Basel, 26 February 2003
Annual Media
Conference Basel, 26 February 2003, 10.00 am C.E.T.
Additional information Speeches
English (The
spoken German text SPRACHWECHSEL!!!!!! is definitive) - Franz
B. Humer
– Chairman of the Board of Directors and CEO Slides
- Heino von Prondzynski
– Member of the Executive Committee
and Head of Diagnostics Slides only - William M. Burns
– Member of the Executive Committee and Head of Pharmaceuticals Slides
only - Erich Hunziker
– Member
of the Executive Committee and Chief Financial Officer Slides
Franz
B. Humer Ladies and Gentlemen, Welcome to Roche’s
Annual Media Conference. As in previous years, we will start by presenting Roche’s results for 2002.
Then you will have an opportunity to ask questions. Before briefing you in
detail on last year’s results, I would like to say a few words about our corporate strategy by way of
background. - For some years now we have been pursuing a strategy of
focusing
on two high-tech, high-value-added healthcare businesses — pharmaceuticals and diagnostics. With the
sale of the Vitamins and Fine Chemicals Division, this focusing process is now complete.
- Our
long-term goal is to sustain organic growth in both of our innovative businesses. And we intend to continue
augmenting this growth through targeted alliances, acquisitions and licensing agreements — areas where
we also reached some significant milestones in 2002.
- To remain a successful,
independent group, we need a strong balance sheet and adequate liquid assets. We continue to have both.
Group results for 2002 – Two sets of developments had
a major
impact
Against this background, we can now look at two very different sets of developments
that had an impact on our Group’s results last year. On the one hand, 2002 was a successful year for
Roche in operational terms. Our core pharmaceuticals and diagnostics businesses made very good progress
in terms of sales, operating profits and margins. On the other hand, it was
a year in which we successfully addressed a number of unresolved issues from the past: notably, issues
relating to the Vitamins Division, outstanding lawsuits and — owing to the dramatic downturn on stock
markets — our financial assets. This resulted in a number of substantial one-time charges in our 2002
financial statements. Painful as the corrective measures we have taken are, they were necessary in order
to reposition Roche as a highly focused healthcare company. Taking this action has meant recording a
net loss of 4.02 billion Swiss francs, despite Roche’s significant strategic and operational progress
and solid operating results. Group results for 2002 – Net loss
of CHF 4 bn despite strong core businesses
I would now like to discuss the three
biggest factors that negatively affected the Group’s results: - As we
announced
two weeks ago, the contracts with DSM have been signed and we expect to close the sale of the Vitamins
Division in the first half of this year, once the transaction has been approved by the antitrust authorities.
Our branded vitamin products Supradyn, Berocca and Redoxon, I should add, are not part of the transaction
and will continue to be marketed by Roche Consumer Health. In order to sell the vitamins business to
DSM, we have had to reduce the price we agreed with them in September. The price reduction was necessitated
by a further drop in the profitability of the Vitamins and Fine Chemicals Division, reflecting the current
difficult economic climate, and by the increasingly unfavourable exchange rate of the dollar against
the Swiss franc. As reported, this resulted in our having to take a 1.65 billion Swiss franc impairment
charge on the carrying value of the division’s net assets. This loss was partially offset by an accounting
gain of 600 million Swiss francs on the net assets that Nippon Roche brought into the alliance with
Chugai.
- Secondly, we set aside provisions totalling some 2.6
billion Swiss francs last year for major lawsuits. As announced last autumn, we raised the provision
for the vitamin case by 570 million to 1.77 billion Swiss francs. Contrary to all the speculation that
has been going around in recent months, this amount will be adequate to cover all outstanding claims
by customers in the United States. In our view, this is a decisive breakthrough in resolving the vitamin
scandal.
In the first half of 2002 we recorded a provision of 778 million Swiss francs
to cover potential liabilities in a Genentech lawsuit dating from 1976 with City of Hope Medical Center.
As already stated, Genentech has appealed a superior court’s verdict and damages award in the case.
- A
third factor relates to the restructuring of treasury and financing operations at Roche. Erich Hunziker
will be briefing you in detail about this in his presentation a little later. Our strategic objective
is to pursue an investment policy that enables Roche to profitably manage its cash and investments at
a calculable level of risk, thus ensuring adequate liquidity at all times for the growth of our businesses.
