Record Operating Results for Roche Again in 2007

Roche Group
  • Group sales grow 10% to 46.1 billion Swiss francs.
  • Operating profit up by 22% to 14.5 billion Swiss francs.
  • Increase in net income of 25% in francs to 11.4 billion Swiss francs.
  • Increase in Core EPS1 of 20% in francs to 11.85 Swiss francs.
  • Increase in proposed dividend of 35% from 3.40 to 4.60 Swiss francs, representing the 21st consecutive year of dividend growth.

Pharma

  • Division posts double-digit sales growth of 11% (13% excl. Tamiflu pandemic sales) to 36.8 billion Swiss francs, again significantly outpacing global markets.
  • Operating profit up by 22% to 13.0 billion Swiss francs and operating profit margin up by 3.8 percentage points to 35.5%.
  • Additional indications and introductions strengthen leadership position in oncology.
  • Mircera launched in Europe for treatment of renal anemia.
  • Actemra filed in US and EU for rheumatoid arthritis.
  • Substantially higher R&D expenses of 7.6 billion Swiss francs reflect strong pipeline and large number of late-stage clinical trials.
  • New agreements with Transgene (therapeutic vaccines), Toyama (rheumatoid arthritis) and Alnylam (RNAi).

Diagnostics

  • Division maintains global market leadership as sales rise 6% to 9.3 billion Swiss francs.
  • Operating profit increases to 1.6 billion Swiss francs and operating profit margin up 1.3 percentage points to 17.6%.
  • Acquisitions of 454 Life Sciences, BioVeris Corporation and NimbleGen Systems, Inc. completed.
  • Merger agreement signed with Ventana Medical Systems, Inc. (US).

Outlook

  • High single-digit sales increase for the Group2.
  • Sales increase of both Divisions2 above market growth.
  • Core Earnings per Share3 target at least at record 2007 level despite significant increase in R&D investment and considerably lower Tamiflu pandemic sales.
  • Continued increase in dividend payout ratio over next three years.

Barring unforeseen events
Unless otherwise stated, all growth rates are in local currencies.
1) Core EPS (Earnings per Share)
2) Excluding Tamiflu pandemic sales
3) Core Earnings per Share target is based on constant exchange rates



BASEL, Switzerland, Jan. 30, 2008-Franz B. Humer, Roche Chairman and CEO, on the annual results: “In 2007 our operating businesses continued to post healthy growth and excellent results. Sales increased by 10% to 46 billion Swiss francs and have thus shown double-digit growth for the seventh year in succession. In the Pharmaceuticals Division, sales increased at almost twice the global market growth rate. The Diagnostics Division maintained its lead in in-vitro diagnostics with above-market growth. Additional operating improvements have enabled Roche to achieve an increase in earnings per share double that in sales. We are also strongly positioned for the future: our steady focus on innovation, our global pharmaceutical research network, our strengths in biotechnology, our leadership in diagnostics, our strong product pipeline and the integration of pharmaceuticals and diagnostics are important short- and long-term competitive advantages.”


Roche Group
Marked sales increase – entirely through organic growth

Key figures
In millions of
CHF
In millions of   
CHF
% change 
% change 
as % of sales
as % of sales
2007
2006
in CHF
in local cur.
2007
2006
Sales
46,133
42,041
+10
+10
100.0
100.0
Research and development
8,385
7,365
+14
+16
18.2
17.5
Operating profit before exceptional items
14,468
11,730
+23
+22
31.4
27.9
Net income
11,437
9,171
+25
24.8
21.8

2007  
2006                    
% Change                    
Equity ratio (in %)
68.2
62.9
Core earnings per share (in CHF)
11.85
9.86
+20
Dividend per share* (in CHF)
4.60
3.40
+35
Number of emploees (at 31. Dec.)    
78,604
74,372
+6

* Proposed by the Board of Directors

The Roche Group posted record results in 2007. Group sales were up significantly, advancing 10% in local currencies (10% in Swiss francs; 15% in US dollars) to 46.1 billion Swiss francs. This 4.1 billion Swiss franc rise in full-year sales was all organic growth. The Pharmaceuticals Division’s sales increased 11% in local currencies (10% in Swiss francs; 15% in US dollars) to 36.8 billion Swiss francs; this was approximately twice the global market growth rate. Demand remained very strong for the cancer medicines Avastin, Herceptin, MabThera/Rituxan, Tarceva and Xeloda. Combined sales of the division’s oncology products were up 20% for the year, reinforcing Roche’s market leadership in this therapeutic area. Other pharmaceuticals driving growth included Bonviva/Boniva for osteoporosis, CellCept in transplantation, Pegasys in virology and the ophthalmology medicine Lucentis. The Diagnostics Division strengthened its market leadership with sales totalling 9.3 billion Swiss francs, a 6% increase in local currencies (7% in Swiss francs; 12% in US dollars) over 2006. Professional Diagnostics and Applied Science were the business areas posting the strongest growth.

