Investor Update

Basel, 26 July 2012

Roche posts strong operating first-half results; on track to meet 2012 guidance

  • Group sales 22.4 billion Swiss francs: +4% at constant exchange rates1 (+3% in Swiss francs).
  • Core operating profit up 7% at 8.6 billion Swiss francs. Core operating profit margin rises 1.0 percentage point (+0.4 percentage points in Swiss francs) to 38.5% due to underlying business performance and productivity measures.
  • Core Earnings per Share up 8% at 6.94 Swiss francs.
  • Net income down 14% mainly due to one-off costs related to closure of Nutley and productivity measures in Applied Science and Diabetes Care.
  • Successfully launched breast cancer medicine Perjeta as well as skin cancer drugs Zelboraf and Erivedge; full product pipeline with 72 new molecular entities in clinical development.
  • On track to file for EU, US approval of T–DM1 (trastuzumab emtansine) in aggressive form of breast cancer during the second half of this year.
  • Nutley site closure and streamlining of related R&D activities to result in annual savings of 370 million Swiss francs to be largely allocated for the development of Roche’s growing late-stage pipeline; related one-off closure costs 858 million Swiss francs of which 446 million is cash relevant.
  • Roche confirms full-year outlook. Group and Pharmaceuticals sales expected to grow at low to mid-single-digit rates; Diagnostics to grow above the market; target of high single-digit Core Earnings per Share growth.
Key figures (January-June)

In millions of CHF
As % of sales
% change

Group Sales22,42321,67110010043
Pharmaceuticals Division17,40916,815787844
Diagnostics Division5,0144,856222253
Research & Development (core basis)4,0433,8731817.934
Core operating profit8,6418,25138.538.175
Operating free cash flow7,1706,8563231.675
Net income4,3685,25919.524.3-14-17
Core Earnings per Share6.946.68--84

Roche’s CEO Severin Schwan: “Roche delivered strong operating results in the first half of 2012, driven by the solid performance of our existing portfolio as well as new product launches. We recently introduced the innovative cancer medicines Zelboraf, Erivedge and Perjeta, and we are on track to file for T–DM1 in breast cancer this year. Over the last six months we made good progress in developing our product pipeline, and we now have 72 new molecular entities in clinical development.” Schwan added: “Our recent decision to close the Nutley site and the related consolidation of our research and early development activities at other sites will free up resources that we can invest in our promising clinical programmes.”

Strong core operating results

In the first half of 2012 Group sales rose 4% to 22.4 billion Swiss francs despite continued pricing pressures, in particular in Europe. The main growth drivers were Roche’s cancer medicines, hepatitis drug Pegasys, rheumatoid arthritis treatment Actemra/RoActemra and the clinical laboratory business. Group core operating profit increased 7% due to the strong sales performance and productivity measures. The Pharmaceuticals Division’s core operating profit increased 9%.

Diagnostics core operating profit fell by 5%. This was mainly because of bad debt write-offs in Turkey and Brazil as well as factoring costs related to successful collection of outstanding trade receivables in Southern Europe. The division also recorded higher cost of sales due to substantially more instrument placements.

The Group’s core net income rose 6% to 6.0 billion Swiss francs, also reflecting lower financing costs. Group Core Earnings per Share rose by 8% to 6.94 Swiss francs. The operating free cash flow increased 7% to 7.2 billion Swiss francs, reflecting the continued strong underlying cash generation of the Group.

Adjusting organisation for sustained future success

As announced at the end of June, Roche is restructuring the Pharma Research and Early Development organisation and closing the site in Nutley, New Jersey. The resulting annual savings of 370 million Swiss francs will be largely reinvested in the expanding clinical product pipeline. Associated site closure costs amounted to 858 million Swiss francs in June, of which 446 million is cash relevant.

Roche’s Applied Science and Diabetes Care businesses also initiated restructuring measures to sustain their long-term profitability. Roche incurred costs of 289 million Swiss francs for these initiatives.

Further costs of 530 million Swiss francs are a result of other global restructuring plans, including costs related to the termination of the dalcetrapib clinical programme. Due to these one-time costs, net income decreased by 14% on an IFRS basis.

Strong Pharmaceuticals and Diagnostics portfolio to support future growth.

The Group strengthened its leading position in the global oncology market by successfully launching breast cancer treatment Perjeta and skin cancer medicine Erivedge in the US as well as melanoma therapy Zelboraf in Europe, Australia, Canada and other countries this year.

Roche is on track to file T–DM1, another innovative treatment for HER2-positive metastatic breast cancer, for approval in both the US and Europe in the second half of the year. Data showing encouraging efficacy, safety and quality of life results for T–DM1 were presented at the American Society of Clinical Oncology annual conference in June. Approval of T–DM1 will bring a more effective medicine to the one in five breast cancer patients who are diagnosed with this type of the disease each year. T–DM1 and recently launched Perjeta are expected to further strengthen Roche’s HER2 franchise over the coming years.

Roche continued to make excellent progress in the development of the product pipeline, with positive results in seven out of nine late-stage trials. Despite the recent decision to stop the development of dalcetrapib, the Group remains committed to developing medicines for patients with cardiovascular disease and diabetes due to the high medical need.

Roche’s Diagnostics Division expanded its position as market leader and strengthened its portfolio by launching 25 major products in key markets.

Full-year targets confirmed

Roche confirms its full-year outlook for 2012. Barring unforeseen events, Roche expects low to mid-single-digit sales growth at constant exchange rates for the Group and the Pharmaceuticals Division in 2012. 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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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 personalized healthcare strategy aims at providing medicines and diagnostic tools that enable tangible improvements in the health, quality of life and survival of patients. In 2011, Roche had over 80,000 employees worldwide and invested over 8 billion Swiss francs in R&D. The Group posted sales of 42.5 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:

1) Unless otherwise stated, all growth rates are calculated using constant exchange rates

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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.