dr. K. F. Arnold Hertzsch, Dieter Koch and Constantin Meyer, who will resign from their positions effective at the end of the Annual General Meeting 2016. Thus, the Annual General Meeting on August 26, 2016 will replace four of the six Supervisory Board seats on the shareholder's side. This shows the seriousness with which the Supervisory Board is working to structurally renew the board in the interest of the company and all shareholders.

STADA Arzneimittel AG Stadastraße 2–18 61118 Bad Vilbel Telefon: 06101 603-0 Telefax: 06101 603-259 E-Mail: [email protected] www.stada.de www.stada.com

Vorstand: Dr. Matthias Wiedenfels (Vorsitzender) Helmut Kraft Hartmut Retzlaff (dienstbefreit) Aufsichtsrat: Dr. Martin Abend (Vorsitzender)

Bankkonten: Deutsche Bank AG 60311 Frankfurt am Main BLZ: 500 700 10 Konto: 096 0120 00 IBAN Nr.: DE13 5007 0010 0096 0120 00 BIC Code: DEUTDEFF

Postbank AG 60288 Frankfurt am Main BLZ: 500 100 60 Konto: 9218607 IBAN Nr.: DE36 5001 0060 0009 2186 07 BIC Code: PBNKDEFF

Sitz der Gesellschaft: Bad Vilbel Registergericht: Frankfurt am Main HRB 71290 USt-IdNr.: DE 112589604 Steuer-Nr.: 02022552706

2 The following candidates selected by the Nomination Committee and based on the requirements profile will be presented by the Supervisory Board for election at the Annual General Meeting: •

Rolf Hoffmann (57), most recently a member of the expanded Executive Board of Amgen, Senior Vice President of US Commercial Operations at Amgen Inc. and, since June 2016, an adjunct professor at the University of North Carolina's Kenan-Flagler Business School in Chapel Hill, USA, for strategy and entrepreneurship. In Mr. Hoffmann, STADA will gain a proven pharmaceutical and biotech expert who demonstrates comprehensive operational responsibility on all continents. Mr. Hoffmann is experienced in the process of tapping and expanding the world's largest pharmaceutical markets, including Brazil, Russia, China and Japan.

•

Dr. Birgit Kudlek (49), a member of the Supervisory Board of WILEX AG and most recently the Chief Operating Officer of Aenova Holding GmbH. Dr. Kudlek is a pharmacist, economist and a proven expert in the generic drug industry. She also has many years of international management experience in the areas of development, approval and production. She has held managing positions for well-known generic companies such as Sandoz, known by the name Hexal in Germany, and Ratiopharm.

•

Tina Müller (47), Director of Marketing and Chief Marketing Officer at the Opel Group GmbH. Ms. Müller is one of Germany's most prominent marketing and sales executives. In addition to the many years of work she has done in the areas of consumer goods/fast-moving consumer goods, she also has broad international know-how, including in the skin and oral care segments important for STADA, through her previous activities at Henkel, Wella and L’Oréal. She is also in charge of digitization, a relevant topic for STADA.

•

Dr. Gunnar Riemann (58), an independent business consultant in the life sciences industry and the former President (managing director) of the global Environmental Science Division at Bayer CropScience AG. In Dr. Riemann, a licensed pharmacist with more than 30 years of experience in the international life sciences industry, STADA will gain an individual who is a highly respected expert in pharmaceuticals, consumer care, biological products and animal health. Dr. Riemann has extensive international experience, including in the US, Asia and South America. He was active for many years as a member of the Executive Board of Bayer Schering Pharma and was responsible for the integration after the takeover by Bayer. In addition, Dr. Riemann can draw on extensive experience in the fields of production, development, marketing and management in the OTC market, also a relevant market for STADA.