We need to bring the risk profile of our investments — including the large holdings of equities that
earned high returns for us in the 1990s — into line with this objective. As a result of the unexpectedly
sharp downturn on stock markets over the past two years, the carrying value of our equity portfolio,
which consists primarily of Swiss SMI securities, has declined significantly. In the past, unrealised
losses on investments have been transparently reported as losses deferred in equity. We have now decided
to proactively revise Roche accounting policy: Starting with our 2002 financial statements, any financial
asset whose market value remains more than 25% below original cost for six months will be considered
impaired, and the loss will be charged to income rather than deferred in equity. Our 2002 income statement
accordingly includes an accumulated impairment loss of roughly 5.2 billion Swiss francs on our equity
portfolio. Painful as the one-time impact of this measure is, it gives us the flexibility to allocate
resources when and where they are needed for the strategic development of our operating businesses.
In adopting this new policy, we’ve gone considerably further than many comparable companies. This is
a very deliberate step on our part, and one that we’ve taken from a position of strength.
Even
after this corrective action, Roche remains solidly financed, with an equity-to-assets ratio of 40%.
And our strong cash flow, which last year approached 8 billion Swiss francs, ensures that we will continue
to have the necessary flexibility to act. Strong operating results
I
turn now to our operating results. The future success of Roche ultimately hinges on its performance
in the marketplace. As can be seen from the figures for the Pharmaceuticals and Diagnostics Divisions,
our performance in 2002 was good, and we intend to do even better in the current year. To
increase the visibility of our underlying business performance and improve comparability, this year’s
Annual Report once again includes a presentation of our results on an adjusted basis. The principles
used in compiling the adjusted results have remained unchanged since 1999. The adjusted figures exclude
non-recurring special items and the results of the Vitamins Division, which is treated as a discontinuing
operation, and include only our on-going pharmaceuticals and diagnostics businesses. On an adjusted
basis, Roche recorded net income of 3.8 billion Swiss francs for 2002. The Group’s operating profit
rose 22% in local currencies and 12% in Swiss francs. Despite the substantial increase in operating
profit, net income was down 17% from the previous year. This can be ascribed to a decrease in financial
income, which totalled 736 million Swiss francs for the year, and a higher tax charge. Erich Hunziker
will have more to say about this later. Sales in 2002 – Double-digit
growth for prescription medicines and diagnostics
In 2002 our core Pharmaceuticals
and Diagnostics Divisions posted record sales of 26.5 billion Swiss francs. At 9%, sales growth in local
currencies was at the high end of our expectations. Owing to the franc’s strength relative to the Group’s
major trading currencies, however, growth in Swiss francs was a substantially lower 2%. From now on
I will be referring to local-currency growth rates, as these reflect market performance without the
effects of exchange rate movements. Sales of Roche prescription medicines
and diagnostic products and services increased by double digits and outpaced the average growth rates
in these markets. Our Pharmaceuticals Division grew faster than the global market for the first time
in two years, while our Diagnostics Division posted above-market growth for the fifth consecutive year. Revenues
from sales of our anticancer drugs rose by roughly one-third, to over 5 billion Swiss francs. Our oncology
portfolio now accounts for almost one-third of our prescription drug sales. We thus succeeded in further
expanding our global lead in this major therapeutic area, and last year also saw us move closer to achieving
leadership in virology. Following approval in the United States and Europe, Pegasys, in combination
with Copegus, is on its way to becoming the leading treatment for hepatitis C. Bill Burns will be telling
you more about the impressive market share gains we’ve made with this product. We expect our novel AIDS
medicine Fuzeon to be approved in the first quarter of this year. Sales by the new Chugai, created by
the merger of Chugai and Nippon Roche, have been consolidated since 1 October 2002 and made a significant
contribution to last year’s good sales performance. Last year we extended
our global market lead in in-vitro diagnostics, increasing our market share to 19%. Sales grew ahead
of the market average in each of the Diagnostics Division’s five business areas and in each of the geographic
regions it serves. Once again, growth was especially strong in our key, high-margin Molecular Diagnostics
and Diabetes Care businesses. Operating performance – Operating
profits up by double digits in local currencies
Group operating profit also grew
at a double-digit rate. Apart from solid sales growth, cost structure improvements were the main reason
for the increase. These resulted primarily from our restructuring initiative in Pharmaceuticals, which
has now largely been completed. Both divisions posted double-digit gains in operating profit, which
in local currency terms exceeded 20%. The profitability of our pharmaceuticals
and diagnostics businesses is also reflected in another year of strong gross cash flow, which reached
a record high of 7.7 billion Swiss francs. Profitability – Margins
improved
We are particularly pleased to report that profitability in both divisions
improved once again. In 2002 the Pharmaceuticals Division’s operating profit margin rose by 1.6 percentage
points to 21.1%. We are thus moving steadily towards our medium-term goal of achieving an operating
profit margin for Pharmaceuticals that approaches 25%. And the operating profit margin in the Diagnostics
Division also showed another year-on-year increase, advancing from 14.4% to 15.6%. Steady
rise in the Group’s profitability
Over the past two years operating profit as a
percentage of sales has steadily improved, from 17% to nearly 19%, showing that we are on track to reach
our medium-term goal of an operating profit margin of over 20%. In view of
the Group’s high gross cash flow and further improvement in operating profitability, at the Annual General
Meeting the Board of Directors will propose a dividend increase of 12%, to 1.45 Swiss francs per share
and non-voting equity security, despite the high one-time charges in the 2002 financial statements.