Operating profit margin over 30% for first time
The higher Group sales had a very positive impact on earnings performance. The Group’s operating profit increased 22% in local currencies to 14.5 billion Swiss francs. The operating profit margin grew 3.5 percentage points to 31.4%. In the Pharmaceuticals Division, operating profit rose 22% in local currencies to 13.0 billion Swiss francs, with the corresponding margin showing a 3.8 percentage point increase to 35.5%. This margin growth was achieved while the Group continued to significantly increase investments in its strong development pipeline. This is reflected in the Pharmaceuticals Division’s higher research and development expenses, which grew 18% in local currencies to 7.6 billion Swiss francs. The Diagnostics Division’s operating profit rose 14% in local currencies to 1.6 billion Swiss francs, and its operating profit margin improved 1.3 percentage points to 17.6%.

Strong earnings growth – high equity ratio
Net financial income totalled 834 million Swiss francs, compared with 855 million Swiss francs in 2006. The Group’s effective tax rate declined to 25.3% from 27.3%.
Net income increased 25% to 11.4 billion Swiss francs. Core Earnings per Share (Core EPS), which excludes amortisation and impairment of intangible assets, increased by 20% to 11.85 Swiss francs.
The Group’s business operations continued to show strong cash generation of 18.5 billion Swiss francs, driven by continued growth in EBITDA. Net cash increased by more than one billion to 17.3 billion Swiss francs.
There was a further significant improvement in the Group’s financial position. The ratio of equity to total assets reached 68% (up from 63% in 2006), and over 80% of total assets are now financed long-term.

Outlook
For 2008 the Group expects sales in local currencies to increase at a high single-digit rate, with above-market sales growth in both divisions. This excludes government and corporate stockpiling orders of Tamiflu for pandemic use. As most of the existing pandemic stockpiling orders have now been filled, Roche anticipates a significant decrease in Tamiflu sales in 2008.
The progress in Roche’s rich clinical development pipeline is especially important to our future growth outlook. Accordingly, the Group plans to increase research and development spending again significantly in 2008 in order to realise the full potential of Roche’s strong development portfolio. The activities this will support include late-stage clinical testing of promising compounds such as pertuzumab (breast cancer), ocrelizumab (autoimmune disorders), GLP-1 analogue (type 2 diabetes) and the CETP inhibitor (dyslipidemia), and several programmes aimed at expanding the use of Roche’s leading anticancer medicines into additional indications.
The Group anticipates continued strong growth in 2009 and 2010, driven by the launch of Actemra, Mircera and additional new indications for MabThera in rheumatoid arthritis, Avastin and other cancer medicines. Very importantly, Roche also anticipates pivotal clinical trial data on the use of Avastin in early-stage cancer (adjuvant therapy) by 2010.
Despite anticipated considerably lower Tamiflu sales and significantly higher R&D spending Roche is aiming for 2008 Core EPS at constant exchange rates to remain at least in line with the record level achieved in 2007. Roche expects and intends to continue raising its dividend payout ratio over the next three years.

21st dividend increase in a row
In view of Roche’s excellent full-year results, the Board of Directors will propose that the dividend for 2007 be increased by 35% to 4.60 Swiss francs per share and non-voting equity security (up from 3.40 Swiss francs for 2006). Subject to approval at the next Annual General Meeting of Shareholders, this will be Roche’s 21st consecutive annual dividend increase.


Pharmaceuticals Division
Sales increase again significantly outpacing global market growth rate

Key figures
in millions of CHF
% change in CHF
% change in local currencies
as % of sales
Sales
36,783
+10
+11
100
- Roche Pharmaceuticals
22,970
+11
+9
63
- Genentech
10,414
+14
+19
28
- Chugai
3,399
-3
+3
9
EBITDA
14,706
+21
+20
40.0
Operating profit before exceptional items
13,042
+24
+22
35.5
Research and development    
7,598
+15
+18
20.6


The Pharmaceuticals Division continued its strong, above-market performance in 2007. Sales for the full year rose 11% in local currencies and 10% in Swiss francs (15% in US dollars) to 36.8 billion Swiss francs, around twice the global market growth rate (6%)1. Excluding pandemic stockpiling sales of Tamiflu to governments and corporations, pharmaceutical sales grew 13%2 for the year. Regional sales growth significantly outpaced the market average in North America (15% vs 5%) and Europe (10% vs 7%). In Japan, at 3%, sales development was slightly below market growth. The major growth drivers were key products in the oncology, transplantation, metabolism/bone and virology franchises, as well as Genentech’s ophthalmology medicine Lucentis. The division’s operating profit advanced 22% in local currencies to 13.0 billion Swiss francs, and the operating margin 3.8 percentage points to 35.5%. Sales growth and higher royalty and other operating income more than compensated for – in particular – substantially higher research and development expenses, with significant investments in our strong pipeline reflecting the expanded portfolio and large number of late-stage clinical trials. EBITDA3 totalled 14.7 billion francs or 40.0% of sales, compared with 36.5% in 2006.