The candidates will introduce themselves personally at the Annual General Meeting on August 26, 2016. It is critically important that a large number of you, our shareholders, is going to attend the Annual General

Meeting

because

requests

for

agenda

supplements

and

countermotions

to

the

abovementioned proposal of the Supervisory Board have been submitted by the shareholder Active Ownership Capital (AOC) on July 25, 2016. The motions have been reviewed in terms of completeness and legal admissibility. In compliance with legal provisions, the motions were publicly released and made available to shareholders. The motions have two purposes: First, they propose to vote Dr. Martin

3 Abend and Carl Ferdinand Oetker out of office and to replace them by new candidates (complementary motions). Second, they recommend two other candidates for the election of new members to the Supervisory Board in place of Dr. Kudlek and Dr. Riemann (countermotions / election candidate proposals). The position of the Supervisory Board on these motions has been included in the documents prepared for the Annual General Meeting. Let us summarize this position for you: •

The purpose of the motions submitted by AOC is to replace all six shareholder representatives on STADA's Supervisory Board. Such disruptive action is ill-considered and irresponsible. Thus, it is not in the interest of you, our shareholders. The complete replacement of shareholder representatives would immediately expose STADA to an irresponsible risk by preventing members of the Supervisory Board who have broad knowledge about the company from sharing their insights with the new members on the board. The Supervisory Board would simply not be able to function during the necessary orientation phase. And this would occur in a situation where the invalidity of Mr. Retzlaff led to a change on the Executive Board as well.

•

All four candidates proposed by AOC do not measure up to the candidates recommended by the Supervisory Board – when they are compared with the requirement profile that was developed by the Nomination Committee with the support of Egon Zehnder and that was recently made public or when they are assessed against the qualification criteria offered by AOC itself. The process used by AOC to select its candidates is intransparent. It is also unclear which candidate is supposed to become Chairman of the Supervisory Board and which one would be the independent finance expert who would chair the Audit Committee. This dubious and intransparent action strengthens the impression that the submitted list of alternate candidates would serve the interests of just one shareholder, and not those of all shareholders.

•

By contrast, the list of candidates submitted by the Supervisory Board was drawn up with a clear goal in mind: In the interest of all shareholders, the newly constituted Supervisory Board would have all of the expertise needed by the company in the future. We put together the team that would join Dr. Martin Abend and Carl Ferdinand Oetker on the Supervisory Board and that we recommend to you for election to the board on the basis of discussions with many investors and of criteria that were carefully developed and transparently presented. The composition of the new Supervisory Board would ensure smooth knowledge transfers thanks to the balanced relationship between new and old members and would support the company's strategic repositioning by the Executive Board. After being reconstituted, the Supervisory Board in its entirety would bring together relevant business and market knowledge, many years of international experience and profound expertise in finance, accounting and legal affairs. This would not be the case with the candidates proposed by AOC.

With this thought in mind, the Supervisory Board urgently recommends you to reject the AOC motions. The motions of the Supervisory Board are within the statement included in this letter. You will also have the opportunity during the Annual General Meeting to vote on the redesigned remuneration system for Executive Board members. Remuneration systems are currently the focus of intense debate in corporate governance circles and among the general public. In response to these

