Investor Update

Basel, 02 February 2011

Solid overall results

Mid-single digit sales growth in local currencies excluding Tamiflu
Strong profit growth
Promising late stage pharmaceutical pipeline of twelve new molecular entities


  • Group sales increase 5% in local currencies, excluding Tamiflu; including Tamiflu, Group sales remain stable in local currencies at 47.5 billion Swiss francs.
  • Growth momentum maintained throughout 4th quarter due to continued uptake for Actemra, Herceptin, MabThera and immunoassays.
  • Core operating profit increases 7% in local currencies to 16.6 billion Swiss francs, core operating profit margin up by 1.7 percentage points to 34.9%; operating free cash flow of 14.1 billion Swiss francs underscores financial strength.
  • Net income increases 4% to 8.9 billion Swiss francs despite significant costs in connection with the ‘Operational Excellence’ initiative.
  • Core Earnings per Share 10% higher at constant exchange rates and 4% higher in Swiss francs.
  • Implementation of Operational Excellence on track; Group-wide review of structures and processes aims to accelerate productivity improvements and strengthen innovation capacity; cost savings of 2.4 billion Swiss francs from 2012 onwards; restructuring charges of 2.7 billion Swiss francs, of which 1.3 billion Swiss francs were included in the 2010 operating results.
  • Board proposes a dividend increase of 10% to 6.60 Swiss francs, the 24th consecutive year of dividend growth; this would increase the payout ratio to 52%.
Key figures

In millions of CHF
% change
As % of sales

20102009In CHFIn LC120102009

Research and development9,0509,509 -5-219.119.4
Core operating profit16,59116,272 +2+734.933.2
Operating free cash flow14,14915,722-10-629.832.1
Net income attributable to Roche shareholders8,6667,784 +11

Net income8,8918,510 +4
18.7 17.3
Core Earnings per share (CHF) 12.7812.34+4+10

Dividend per share2 (CHF)6.66+10

1 LC= local currencies
2  Dividend 2010 as proposed by the Board of Directors


  • Pharmaceuticals sales up 5% in local currencies, excluding Tamiflu, above the global market. Major growth drivers are key products for cancer, Actemra/RoActemra for rheumatoid arthritis and Lucentis in ophthalmology.
  • Core operating profit margin increases significantly, by 1.9 percentage points to 39.9%.
  • Late-stage development pipeline with twelve innovative new molecular entities, including six potential personalised healthcare medicines with planned companion diagnostic tests.
  • Roche personalized investigational medicine RG7204 shows survival benefit in advanced skin cancer.
  • Four new molecular entities moved into late-stage clinical development: lebrikizumab (asthma), MetMAb (lung cancer), RG 7128 (hepatitis C) and ocrelizumab (multiple sclerosis).
  • Roche has made the decision to stop the development of taspoglutide for type 2 diabetes and to return the product to Ipsen.


  • Diagnostics sales increase 8% in local currencies to 10.4 billion Swiss francs, significantly ahead of the market, driven by Professional Diagnostics and Diabetes Care.
  • Core operating profit margin up substantially, 3.8 percentage points to 21.1%.
  • Fifty tests and instruments launched in key markets.
  • cobas 8000 modular analyser series rolled out in US; new immunoassay module enables consolidation of serum work area for high-volume laboratories.
  • ATHENA clinical trial demonstrates high medical value of cobas 4800 HPV test, which detects high-risk genotypes 16 and 18, in screening for cervical cancer.


  • Full-year 2011 sales for Pharmaceutical and the Group expected to grow at low single-digit rates in local currencies (excluding Tamiflu), in line with expected market growth.
  • Diagnostics sales expected to grow significantly ahead of the market.
  • Target of high single-digit Core Earnings per Share growth in 2011 at constant exchange rates.
  • Planned dividend increase in line with Core Earnings per Share growth.
  • Based on the strong operating free cash flow, Roche expects to reduce debt progressively and to return to a net cash position by 2015.

Barring unforeseen events.