Oncology – five life-prolonging drugs
Sales of the division’s oncology portfolio4 grew 20% in 2007 and now account for 50% of pharmaceutical sales. Excluding supportive care products, combined sales of cancer therapeutics rose 23%, increasing the Roche Group’s share of the global market for cancer medicines to just under 30%.

MabThera/Rituxan (rituximab), for the treatment of patients with non-Hodgkin’s lymphoma (NHL), maintained strong sales growth throughout 2007. Increases were driven by the use of MabThera for maintenance treatment in follicular lymphoma, the most common form of indolent lymphoma, as well as first-line treatment for indolent forms of the disease in all markets, particularly in Europe/Rest of World (RoW)5. This growth was supported by strong uptake of first-line treatment of patients with aggressive NHL in emerging markets. In January 2008 the European Commission approved an application filed by Roche last July to extend the product’s existing first-line indolent lymphoma indication to include the use of MabThera with any chemotherapy combination. The expanded indication makes treatment with MabThera available to a wider group of patients across Europe.

Sales of Herceptin (trastuzumab), which is designed to treat a particularly aggressive form of tumour (HER2-positive) that accounts for 20-30% of all breast cancers, continued to deliver strong growth throughout the year. This performance was primarily driven by growth in the adjuvant (early-stage) breast cancer segment in Germany, France, Italy, Spain and the United Kingdom, the top five European markets. Due to earlier, rapid adoption of Herceptin for adjuvant treatment, the product’s market penetration in the United States stabilised at a high level during 2007. In the metastatic setting, adoption rates and treatment duration remained stable both in the US and in the top five European markets. New data from the NeOAdjuvant Herceptin (NOAH) study released in June show that treatment with Herceptin to reduce tumour size before surgery helps eradicate HER2-positive tumours and may reduce the need for breast removal. These results add to the substantial evidence supporting Herceptin as the foundation of care for women with HER2-positive breast cancer at all stages of the disease. In May Roche gained EU approval for the use of Herceptin in combination with hormonal therapy (aromatase inhibitor) for the treatment of patients with metastatic breast cancer that is both HER2-positive and hormone receptor-positive.

Avastin (bevacizumab), the first antiangiogenic therapy to demonstrate overall and/or progression-free survival benefits in patients with colorectal, lung, breast and kidney cancer, continued to record strong sales growth in all regions. Sales growth in the United States was driven primarily by increased use in advanced non-small cell lung cancer (NSCLC). In Europe sales growth was boosted by further uptake of the product in the metastatic colorectal cancer setting. In March the European authorities approved Avastin for the treatment of metastatic breast cancer in combination with chemotherapy (paclitaxel). The approval is based on clinical trial data showing that patients have the chance to live twice as long without their cancer progressing if treated with Avastin plus paclitaxel, compared with paclitaxel alone. Avastin was approved in April in Japan for advanced or recurrent colorectal cancer and in August in Europe, in combination with platinum-based chemotherapy, for the treatment of advanced NSCLC. Avastin is the first medicine to prolong the life of NSCLC patients beyond one year. In December the EU authorities approved Avastin in combination with interferon for the treatment of advanced renal cell carcinoma, the most common form of kidney cancer. In January the European Commission approved expanding the product’s existing marketing authorisation in advanced colorectal cancer to allow Avastin to be combined with any chemotherapy in any line of therapy. The broader marketing approval means that virtually all patients with metastatic colorectal cancer now have access to Avastin’s proven survival benefits. In August Genentech resubmitted its supplemental marketing application to the US Food and Drug Administration (FDA) for use of Avastin in combination with paclitaxel as first-line treatment of patients with locally recurrent or metastatic breast cancer. In December the agency’s Oncologic Drugs Advisory Committee voted five to four that the data are not sufficient to establish a favourable risk/benefit analysis for Avastin in this setting. Genentech will continue to work with the FDA to make Avastin available for US breast cancer patients. The FDA is expected to make a decision on the application by 23 February 2008.