Expanding our healthcare business — Clear focus on core activities
Over
the past few years we have steadily strengthened the Group and forged a strong position for ourselves
in the healthcare sector by combining organic growth with complementary strategic moves. Important recent
transactions include: - The alliance with Chugai, formally completed
in October
2002. The alliance catapulted Roche from the number 32 position to number 5 in the Japanese pharmaceuticals
market. We now have the fourth-largest sales organisation to market Roche’s established and future products
in the world’s second-largest pharmaceuticals market. Moreover, Chugai can now draw on one of the biggest
development organisations in the country and will help to further consolidate Roche’s global number
two position in biotechnology. The alliance is already producing positive results. Based on the figures
for January 2003, we now rank third in the Japanese pharmaceuticals market.
- As
you know, in February Roche made a tender offer to acquire Disetronic, the world’s second-largest maker
of insulin pumps. For Roche, the number one supplier of diabetes monitoring products, the acquisition
offers an ideal fit and will make us a leader in integrated diabetes management. Diabetes is one of
the world’s fastest-growing health problems. Let me say something at this point about the timing and
cost of the transaction. The timing is right, because the whole diabetes market is in transition and
acquiring Disetronic will enable us to strengthen our position significantly in the United States. The
price we have offered is also reasonable and is well below what we would have paid a few months ago.
Disetronic will be a valuable addition to the Group.
- The agreement
we’ve signed with Affymetrix, giving us access to its GeneChip technology, is another important strategic
move for Roche Diagnostics. We are convinced that synergies between Affymetrix’s GeneChip platform and
our own PCR technology will establish new standards in genetic testing, helping doctors to tailor therapies
to individual patients.
Our progress in strengthening our research and
development
pipeline means that we are now even better equipped for future organic growth. In the Pharmaceuticals
Division we have substantially increased the number of compounds in development through our own successful
R&D efforts and targeted licensing agreements. Roche pipeline
significantly strengthened – 65 NMEs in Pharma, over 100 projects in Diagnostics
Currently
the Roche worldwide prescription group has 65 new molecular entities (NMEs) in development, 19 more
than we had one year earlier. To complement our own strong R&D units and our strategic alliances
with Genentech and Chugai, we are also focusing on partnerships with universities and biotech companies
and on targeted licensing agreements. In 2002 alone we signed 25 new licensing agreements for our pharmaceuticals
business. The result is that we have now overcome the pipeline problems that were a legacy of research
projects initiated in the 1990s. Similarly, Roche Diagnostics is pursuing
over 100 R&D projects, giving it the broadest pipeline in the industry. Thanks to advances in molecular
genetics, collaboration between our Pharmaceuticals and Diagnostics Divisions is an increasingly important
factor in raising research productivity. The interplay between these two businesses in the discovery
and development of new medicines gives Roche clear strategic advantages over its competitors. Our
improved operating results, our consolidated global leadership in oncology and in-vitro diagnostics
and our expanded R&D pipeline are clear evidence that we are successfully executing our strategy
for creating sustainable corporate value. Further enhancement
of transparency and corporate governance
Let me say a few words about corporate
governance. As stated in the Annual Report and on the Roche website, we comply with the latest requirements
of the Swiss Stock Exchange (SWX) and the Swiss Code of Best Practice for Corporate Governance, published
by the Swiss business association economiesuisse. In the 2002 Annual Report you will also find, for
the first time, detailed information on my personal remuneration. As previously
announced, Markus Altwegg, Head of the Vitamins and Fine Chemicals Division and a member of the Executive
Committee since 1986, will retire from his operational role at Roche following the transfer of the division
to DSM. I want to take this opportunity to thank him for his great personal contribution to the growth
and success of the Roche Group. Novartis’ stake in Roche
Early
this year Novartis announced that it had increased its holding in Roche to 32.7% of the voting shares.
