Investor Update

Basel, 01 February 2012

Roche in 2011: Strong results and positive outlook

  • Group sales rise 2% 1 (-10% in Swiss francs; +6% in US dollars), excluding Tamiflu.
  • Significant foreign exchange impact of –12 percentage points due to appreciation of the Swiss franc; overall Group sales at 42.5 billion Swiss francs.
  • Pharmaceuticals sales, excluding Tamiflu, up 1%, in line with the market; Diagnostics sales increase 6%, significantly ahead of the market.
  • Core earnings per share rise 11% due to solid operating performance, lower financing costs and a lower tax rate.
  • Core operating profit increases by 6%, significantly faster than sales, driven primarily by savings from the Operational Excellence programme and continued productivity improvements.
  • Strong operating free cash flow of 13.7 billion Swiss francs, up 14%.
  • Net income increases by 26% to 9.5 billion Swiss Francs (+7% in Swiss Francs)
  • Excellent progress in late-stage pipeline: 17 out of 20 trials deliver positive results in 2011; targeted melanoma medicine Zelboraf and companion diagnostic test successfully launched in the US; marketing applications filed in US and EU for targeted cancer medicines Erivedge (vismodegib – US approval received January 2012) and pertuzumab.
  • Planned acquisition of Illumina to strengthen Roche Diagnostics’ offering in DNA sequencing.
  • Board proposes a dividend increase of 3% to 6.80 Swiss francs, the 25th consecutive year of dividend growth.
  • Outlook for 2012: Low to mid-single-digit sales growth for Group and Pharma; Diagnostics to grow above the market; high single-digit Core EPS growth target; Roche will continue its attractive dividend policy.
Key figures

In millions of CHF
As % of sales
% change

Group Sales42,53147,4731001001-105
excluding Tamiflu42,17246,600

Pharmaceutical Division32,79437,05877780-124
excluding Tamiflu32,43536,185

Diagnostics Division9,73710,41523226-710
Core operating profit15,14916,59135.634.96-9
Operating free cash flow13,73314,14932.329.814-3
Net income9,5448,89122.418.7267
Core earnings per share12.3012.78


* Constant exhange rates (average full-year 2010)

Roche CEO Severin Schwan commenting on the Group’s 2011 results: “We achieved our sales and earnings targets for the year and also made significant progress with our pipeline. With 17 positive late-stage clinical trials in 2011, we continue to build our future business with innovative products. Furthermore the planned acquisition of Illumina will strengthen our presence in the fast-growing sequencing market and enable the discovery of complex biomarkers for research and clinical use. For 2012 we expect Group sales to grow at a low to mid-single-digit rate and we have set ourselves the target of high single-digit Core Earnings per Share growth.”

Strong performance in 2011 impacted by significant currency effects

The Roche Group posted strong operating results in a challenging market in 2011. Core operating profit grew faster than sales, and Core Earnings per Share increased by 11% at constant exchange rates (-4% in Swiss francs). The strengthening of the Swiss franc against major currencies, notably against the US dollar and the euro, had a significant negative impact on the results expressed in Swiss francs. However the underlying currency translation exposure arising from non-Swiss franc revenues is significantly mitigated by the majority of the Group’s cost base (80%) being located outside Switzerland.

Solid sales growth

Group sales increased by 1% in constant currencies 2 (-10% in Swiss francs; +5% in US dollars) to 42.5 billion Swiss francs. Underlying growth was able to compensate for the expected decline in Tamiflu and Avastin sales and the impacts of healthcare reforms, austerity measures and price cuts. Excluding Tamiflu, sales increased by 2% in constant currencies. Sales by the Pharmaceuticals Division, excluding Tamiflu, grew 1%, reflecting the solid growth of key medicines, including recently launched products. Including Tamiflu, pharmaceutical sales remained stable in constant currencies (-12% in Swiss francs; +4% in US dollars) for a total of 32.8 billion Swiss francs. Diagnostics sales grew significantly faster than the in vitro diagnostics (IVD) market at 6% at constant exchange rates (-7% in Swiss francs; +10% in US dollars) totalling 9.7 billion Swiss francs. Professional Diagnostics (+9%) and Tissue Diagnostics (+15%) were the main contributors.

Operating profitability further improved

The Group’s core operating profit increased by 6% in constant currencies (-9% in Swiss francs), resulting in an increase in the core operating profit margin of 0.7 percentage points to 35.6% at reported exchange rates. Continued pressure on prices was more than compensated by increased sales volume and efficiency measures. Operating costs decreased primarily as a result of the Operational Excellence programme launched in November 2010.