Xeloda (capecitabine), an oral anticancer medicine that greatly simplifies treatment, recorded double-digit sales growth in 2007, with the main contributions coming from the US (+19%) and Europe/RoW (+19%). Sales were boosted by EU approval of Xeloda for the treatment of advanced gastric (stomach) cancer and by positive data on its use in colorectal cancer. In December the CHMP recommended approval of an application filed by Roche in April to broaden the product’s EU marketing authorisation to allow Xeloda to be used in any therapeutic combination in any line of metastatic (advanced) colorectal cancer treatment, including combinations with Avastin. The FDA is currently reviewing Roche’s application for US approval of Xeloda in combination with oxaliplatin, with or without Avastin, for first-line treatment and in combination with oxaliplatin for second-line treatment of metastatic colorectal cancer. In December Chugai received approval in Japan for Xeloda as therapy for adjuvant (post-surgery) colon cancer. Five-year follow-up data from the X-ACT trial presented at the European Cancer Conference (ECCO) in September show that patients with advanced colon cancer whose disease has progressed live longer when taking Xeloda compared with intravenous 5-fluorouracil plus folinic acid, the current standard treatment. In addition, data from a major trial in breast cancer published in December show that Xeloda in combination with Herceptin and docetaxel extended survival in HER2-positive patients by a further five months.

Tarceva (erlotinib), a targeted drug with proven survival benefit in advanced non-small cell lung cancer (NSCLC) and advanced pancreatic cancer, grew strongly over the previous year, mainly thanks to increased uptake in NSCLC and launches in additional countries. Tarceva was launched in China early in 2007, and in December Chugai launched the product in Japan for the second- and third-line treatment of NSCLC. Tarceva is now approved in 87 countries worldwide for the second- and third-line treatment of patients with advanced NSCLC. The EU launch in pancreatic cancer also contributed to Tarceva’s strong performance. Tarceva is currently approved in more than 60 countries for patients with this difficult to treat disease, with further approvals anticipated in 2008.

Anemia – promising Mircera launch
Combined sales of the erythropoietin-stimulating agents (ESAs) NeoRecormon and Epogin (epoetin beta) from Roche and Chugai, respectively, declined in a market that remains highly competitive due to pricing pressure from branded competitors and the entry of biosimilar versions of epoetin alfa in Europe. While the decline in NeoRecormon sales was slight, sales of Epogin in Japan were affected by competitive pricing pressures and, in the first quarter, the residual impact of government-mandated price cuts and reimbursement changes.

Following EU marketing approval in July, Mircera (methoxy polyethylene glycol-epoetin beta), Roche’s innovative continuous erythropoietin receptor activator for the treatment of anemia associated with chronic kidney disease (CKD), has now been launched in Germany, the United Kingdom, Ireland, Sweden, Austria, Slovenia and Hungary, as well as Norway and Switzerland. Initial sales have been in line with expectations. In November, the FDA approved Mircera for the same indication, and further applications for marketing approval are pending worldwide. Mircera allows stable hemoglobin levels with once-monthly dosing during maintenance treatment. It enables correction of anemia with twice-monthly dosing and direct conversion from dosing schedules of up to three times a week with other ESAs to once-monthly dosing in all CKD patients.

In October a US District Court in Massachusetts found in favour of Amgen in a patent infringement lawsuit brought by Amgen relating to Mircera. Roche is currently evaluating its legal options, including the possibility of an appeal.

Transplantation – leading position maintained
CellCept (mycophenolate mofetil) is the world’s most widely used immunosuppressant medication. Revenue growth in 2007 was driven by solid sales in both the US and Europe, based on physicians’ recognition of the long-term protective benefits of CellCept compared with other, more toxic therapies.

Virology – Tamiflu pandemic stockpiling orders completed
Sales of the anti-influenza medicine Tamiflu (oseltamivir) declined sharply in the second half of 2007 due to the completion of most of the existing pandemic stockpiling orders from governments and corporations. Guidelines issued by the WHO in 2007 have reinforced the position of Tamiflu as the treatment of choice for avian influenza. Seasonal sales of Tamiflu in Japan were negatively affected by restrictions imposed by the authorities on the use of the medicine in adolescents. This was compensated, however, by a substantial increase in pandemic sales to the Japanese government. The global manufacturing network put in place by Roche can produce 400 million treatment courses of Tamiflu annually, if required. Production levels have been tailored to current demand but can be increased should the need arise. In July and September respectively, Roche received marketing approvals in US and Europe for a smaller, lower-strength capsule formulation of Tamiflu intended primarily for use in children.

Throughout 2007, sales of Pegasys (peginterferon alfa-2a), for the treatment of hepatitis B and C remained strong despite an overall decline in market volume in the US and Western Europe. Growth was particularly strong in emerging markets such as China and Turkey. Copegus (ribavirin) sales were up 6% compared with 2006, as the launch in Japan more than outweighed declines due to generic competition in the United States and Europe/RoW. There has been a positive market response in Japan to the rollout of combined Pegasys plus Copegus for hepatitis C. Final results from a landmark study in previous non-responders, presented at the annual meeting of the American Association for the Study of Liver Diseases in November, show that Pegasys plus Copegus is a promising treatment option for patients who have failed to respond to treatment with another anti-HCV medicine.

Roche’s HIV medicines Fuzeon (enfuvirtide) and Invirase/Fortovase (saquinavir) recorded steady growth throughout 2007. In October the European Commission reinstated the suspended marketing authorisation for the HIV medication Viracept (nelfinavir) in the European Union. This followed the recall of Viracept earlier in the year in all markets where Roche supplies the product, following the discovery of higher than usual levels of a chemical impurity in some production batches.