This change does not affect our short-term activities or our long-term strategy. That strategy has the
unqualified support of the Board of Directors and of the members of the founding family with pooled
voting rights, who hold the majority of our voting shares. These members of the Hoffmann and Oeri families
have repeatedly stated their long-term commitment to Roche and affirmed that they have no intention
of relinquishing their majority interest in our Group. Resolutions
requiring qualified majority vote by shareholders (§16 of Articles of Incorporation)
There
has been a good deal of conjecture in the public and the media about what might happen if Novartis were
to increase its shareholding to 33.3% and thus gain a blocking minority interest. As some of what has
been said is inaccurate, I would like to briefly present the relevant part of the Roche Articles of
Incorporation. Article 16 states that resolutions by a general meeting of shareholders passed with at
least two-thirds of the votes represented and the absolute majority of the nominal value of shares represented
are required for: - Changes to the purpose of the Company
- Recision
of provisions in the Articles requiring a qualified quorum or majority for resolutions at the General
Meeting
- Creation of shares with privileged voting rights
- Restrictions
on the transferability of registered shares
- An authorised or conditional increase
in capital
- An increase in capital by recourse to equity, against contribution
in
kind or for the acquisition of assets and the granting of special benefits
- Restriction
or elimination of subscription rights
- Relocation of the Company’s registered
office
- Dissolution of the Company without liquidation
No
such matter is currently up for discussion, and none of these issues has been relevant for the management
of the company in the past. All of our Group’s strategic decisions — including the decisions to acquire
Genentech, Syntex, Boehringer Mannheim, Chugai and Disetronic — have been taken by the Board of Directors
alone and implemented by the Executive Committee. Such decisions have never required approval by a two-thirds
majority at a general meeting of shareholders. This means that we have complete freedom to continue
implementing our strategic plans. Outlook
And
now I come to the outlook. For 2003 we expect double-digit, above-market increases in sales in local
currencies and double-digit operating profit growth for the Group as a whole and for Pharmaceuticals
and Diagnostics, along with a stable operating profit margin for the Group as a whole. In
the Pharmaceuticals Division we expect our oncology, transplantation and anemia franchises to be the
main growth drivers, with an additional boost coming from the integration of Chugai. We also expect
strong growth from our antivirals Pegasys and Fuzeon. Pegasys has now been approved in over 60 countries
and in only a few months has posted impressive market share gains, and we are looking for Fuzeon to
receive marketing approval in the first quarter of 2003. We are thus confident that we will achieve
our goal of raising the operating profit margin of our Pharmaceuticals Division to close to 25% by the
end of 2004. We remain equally committed to the goal of lifting the Diagnostics Division’s operating
profit margin to slightly over 20% by 2006. Ladies and Gentlemen, in 2002 we
faced a number of unresolved issues from the past, and finding solutions has required substantial effort,
time and money — but we have succeeded. As you can see, I cannot hide my annoyance about the negative
impact this has had on our consolidated results — the first time in the Group’s history something like
this has happened. At the same time, however, I am relieved that we can now focus all our energy on
achieving our ambitious targets. In 2003 Roche will return to making good news.
Erich
Hunziker Ladies and Gentlemen Group
Financial results 2002: Impacted by significant events and decisions
As my colleagues
have already pointed out, the Roche result 2002 reflects a number of significant events: at a strategic
level the Chugai alliance and the sale of the Vitamin business have left very significant marks; at
an operating level the two core businesses Pharma and Diagnostics have provided excellent results. Major
challenges had to be dealt with at the non-operating level: the efforts to build Roche Finance into
a platform for value creation for the operating business and significant litigation cases have resulted
in a negative net income of the Group. Strategic level: Chugai
alliance and sale of Vitamins business
According to our records the alliance with
Chugai is the largest transaction concluded in the healthcare industry in 2002. The strategic dimension
of this quantum leap in the second largest Healthcare market in the world is already becoming visible.