Core operating profit in the Pharmaceuticals Division grew 5% at constant exchange rates to 13.4 billion Swiss francs. The core operating profit margin of the division increased significantly by 1.0 percentage points at reported exchange rates, driven by the Operational Excellence programme, resource prioritisation and productivity improvements. This was achieved in spite of the expected decline in Tamiflu sales of 0.5 billion Swiss francs, significantly lower sales of Avastin in the metastatic breast cancer indication, and the impact of healthcare reforms and austerity measures. Core operating profit in the Diagnostics Division increased by 14% at constant exchange rates to 2.2 billion Swiss francs. Roche Diagnostics’ core operating profit margin increased 1.3 percentage points to 22.4% of sales at reported exchange rates, driven by sales growth and further positive effects from ongoing productivity improvements.

Net income and Core Earnings per Share significantly up

Net income grew strongly mainly due to the good operating performance, lower financing costs and a lower tax rate, advancing 26% on a currency adjusted basis to 9.5 billion Swiss francs (+7% in Swiss francs). Core EPS, which excludes non-core items such as global restructuring charges and amortisation and impairment of intangible assets, increased by 11% in constant currencies (-4% in Swiss francs).

Strong operating free cash flow and improved net debt position

The Group’s operating free cash flow remained strongly positive at over 13.7 billion Swiss francs, advancing 14% in constant currencies (-3% in Swiss francs). Based on a strong free cash flow, the net debt position of the Group at the end of 2011 decreased by 3.6 billion Swiss francs, from 19.2 billion Swiss francs at the start of the year to 15.6 billion Swiss francs. The net debt to asset ratio was further reduced to 25%.

Planned acquisition of Illumina

On 25 January 2012 Roche offered to acquire all outstanding shares of Illumina, a leader in DNA sequencing, for 44.50 US dollars per share. Illumina’s sequencing systems and microarrays will complement Roche Diagnostics’ offering in genomics research and diagnostics, to enable the further discovery of complex biomarkers for research and clinical use.

Approvals and filings of targeted cancer drugs and tests

In the fourth quarter of 2011 Roche achieved several important regulatory milestones with novel medicines and tests for personalised treatment of melanoma, basal cell carcinoma, and breast and lung cancer:

Following its successful US launch in August for BRAF mutation-positive metastatic melanoma, Zelboraf received marketing approval in Switzerland and Brazil in the fourth quarter, and in December the EU’s Committee for Medicinal Products for Human Use recommended full marketing approval.

Avastin received EU approval in December for front-line treatment (first-line treatment following surgery) of women with newly diagnosed advanced ovarian cancer, the sixth type of cancer for which the medicine has been approved, based on the results of the phase III ICON-7 and GOG 218 trials.

On 30 January 2012, after priority review, the US Food and Drug Administration (FDA) approved Erivedge (vismodegib) as a treatment for adults with advanced basal cell carcinoma (BCC), a type of skin cancer. The approval and an EU marketing application submitted by Roche in the last quarter of 2011 are based on pivotal phase II results showing that the medicine substantially shrank tumours or healed visible lesions in a significant proportion of patients with advanced BCC.

In December Roche and Genentech filed EU and US marketing applications for pertuzumab for HER2-positive metastatic breast cancer, based on study results which showed that pertuzumab combined with Herceptin and chemotherapy significantly extended progression free survival, compared with Herceptin and docetaxel alone.

In December Roche received CE Mark certification for the cobas EGFR test, enabling its clinical use in the European Union. The test helps select patients for first-line treatment with epidermal growth factor receptor (EGFR) inhibitors such as Tarceva and adds to Roche’s portfolio of companion diagnostics.

See the separate Appendix to this Media Release for a full list of Pharmaceuticals product approvals, filings and key clinical trial results, and Diagnostics product launches.

Proposals for the Annual General Meeting 2012

Based on last year’s good results and the positive prospects for the future, the Board of Directors proposes that the dividend for 2011 be increased by 3% to 6.80 Swiss francs per share and non-voting equity security. Subject to approval by the Annual General Meeting of shareholders on 6 March 2012, this will bring Roche’s total dividend payout to about 5.9 billion Swiss francs, or 172 million more than the year before, for a payout ratio of 55.3%. If approved, this will be Roche’s 25th consecutive annual dividend increase.

In addition, the Board of Directors recommends the re-election of Dr. Franz B. Humer, André Hoffmann and Professor Sir John I. Bell at the Annual General Meeting.

Outlook 2012

Roche expects low to mid-single-digit sales growth at constant exchange rates for the Group and the Pharmaceuticals Division in 2012. Pharma sales growth is expected to accelerate, driven by the strength of its established product portfolio as well as planned new product launches. Sales by the Diagnostics Division are expected to again outpace the market.

Despite a challenging market environment, based on the expected sales growth and continued efficiency improvements, Roche is aiming for a high single-digit increase in Core Earnings per Share at constant exchange rates.

Roche will continue its attractive dividend policy.

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1,2) Unless otherwise stated, all growth rates are calculated using constant exchange rates (average full-year 2010).

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.