Combined sales of Valcyte (valganciclovir) and Cymevene (ganciclovir), the standard of care for the treatment of cytomegalovirus infection in transplant patients and people with HIV/AIDS, again grew strongly in 2007.

Inflammatory and autoimmune diseases – marketing applications for Actemra filed in US and EU
Adoption by physicians of MabThera/Rituxan, the first and only selective B cell therapy for the treatment of rheumatoid arthritis (RA) in patients who have an inadequate response to or cannot tolerate TNF inhibitors, continued to increase throughout 2007. The product has now been launched in the major European markets, North and Latin America, and other markets worldwide. Data published in May show that, in patients whose RA had not responded adequately to TNF inhibitor therapy, treatment with MabThera controlled disease activity more effectively than switching to an alternative TNF inhibitor. In February new data were added to the European prescribing information on the ability of MabThera to significantly slow progression of joint damage in patients with inadequate response or intolerance to TNF inhibitor therapy. In August MabThera was recommended by the National Institute for Clinical Excellence (NICE) in England and Wales, making it the first and only therapy recommended by the Institute for patients with an inadequate response to at least one TNF inhibitor.

Actemra (tocilizumab) is a first-in-class humanised monoclonal antibody designed to block the effects of interleukin-6 (IL-6), a key protein involved in the inflammation that drives RA. In 2007 four phase III trials reported significant clinical benefits for a wide range of RA patients who received Actemra. Based on these results, Roche filed marketing applications for Actemra in RA in the US and the EU in November. The Japanese authorities are reviewing an application filed by Chugai in 2006 for approval of Actemra in adult RA and systemic onset juvenile idiopathic arthritis.

Metabolic disorders – strong growth of Bonviva/Boniva
Bonviva/Boniva (ibandronic acid) is the first and only once-monthly oral bisphosphonate approved for the treatment of postmenopausal osteoporosis. In a highly competitive market, sales of Bonviva/Boniva continued to show strong growth. The majority of sales were in the US, where the product’s market share (total prescriptions) increased to over 15%. Sustained growth was also helped by successful launches of Bonviva once-monthly tablets in France and Spain, additional launches of Bonviva Injection, and new efficacy data showing that the product can reduce the risk of non-vertebral fractures (fractures at sites other than the spine).
Sales of the prescription weight-loss medication Xenical (orlistat 120 mg) declined worldwide, especially in the United States, where Roche’s partner GlaxoSmithKline successfully launched non-prescription orlistat 60 mg under the brand name alli in June. As licensor, Roche receives royalties on sales of alli in the US. GSK has exclusive rights to market non-prescription formulations of orlistat globally, except in Japan.

Research and development – R&D pipeline strengthened further
In 2007 the Pharmaceuticals Division filed 14 major new marketing applications and gained 18 major regulatory approvals. At the beginning of 2008 the Division’s R&D pipeline comprised 115 clinical projects, including 57 new molecular entities (NMEs) and 58 additional indications. Thirty-four NMEs are currently in phase I, 19 in phase II and four in phase III or filed for regulatory review. In 2007 the total number of late-stage projects (NMEs and additional indications) increased from 47 to 50.
Roche Pharmaceuticals currently has 92 projects in preclinical research across five therapeutic areas and 85 development projects in six therapeutic areas, including nine in phase 0 (transition from preclinical to clinical development).
In 2007 ten Roche-managed projects were either terminated or reverted to our R&D partners. Of these, six were in phase I and four in phase II. No phase III projects were discontinued during the year.

Phase III testing of the HER dimerisation inhibitor pertuzumab in patients with HER2-positive metastatic breast cancer is expected to start patient recruitment early in 2008. This follows positive results of a phase II study in patients with pretreated metastatic HER2-positive breast cancer in which pertuzumab showed substantial antitumour activity when used in combination with Herceptin. In the phase III study women who have not previously been treated for metastatic HER2-positive breast cancer will receive Herceptin plus docetaxel or combined Herceptin, docetaxel and pertuzumab. The potential role of pertuzumab in other cancer types is also being investigated.

Ocrelizumab is a humanised anti-CD20 monoclonal antibody being developed by Roche and Genentech for the treatment of autoimmune diseases. Like MabThera/Rituxan, ocrelizumab also targets B cells. As a humanised antibody, it has the potential to be less immunogenic, better tolerated and more convenient to administer. An extensive global phase III clinical development programme was started in 2007, including three phase III trials in rheumatoid arthritis and phase III trials in systemic lupus erythematosus and lupus nephritis. A phase II programme in relapsing-remitting multiple sclerosis will be initiated in the first half of 2008.