The acquisition accounting of this transaction is too complex to be covered here. But this afternoon
the Roche experts involved will make the details available to interested parties at a workshop during
our analysts’ conference in London. For this audience here, it may well be of interest that Roche was
able to achieve a one-time gain of 586 million Swiss francs by this transaction. With
the signing of the sales contract for the Vitamins business Roche in 2002 has concluded another multi-billion
transaction. On the background of the turbulence around this business it may escape the attention of
many that Vitamins was a very successful core business of the Roche group for several decades. During
those times even the Pharma business profited from some ideas originating within Vitamins. In finding
a solution for this business we wanted to offer the 7,000 employees a new perspective. We are convinced
that DSM is the right partner. The fact that we were finally able to receive a sales price at the lower
end of our expectations is to a large extent due to the very difficult economic environment of the world-wide
economy, and the Vitamins business in particular. This transaction results in a very considerable impairment
of 1.65 billion Swiss Francs. Operating level: The ’EBITDA/EBIT
– engine’ of the Group in good shape
As my colleagues have already pointed out
all targets were achieved or even over-achieved at an operating level. The EBITDA of 7.7 billion Swiss
Francs brings Roche amongst the top 50 companies world-wide according to our information. We are not
only committed to short-term successes, we also want to create a sustainable improvement of all ratios
medium- to long-term: you can see this intention by the constantly improving margins of our core businesses,
and at the same time by the acquisition of technology to strengthen our R&D-Pipeline. Non-operating
level: status of major litigation cases
The Genentech litigation with City of Hope
Medical Center and the related provisions of 778 million Swiss francs have been explained in all details
along the presentation of the half-year results in August 2002. In October
2002 we increased the provisions for the vitamin case by 1.2 billion Swiss francs. Since then we have
succeeded in settling all claims with US direct customers. This breakthrough came at the price of another
570 million Swiss francs, making a total of 1.77 billion Swiss francs for 2002. Roche believes this
amount will cover all outstanding claims by US customers. We have not taken
any provisions for the claims of non-US-customers which are the subject of a case before the appeals
court of the District of Columbia. We intend to fight this case and defend our interest up to the supreme
court. Building Roche Finance into a platform for operational
value creation
The clear focus on the two high tech core businesses Pharma and
Diagnostics also brings an end to an era of Roche Finance: for more than a decade the liquid funds of
the Roche Group exceeded the direct needs of the operating business. On the one hand this comfortable
situation allowed Roche to pay cash for acquisitions like Corange/Boehringer Mannheim and Chugai, thereby
never diluting the Roche securities. On the other hand Roche was very successful with the asset management
of the funds exceeding the strategic needs of the operating business. After the impact of the vitamin
case and the impairment of the equity portfolio the situation has changed: we will continue to hold
liquid funds to finance acquisitions like Chugai and Disetronic without diluting the Roche securities,
but these funds will be invested with a risk profile in line with our industry peers. Another
major change will be made in the field of raising debt: in the past ten years Roche initiated a variety
of very innovative debt instruments convertible into Roche Genussscheine. As long
as the value of the GS increased year by year, these instruments were highly attractive due to their
leverage. Since the value of the GS has no longer developed along the underlying expectations, these
debt instruments have become increasingly unattractive. We intend to start to re-pay or re-finance these
convertibles, beginning in April 2003 with the ‘LYONs II’. In the future we will work with a European
Medium Term Notes (EMTN) – Program which will allow us to raise funds at predictable conditions. In
the past Roche had a very low tax rate due to the high percentage of financial income. In the future
the major contribution to the net income will come from the operating business (including Genentech
and Chugai). Roche will therefore have a higher tax rate. We have implemented projects to improve the
situation, but for 2003 and 2004 the tax rate will remain in the range of 29% achieved in the year 2002.