Commenting on the Group’s 2010 performance, Roche CEO Severin Schwan said: ‘The Group results are solid despite an increasingly challenging market environment. Excluding Tamiflu the Pharma Division grew above  the market. Diagnostics kept its strong momentum and grew significantly ahead of the market. The twelve innovative new molecular entities in our late-stage pharmaceutical pipeline form a strong basis for the company’s future success. Six of these drug candidates are being developed for specific patient subpopulations with the aim to advance personalised healthcare in key therapeutic areas such as cancer and asthma.’

Group Results and Outlook

Overall results

The Roche Group posted solid overall results in 2010. Group sales were stable in local currencies at 47.5 billion Swiss francs (–3% in Swiss francs; 1% in US dollars). The good underlying growth of both divisions compensated for the expected decline in Tamiflu sales and the impacts of healthcare reforms and austerity measures. Excluding Tamiflu, sales increased by 5% in local currencies. The Pharmaceuticals Division represented 78% of Group sales and the Diagnostics Division contributed 22%.

Sales in the Pharmaceuticals Division declined by 2% in local currencies to 37.1 billion Swiss francs. Excluding Tamiflu, local growth was 5%, above market growth. Demand for the oncology drugs Avastin, MabThera/Rituxan, Herceptin, Xeloda and Tarceva continued to grow strongly. Additional major growth drivers were Actemra/RoActemra in rheumatoid arthritis, Mircera in anemia and Lucentis in ophthalmology. Actemra, which is now launched in some 50 countries including the United States, the EU and Japan, reached sales of 397 million Swiss francs in 2010. These positive factors compensated for most of the expected strong decline in Tamiflu sales, the reduction in CellCept sales due to US patent expiry in May 2009 and the impacts of the US healthcare reforms, European austerity measures and price cuts in Japan.

The Diagnostics Division increased sales to 10.4 billion Swiss francs in 2010, growing 8% in local currencies (4% in Swiss francs; 8% in US dollars), thereby strengthening its leading market position. Major drivers were Professional Diagnostics with 11% sales growth and Diabetes Care with 4% sales growth.

The Group’s core operating profit increased by 7% in local currencies (2% in Swiss francs). The Pharmaceuticals Division increased its core operating profit by 4% in local currencies, driven primarily by cost synergies from the Genentech integration and productivity improvements. Core operating profit growth in the Diagnostics Division was 30% in local currencies, mainly resulting from sales growth due to new product launches and the ongoing operational efficiency programmes. The Group’s core operating profit margin increased by 1.7 percentage points to 34.9%, with the Pharmaceuticals Division improving by 1.9 percentage points to 39.9% and the Diagnostics Division by 3.8 percentage points to 21.1%.

In 2010 the Group’s net income increased by 4% to 8.9 billion Swiss francs compared to 2009. Net income attributable to Roche shareholders rose 11% to 8.7 billion Swiss francs.

The Group’s operating free cash flow remained strong at 14.1 billion Swiss francs. A free cash flow of 4.7 billion Swiss francs was achieved in 2010 despite higher interest, tax and dividend payments.

Of the debt raised in early 2009 to finance the Genentech transaction, 33% had already been repaid by 31 December 2010. In addition, the Group exercised its option to call for redemption a portion of the US dollar notes due 1 March 2014. Of the total principal amount of 2.75 billion US dollars, 1.0 billion US dollars will be redeemed in March 2011. The net debt position of the Group is 19.2 billion Swiss francs, a decrease of 4.7 billion Swiss francs from 31 December 2009.

Financial implications of Operational Excellence

On 17 November 2010 the Group announced implementation plans for its Operational Excellence programme, which is aimed at adapting cost structures to an increasingly challenging market environment and achieving significant efficiency and productivity gains. The initiative is expected to generate savings of 1.8 billion Swiss francs in 2011, with projected savings of 2.4 billion Swiss francs from 2012 onwards. Implementation is scheduled to be substantially completed by the end of 2012. During the period from 2010 through 2012 Roche expects to incur restructuring costs totalling 2.7 billion Swiss francs.