Low levels of high-density lipoprotein cholesterol (HDLC), or ‘good’ cholesterol, are associated with an increased risk of cardiovascular disease. R1658 (JTT-705), licensed from Japan Tobacco, is designed to raise levels of HDLC by inhibiting cholesteryl ester transfer protein (CETP) activity. Based on promising phase II data, Roche has decided to move R1658 into phase III clinical trials.

R1583 (BIM 51077, licensed from Ipsen) is a long-acting glucagon-like peptide-1 (GLP-1) analogue being developed for the treatment of type 2 diabetes. The structure of the molecule is similar to that of the natural human hormone GLP-1, with potential for weekly or longer administration intervals. Phase II testing of R1583 was completed in 2007, and the initial data are very encouraging. Roche expects to make a decision on entry into phase III clinical trials in the first half of 2008.


Diagnostics Division
Global market leadership maintained

Key figures
in millions of CHF
% change in CHF
% change in
local currencies
as % of sales
Sales
9,350
+7
+6
100
- Professional Diagnostics
4,294
+9
+8
46
- Diabetes Care
3,216
+6
+5
34
- Molecular Diagnostics
1,148
-2
-2
12
- Applied Science
692
+11
+11
8
EBITDA
2,580
+3
+2
27.6
Operating profit before exceptional items
1,648
+16
+14
17.6
Research and development 
787
+2
+1
8.4


Roche Diagnostics remained the global market leader in 2007 with a market share of approximately 19%. Divisional sales for the year totalled 9.3 billion Swiss francs, an increase of 6% in local currencies (7% in Swiss francs; 12% in US dollars) over 2006.6 The Professional Diagnostics and Diabetes Care businesses posted solid single-digit sales increases. Roche Applied Science’s sales grew at a double-digit rate. As expected, pressure on industrial reagent prices continued to affect Roche Molecular Diagnostics’ sales, which were down 2% for the year. Excluding industrial reagents, this business area posted 3% top-line growth.

All regions contributed to growth, with sales advancing at double-digit rates in Latin America and Asia–Pacific and at single-digit rates in Europe, North America and Japan. Sales in Asia-Pacific grew almost twice as fast as the market.
The acquisitions of 454 Life Sciences, BioVeris Corporation and NimbleGen Systems, Inc., were completed in May, June and August, respectively. In January 2008 Roche signed a definitive merger agreement with Ventana Medical Systems, Inc., of Tucson (Arizona). The acquisition of Ventana will mark Roche’s entry into tissue-based diagnostics and be an important step in the Group’s strategy of delivering personalised healthcare solutions to patients.

Divisional operating profit rose 14% to 1.6 billion Swiss francs, while the operating profit margin increased 1.3 percentage points to 17.6%. The margin improvement was driven by sales growth and was positively impacted by the reversal of royalty accruals relating to BioVeris and the absence in 2007 of the significant impairment charges recorded on intangible assets in 2006. These factors compensated for continued heavy investments in launch activities and significantly reduced industrial reagent sales in 2007. EBITDA7 totalled 2.6 billion Swiss francs, or 27.6% of sales, compared with 28.6% in 2006. This is well above the industry average.

Professional Diagnostics – increased market share
Roche Professional Diagnostics gained market share in 2007 on overall sales growth of 8%. Immunochemistry remained the biggest growth driver, with sales revenues rising 13% for the year; this was the seventh consecutive year of above-market growth in immunochemistry sales. Sales of clinical chemistry products grew 3% in a highly competitive, cost-sensitive market. Roche remains the leading supplier of clinical chemistry and immunochemistry analysers in all markets except the United States.
The increase in immunochemistry sales was fuelled by continued strong demand for assays for the cardiac markers NT-proBNP and troponin T and for a TSH (thyroid-stimulating hormone) assay used to assess thyroid function. A vitamin D assay to diagnose osteoporosis and an assay for monitoring mycophenolic acid (MPA) therapy in heart and kidney transplant recipients were launched in the second half of the year and are expected to contribute to future growth. Monitoring MPA, the active form of Roche’s leading immunosuppreseant CellCept, enables physicians to maintain adequate immunosuppression at critical time points such as when initiating therapy or when reducing other, more toxic anti-rejection drugs.

Demand for the cobas 6000 analyser series for medium-workload laboratories (up to about 500 tests per day) remains very strong and helped drive immunochemistry and clinical chemistry sales. Introduced in 2006, the cobas 6000 was the first of several new modular platforms designed to integrate and improve the efficiency of immunochemistry and clinical chemistry testing in different-sized laboratories. Two new configurations were launched in 2007, increasing the platform’s competitiveness; all seven cobas 6000 configurations will be available by the end of 2008.

