Dear Shareholders,

In 2016, we achieved all our financial targets. Pharmaceuticals sales were up 3%*. Diagnostics sales even increased by 7%*—again well above market growth. Roche’s business success is reflected not least in the core earnings per share and non-voting equity security, which increased 5%*.

Even more important for the future: Our product pipeline has made very good advances. Within a short period, we launched four new medicines to treat aggressive cancers—skin cancer (Cotellic), lung cancer (Alecensa; Tecentriq), leukaemia (Venclexta) and bladder cancer (Tecentriq). In other therapeutic areas, we filed marketing applications in the US and EU for a new medicine against multiple sclerosis (ocrelizumab), and achieved positive late-stage clinical trial results for a new molecule (emicizumab), which treats haemophilia A, a blood-clotting disorder. Additionally, five of our medicines have been granted breakthrough therapy designation by the US Food and Drug Administration, something that could speed up the approval processes.

The Diagnostics Division also introduced a number of key new instruments and tests. In particular, I would like to mention the new immunochemistry platform cobas e 801. This new module for clinical laboratories can carry out up to 300 immunological tests per hour, enabling doctors to make faster and extremely reliable treatment decisions.

Such complex and highly innovative products can only be developed if people from very different disciplines and business areas work closely together. I extend my sincere thanks to our more than 94,000 employees for their outstanding achievements.
Harnessing scientific excellence to improve patients’ lives and, where possible, to help them live longer, is the goal that drives us day in and day out at Roche.

Our advances made in the treatment of multiple sclerosis (MS) are highly encouraging. MS is an autoimmune disorder in which the immune system attacks the body. Data from three large-scale trials have shown that our potential new medicine ocrelizumab is highly effective, even against the somewhat rarer form of the progressively deteriorating disease, for which no treatment has been found to date.

As the world leader in oncology, we strive to advance new approaches to better treat cancer. As cancer cells are resourceful, they look for ways to circumvent a treatment and, at some point in time, often begin to multiply again. The latest immunotherapeutic approaches are therefore proving very promising because they help the body’s immune system to recognise and fight cancer more effectively. For the first time, there is reason to hope that we will be able to cure patients with advanced cancer, too—or transform cancer into a chronic disease. Roche is at the very forefront of cancer immunotherapy, with ten investigational candidates currently in the clinical development phase. In 2016, our first immunotherapeutic medicine Tecentriq was approved in the US for the treatment of bladder and lung cancer. Representing the first major improvement in bladder cancer treatment options in 30 years, this medicine also appreciably extends the life expectancy of people with advanced-stage lung cancer.
The fact that people respond differently to medicines remains a huge medical challenge. Because the immune system is extremely complex, we aim to keep cancer in check more effectively over the long term—or even defeat it—by using highly promising combinations of complementary preparations, for example immunotherapeutic agents with chemotherapies and targeted antibodies. We are currently testing more than 40 such combinations in clinical trials. It is also with a view to these novel treatment approaches that we strive for more flexible pricing models. Instead of the established practice of pricing medicines based on vials or milligrams, we want to link remuneration more closely to patient benefit. This can, for instance, vary for the same medicine, depending on which indication it is being used for and in which combination.

Working closely with payers and service providers, we have already introduced flexible pricing solutions in several European countries—including different prices for medicines used as combination therapies versus monotherapies in breast and skin cancer. In other countries we have initiated pilot projects; we collaborate on setting up the necessary IT infrastructure and—for example in the US—we actively engage in discussions with payers on new pricing models.

Overall, in working with governments and payers, our goal is to ensure the degree of patient benefit and innovation of our products are taken into account.

In 2017, we expect to witness the market launches of the first biosimilars for some of our most important medicines. We are confident that we will be able to meet this challenge by continually improving the standard of care, based on our strength in developing combination therapies of proven and new compounds. Thus, the newly launched medicines will be more important for the development of our business. Also in the current year, we expect a number of key clinical study results and product approvals, and overall we anticipate sales to grow low- to mid-single digit, at constant exchange rates. We are also aiming for core earnings per share to grow broadly in line with sales, at constant exchange rates. And we are planning to further increase the dividend in Swiss francs for 2017.

Roche is strongly positioned for the future. We are the world’s largest biotech company, the leader in cancer therapy, equipped with one of the best product pipelines in the industry and the number 1 in laboratory diagnostics. I am confident that Roche will continue its 120-year success story.

Dr Severin Schwan
Chief Executive Officer