4 discussions and specific suggestions made by investors and international proxy advisors, the Supervisory Board has further modified the remuneration system for STADA's Executive Board to reflect the latest developments. One such area is variable compensation. The conditions for a discretionary bonus for the Executive Board were clearly defined and tightened by the Supervisory Board. The multi-year, long-term incentive portion of performance-based compensation is now structured in such a way that payment of the stockbased portion can also be spread out over three years. In addition, the Supervisory Board has also responded to the investors' desire for more transparency: In the future, the Supervisory Board will release the targets for the Executive Board variable remuneration that are based on the company's announced guidance for adjusted net income. For the ongoing financial year, this target is slightly above the previous year's level. For more information, please refer to the documents included with the invitation to the Annual General Meeting. The new system developed with the assistance of Ernst & Young has been evaluated by the experts of the business law firm Freshfields Bruckhaus Deringer and the personnel consulting firm Willis Towers Watson. The summary of the evaluations has been posted on the company's website. The experts confirm that the amount and form of the remuneration system are appropriate and customary for the industry and that STADA complies with all regulatory requirements for the remuneration system. Furthermore, the company has systematically implemented the recommendations for facultative improvements in the manner described above. Other agenda items include the cancellation of the limited transferability of registered shares of STADA and the resolution on the election of the auditor of the consolidated financial statements for financial year 2016. The Executive Board and the Supervisory Board recommend the election of the auditor PKF Deutschland. The audit of STADA‘s key international affiliates for financial year 2016 will be conducted by the auditing firm Ernst & Young. At next year's Annual General Meeting, the Supervisory Board is going to propose new annual auditors. As planned for some time, STADA initiated a selection process for annual auditors following the introduction of the audit reform in June 2016 in accordance with the stricter new requirements. You will find more information about this issue on our corporate governance website.

5 Ladies and Gentlemen, While the Supervisory Board has dedicated itself over the past weeks to the topics outlined above, the Executive Board has fulfilled its responsibility to further advance the STADA strategy and initiate measures that will continue to enhance the performance of the company. STADA is not just experiencing some exciting times. It is also serving as a driving force – in many areas and with great energy. To that end, on July 11, 2016, the Executive Board adopted an ambitious growth program that formulates clear targets for fiscal year 2019: •

We will raise the adjusted Group sales by 22 percent to €2.6 billion.

•

We will increase the Group's adjusted EBITDA by 31 percent to €510 million.

•

And we will raise the adjusted net income by 51 percent to €250 million.

This growth program is primarily aimed at strengthening the competitiveness of STADA as compared to international benchmarks, and to significantly improve the innovative strength of the company for longterm value creation for you, our shareholders. To achieve this goal, the Executive Board has initiated implementation of a Group-wide set of measures. In this connection, we aim to take advantage of untapped revenue potential, optimize marketing costs and improve sales efficiency. In addition, the plan calls for reducing cost of sales and general and administrative expenses in particular. Within the scope of our business model, we also want to intensify our focus: •

Our thriving generics business will continue to provide the solid basis for our success. However, we seek even further improvement in this segment and will therefore intensify our expansion into less regulated, promising countries.

•

At the same time, we will work to consistently expand our brand products segment. We plan to significantly increase the share of Group sales and net income from brand products in the medium term. To do this, we plan to further internationalize our exceedingly successful brand products and market them more vigorously with innovative market launch concepts. Secondly, we will continuously monitor the markets and analyze them for appropriate acquisitions that could further strengthen our business in the brand products segment.

•

In addition, we want to ensure that we have a stronger stake in the growth markets of tomorrow. As a consequence, we will become even more active in these promising niches and will adopt an attractive “buy and build” approach to add more innovations to our well-known, proven product portfolio and attract new customers.

When presenting the company's key figures for the first six months of 2016 in early August, the Executive Board will present the growth program to the public for the first time and then explain it in detail during the Annual General Meeting.

6 Dear Shareholders, Your confidence is of vital importance to us: Without your support, STADA’s positive trajectory of recent years would not have been possible. We would like to thank you sincerely for that support. STADA is in motion: With the personnel realignment of the Supervisory Board, the rollout of a comprehensive growth program and the introduction of ambitious targets for 2019, the Supervisory Board and Executive Board of STADA have taken important steps to resolutely advance your company and lead it into a successful long-range future. We are firmly convinced that we will accomplish what we have set out to do. Driving all of these measures, it is our aspiration to achieve long-term success for our customers, employees and shareholders. It is now up to you: We ask that you provide us with the necessary tailwind for these newly launched changes at the company by showing a broad presence at the Annual General Meeting. Let’s make STADA even better – together! Best regards,

Dr. Martin Abend

Dr. Matthias Wiedenfels

Chairman of the Supervisory Board

Chairman of the Executive Board