The rollout of the cobas 4000 series of benchtop instruments for small- to medium-size laboratories began in early 2007 with the launch of the cobas e 411 immunochemistry analyser. The entire cobas 4000 package, including the cobas c 311 clinical chemistry instrument, will be available in 2008.
In June Roche and Sysmex Corporation of Japan strengthened their long-standing partnership by extending an agreement that gives Roche exclusive distribution rights for Sysmex hematology instruments in some markets in Europe, Latin America, Southern Africa and Oceania. Hematology sales showed strong double-digit growth in all regions covered by the new 10-year agreement. A separate agreement with Sysmex covering urinalysis products was also extended; these products achieved above-market growth in 2007.

Sales of point-of-care diagnostic products rose 7%, helped by the continued trend towards testing outside the laboratory. Coagulation monitoring sales grew 14%, driven by the CoaguChek XS monitor for patient use and the CoaguChek XS Plus monitor for healthcare professionals, both launched in their first markets in 2006. These systems were released in the United States and Japan in the first half of 2007, and uptake in these major additional markets has been strong. Cardiac marker sales accelerated steadily following the launch of the cobas h 232 system in early 2007. This portable cardiac testing device provides highly reliable results in just 15 minutes. Sales of Accu-Chek Inform hospital blood glucose meters and test strips grew significantly, particularly as a result of the increasing adoption of tight glycemic control protocols in US hospitals.

The ambulatory care portfolio was strengthened in November by the launch of Accutrend Plus (cobas h 152), a hand-held instrument capable of measuring cholesterol, triglyceride and glucose levels (important indicators of cardiac risk) and lactate in blood. Roche expects this easy-to-use device to be an additional growth driver in 2008.

Integration of BioVeris Corporation, acquired in June, is proceeding as planned. The transaction, which gives Roche ownership of all patents relating to the electrochemiluminescence (ECL) detection technology used in its Elecsys product line, will enable Roche to expand its fast-growing immunochemistry business into new areas such as life science research, clinical trials and drug development.
In November Roche signed a licensing agreement with Ortho-Clinical Diagnostics, Inc., and Novartis Vaccines & Diagnostics giving Roche access to their broad portfolio of hepatitis C virus (HCV) patents for use in immunodiagnostics. The agreement also includes cross-licensing of patents owned by Roche Diagnostics. Roche is already a leader in nucleic acid testing for HCV, and the agreement will strengthen its position as a supplier of immunoassays for this major cause of liver disease, including chronic hepatitis, cirrhosis and liver cancer.

Diabetes Care – global market leadership maintained
Roche Diabetes Care remained the global market leader in 2007. Its full-year sales increased 5%, slightly below average growth in an increasingly competitive market. Healthcare system changes affecting pricing and reimbursement had a negative impact on sales growth in several major markets.
The Accu-Chek Aviva and Accu-Chek Compact blood glucose monitoring systems both posted sales increases, compensating for declining sales of the older Accu-Chek Advantage. Accu-Chek Aviva sales were up sharply from 2006 as a result of additional launches and continued market penetration. Accu-Chek Active, a compact, robust meter enabling discreet testing anywhere, also sold well, particularly in some EMEA (European, Middle Eastern and African) and South American markets.

Roche’s insulin delivery business posted double-digit growth, led by sales increases in Europe and North America. Consumer uptake of the Accu-Chek Spirit insulin pump in the United States was positive during its first full year on the US market.

Three new products were added to the diabetes care portfolio in 2007. Accu-Chek Performa, a blood glucose meter launched in the first quarter, automatically minimises the effects of temperature and other factors on test integrity. In the fourth quarter a new model of the Accu-Chek Compact meter was introduced in Germany, the United Kingdom and Norway. Among its features and benefits, this all-in-one system has a built-in test strip drum and is self-coding, for greater safety and only half the usual number of test steps. Accu-Chek 360°, last year’s third new product, is a software package that enables people with diabetes and their health professionals to store, track and analyse blood glucose readings, insulin dosages and other health information quickly and conveniently. The rollout of all three products will continue in 2008.

Molecular Diagnostics – further increase in virology product sales
Roche Molecular Diagnostics remained the industry leader in 2007 with a 36% share of a growing but increasingly competitive market. Overall sales decreased 2% as revenues from the industrial reagents business continued to decline. Excluding industrial reagents, sales advanced 3% compared with 2006.
Sales of virology products rose 4% in 2007, with placements of the automated Cobas AmpliPrep/Cobas TaqMan (CAP/CTM) platform continuing to show good growth in Europe and Asia–Pacific. This platform was successfully launched in the US and Japanese markets in the second half of the year. Virology is Roche Molecular Diagnostics’ largest segment by sales.

Automated tests for HIV-1 and hepatitis B and hepatitis C virus (HBV, HCV) were launched for the CAP/CTM platform in Japan, and the HIV-1 test was also introduced during the year in the United States. Uptake of all three tests remains strong in Europe, where they have been available since 2005. By the end of the year 122 supply contracts for the HIV-1 test had been signed with US laboratories, including a three-year contract with LabCorp of America. In 2008 Roche anticipates US approval and commercial launches of the HCV test for the CAP/CTM platform and an HBV test for the Cobas TaqMan 48 system; this will make Roche the first company to market a full suite of automated real-time PCR tests for major viral markers in the United States.