As a consequence of implementing the respective restructuring measures, significant costs were already incurred in 2010. The costs in 2010 of 1.3 billion Swiss francs mainly relate to severance payments and impairments of intangible assets. The Pharmaceuticals Division accounts for 1.2 billion Swiss francs of these costs, and 0.1 billion Swiss francs relate to the Diagnostics Division. Roughly 40% of the charges are non-cash, being mainly impairments of property, plant and equipment and intangible assets.

Outlook 2011

In 2011, Group and Pharmaceuticals sales (excluding Tamiflu) are expected to grow at low single-digit rates in local currencies, reflecting the impact of US healthcare reform and European austerity measures. Pharmaceuticals sales are thus expected to grow in line with the market.

In 2011, Diagnostics sales are again expected to grow significantly ahead of the market, driven by further rollout of new products in all business areas.

In spite of a more challenging environment and the introduction of an excise tax in the United States, Roche aims for Core Earnings per Share to grow at a high single-digit rate at constant exchange rates in 2011.

Roche aims to increase the dividend in line with Core Earnings per Share.

Based on the strong operating free cash flow, Roche expects to reduce debt progressively and to return to a net cash position by 2015.

Proposals to the Annual General Meeting 2011

The Board of Directors is proposing an increase of 10% in the dividend for 2010 to 6.60 Swiss francs per share and non-voting equity security (2009: 6.00 Swiss francs) for approval at the Annual General Meeting. This would be the 24th consecutive increase of the dividend and corresponds to an increase in payout ratio from 49% in 2009 to 52% for 2010.

Roche announced in December 2010 that Walter Frey and Wolfgang Ruttenstorfer will not stand for re-election to the Board of Directors. Paul Bulcke (CEO of Nestlé), Christoph Franz (chairman and CEO of Deutsche Lufthansa AG) and Peter Voser (CEO of Royal Dutch Shell plc) will be proposed for election to the Board of Directors at the 2011 Annual General Meeting.

Furthermore Roche will propose that the term of Board members will be reduced from three to two years.

Read the entire investor update

About Roche

Headquartered in Basel, Switzerland, Roche is a leader in research-focused healthcare with combined strengths in pharmaceuticals and diagnostics. Roche is the world’s largest biotech company with truly differentiated medicines in oncology, virology, inflammation, metabolism and CNS. Roche is also the world leader in in-vitro diagnostics, tissue-based cancer diagnostics and a pioneer in diabetes management. Roche’s personalised healthcare strategy aims at providing medicines and diagnostic tools that enable tangible improvements in the health, quality of life and survival of patients. In 2010, Roche had over 80,000 employees worldwide and invested over 9 billion Swiss francs in R&D. The Group posted sales of 47.5 billion Swiss francs. Genentech, United States, is a wholly owned member of the Roche Group. Roche has a majority stake in Chugai Pharmaceutical, Japan. For more information:

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Disclaimer: Cautionary statement regarding forward-looking statements
This document contains certain forward-looking statements. These forward-looking statements may be identified by words such as ‘believes’, ‘expects’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘estimates’, ‘future’ or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this document, among others: (1) pricing and product initiatives of competitors; (2) legislative and regulatory developments and economic conditions; (3) delay or inability in obtaining regulatory approvals or bringing products to market; (4) fluctuations in currency exchange rates and general financial market conditions; (5) uncertainties in the discovery, development or marketing of new products or new uses of existing products, including without limitation negative results of clinical trials or research projects, unexpected side-effects of pipeline or marketed products; (6) increased government pricing pressures; (7) interruptions in production; (8) loss of or inability to obtain adequate protection for intellectual property rights; (9) litigation; (10) loss of key executives or other employees; and (11) adverse publicity and news coverage. The statement regarding earnings per share growth is not a profit forecast and should not be interpreted to mean that Roche’s earnings or earnings per share for any current or future period will necessarily match or exceed the historical published earnings or earnings per share of Roche.