We are increasingly focused on overall value creation at all levels and in
particular on asset utilisation. I myself headed a project to benchmark all asset categories like receivables,
inventories and property, plant and equipment with our peers. This project identified significant room
for improvement and related action is initiated. We want to report and communicate
the financial situation of the Roche Group in a transparent manner. The fact that the transparency of
the annual report 2001 was honoured in Switzerland and abroad is a very encouraging sign for us to continue
to pursue this goal. In 2003/2004 we want to build a sustainable concept for
all finance activities to create a solid platform for the future and to bring the financial income towards
zero. Impairment of financial assets
As
mentioned before for a decade Roche had very significant liquid funds well beyond the direct needs of
the operating business. These liquid funds were very successfully managed and contributed in a most
significant manner to the Group result during the upswing of the global financial markets. In the downturn
of the world financial markets over the last two years Roche has incurred very substantial unrealised
losses of around 5 billion Swiss francs. In line with the existing international accounting standard
39 these losses were marked to equity. At the moment IAS 39 is under review,
and a clarification is not expected until later in 2003. For Roche this situation is not primarily a
question of accounting standards: our investors should be able to have a clear understanding of the
situation and the development of our company. We consider predictability an important element in times
of high volatility. We have therefore decided to proactively revise the accounting policy to give a
more appropriate presentation in line with the expected developments in IFRS, while still remaining
within the current rules. From now on we will impair financial assets based on a sustained ( 6 months
or more) and substantial ( 25% or more) drop of market value. Following this rule we have taken a one-time
impairment charge of 5.2 billion Swiss francs. As similar rules are applied by companies reporting according
to US-GAAP, Roche is now in line with most of its industry peers. Asset
allocation
We want to manage all our liquid assets with the objective of generating
financial income, reducing debt or investing for the strategic development of our core businesses. At
the end of 2002 24% of our liquid funds were invested in shares. The decrease of this percentage will
depend on the development of world financial markets. Factors
impacting net income 2002
This slide brings all the previously mentioned events
and decisions together: they have a combined negative impact on the net income of 7.8 billion Swiss
francs. Operating performance (financial statements)
The
events marked with the arrow result in a 59% decrease of the operating profit to 1.3 billion Swiss francs.
Financial income
The financial income
2002 of the Roche Group is 663 million Swiss francs. In the second half of 2002 we successfully concluded
the sale of the last part of our LabCorp shares. In a difficult market environment we were able to achieve
a very attractive price.
Without this positive effect, the importance of re-paying and
re-financing our expensive debt instruments becomes clearly visible: interest and equity income by far
do not cover interest expenses. Without the LabCorp gain we would have incurred a net financial loss
of 536 million Swiss francs. Net income (financial statements)
The
net income of minus 4.0 billion Swiss francs is heavily impacted by the impairment of financial assets
of 5.2 billion Swiss francs. Operating performance (adjusted)
With
the presentation of our results in an “adjusted” form we want to show you the development of the underlying
core businesses Pharma and Diagnostics. It goes without saying that since the implementation of this
adjusted concept in 1999 we have kept to the same rules and always build a totally transparent bridge
between the two sets of results. Sales of the two core businesses Pharma and
Diagnostics increased by 3% in Swiss francs and 9% in local currencies, both above their respective
peer developments. The operating profit increased 12 % to almost 5.0 billion Swiss francs, in local
currencies it increased by 22%. The 10% increase of R&D-costs reflects
our commitment to this area as a high technology company. This increase includes down-payments for a
number of in-licensing deals.
Administration cost increased due to several factors like
e.g. the Chugai integration. Net income (adjusted)
On
an adjusted basis net income reached 3.8 billion Swiss francs, a decrease of 17%. The increased operating
profit was not able to overcompensate a decreased financial income and a higher tax rate. Free
cash flow of CHF –2.9 billion
With an EBITDA of 7.7 billion Swiss francs the two
core businesses Pharma and Diagnostics show their ability to create a successful future of our Group.
Cash payments for settlements in the vitamin case and the blocking of funds for the Igen and Genentech/City
of Hope litigation combined to reduce free cash-flow by 5.1 billion Swiss francs. Therefore the Roche
Group shows a negative free cash flow. Equity decrease of 28%
The
significant 28% decrease in equity levels results mainly due to the negative net income. Balance
sheet
Roche shows a solid equity ratio of 40%.
Since they are due
within the running year the ‘LYONs II’, ‘Helveticus’ and ‘Bullet’ bonds are now classified as short-term
liabilities. In 2003 and 2004 we intend to strengthen the balance sheet by decreasing and re-financing
debt. All together the balance sheet will continue to allow for the strengthening
of our two core businesses Pharma and Diagnostics by targeted acquisitions like Chugai and Disetronic. Outlook
In
2003 we expect - for Pharma and Diagnostics in local currencies double
digit sales and operating profit growth
- operating profit margin stable for the group
- tax
rate at 2002 level (around 29%)
and beyond - operating profit margin:
Pharmaceuticals towards 25% by the end of 2004, Diagnostics slightly better than 20% by 2006, Group
> 20% medium-term
- conditions in place to achieve a balanced financial income by
the end of 2004
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