In the second largest segment, blood screening, full-year sales were down 1% in a very competitive market. In October Roche signed a five-year contract, effective from 2008, to supply its fully automated and integrated cobas s 401 instrument and cobas TaqScreen MPX (multiplex) Test to screen the entire Japanese Red Cross blood supply (roughly 5 million blood donations annually). Capable of simultaneously detecting HIV-1 (Groups M & O), HIV-2, HBV and HCV in donated blood and plasma, the cobas TaqScreen MPX Test has already been adopted by more than 50 sites across Europe, which run it on the fully automated modular cobas s 201 blood screening system. In 2008 Roche expects this test to be approved and launched in the United States, where it will also run on the cobas s 201. The cobas s 201 system was introduced in the United States with a test for West Nile virus in the second half of 2007.
The Amplicor and Linear Array tests for detecting and identifying low- and high-risk strains of human papillomavirus (HPV) also contributed to growth. Persistent infection with some strains of HPV is a major cause of cervical cancer.

Applied Science – well ahead of life sciences market growth
Roche Applied Science’s sales increased 11% in 2007, well ahead of the average growth of the life sciences market. Once again the main growth drivers were the LightCycler 480 instrument, the Genome Sequencer systems and research reagents. All of the business area’s main products sold well. Roche Applied Science maintained its share of the genomics systems market while more than doubling its share of the rapidly expanding market for DNA sequencing products. This significant increase was due primarily to the versatile, ultra-fast Genome Sequencer FLX system, launched in the first half of 2007. Gene scanning software and reagents, also launched in 2007, have enhanced the versatility of the LightCycler 480 system, which can now be used to screen DNA samples for previously unknown variations in genes as well as to detect known genetic variants.

The integration of 454 Life Sciences and NimbleGen Systems, Inc., both acquired by Roche in 2007, is proceeding as planned. As a result of these acquisitions, Roche now offers the industry’s most comprehensive, high-throughput workflow solutions for unlocking the secrets of the genome. In November the business area also strengthened its capabilities in cell analysis by signing an exclusive agreement with ACEA Biosciences Inc. to develop, supply and distribute systems based on ACEA’s real-time cell assay technology.

Industrial reagents and substrates, which account for a major part of Roche Applied Science’s sales revenues, remained important contributors to growth in 2007.

About Roche
Headquartered in Basel, Switzerland, Roche is one of the world’s leading research-focused healthcare groups in the fields of pharmaceuticals and diagnostics. As the world’s biggest biotech company and an innovator of products and services for the early detection, prevention, diagnosis and treatment of diseases, the Group contributes on a broad range of fronts to improving people’s health and quality of life. Roche is the world leader in in-vitro diagnostics and drugs for cancer and transplantation, and is a market leader in virology. It is also active in other major therapeutic areas such as autoimmune diseases, inflammatory and metabolic disorders and diseases of the central nervous system. In 2007 sales by the Pharmaceuticals Division totalled 36.8 billion Swiss francs, and the Diagnostics Division posted sales of 9.3 billion francs. Roche has R&D agreements and strategic alliances with numerous partners, including majority ownership interests in Genentech and Chugai, and invested over 8 billion Swiss francs in R&D in 2007. Worldwide, the Group employs about 79,000 people. Additional information is available on the Internet at www.roche.com.

All trademarks used or mentioned in this release are protected by law.

Annex

Additional information
- Annual Report 2007
- Presentations / live media conference broadcast (starting at 10:00 am CET):
- Photographs of the media conference (starting at 2:00 pm CET):
- Roche Pharma pipeline

Next events
- Annual General Meeting: 4 March
- First quarter sales 2008: 17 April (tentative date)
- Half-year results 2008: 24 July (tentative date)
- Nine month sales 2008: 21 October (tentative date)



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 2006 or any subsequent period will necessarily match or exceed the historical published earnings or earnings per share of Roche.


1) Market growth figures here and elsewhere according to IMS (to end of October 2007).
2) Unless otherwise stated, all growth rates are in local currencies.
3) Earnings before financial income, financing costs, tax, depreciation and amortisation, including impairment.
4) Oncology portfolio (main products): MabThera/Rituxan, Herceptin, Avastin, Xeloda, Tarceva, NeoRecormon, Kytril, Neutrogin, Neupogen, Bondronat, Roferon-A, Furtulon, Vesanoid.
5) Roche defines Europe/Rest of World as covering Europe and all other countries except Japan and the United Sates.
6) Unless otherwise stated, all growth rates are in local currencies.
7) Earnings before financial income, financing costs, tax, depreciation and amortisation, including impairment

Posted: January 2008


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