Roche Annual Report 2010

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2010

Roche Annual Report

Creating value for patients

Key figures Roche Group

Index 2008 = 100

Sales

Free cash flow

mCHF

mCHF

2010

47,473

4,699

2009

49,051

8,893

2008

45,617

4,979

Research and development 2

Total dividend

mCHF

mCHF

5,693 3

2010

9,050

2009

9,509

5,175

2008

8,704

4,313

Operating profit 2

Number of employees

mCHF

2010

16,591

80,653

2009

16,272

81,507

2008

15,068

80,080

Income taxes 2

Total employee remuneration

mCHF

mCHF

2010

3,135

11,934

2009

3,287

12,080

2008

3,604

11,129

Net income

Patients on clinical trials 4

mCHF

2010

8,891

327,804

2009

8,510

302,063

2008

10,844

277,674

Core Earnings per Share

Eco-efficiency rate 5

CHF

0.414

2010

12.78

2009

12.34

0.46

2008

11.17

0.387

Price development of non-voting equity security (Genussschein) | 2008

in CHF

2009

2010

300 250 200 150 100

Roche non-voting equity security

1 2 3 4 5

Key figures indexed to 2008 = 100. Core results. Proposed by the Board of Directors. Development phase I to IV. For calculation of the Eco-Efficiency Rate see: www.roche.com/environment

Swiss Market Index (rebased)

Figures for 2008 as in Annual Report 2009. For a full index of Global Reporting Initiative (GRI) indicators used in the report see: www.roche.com/reporting_and_indices

Highlights 2010 January EU Commission approves ­Herceptin for treatment of HER2positive advanced stomach cancer

January FDA approves Actemra for the treatment of moderately to severely active rheumatoid arthritis

february Roche Annual General Meeting votes to increase shareholder dividend by 20%

20 % April Roche acquires Medingo to expand its position in the growing insulin delivery systems market

June FDA expands Lucentis approval to include treatment of macular edema following retinal vein occlusion

July 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

47,000 women

september FDA clearance for cobas 8000 modular analyser series for high-­ volume lab testing

september Roche named Healthcare Supersector Leader in Dow Jones Sustainability Indexes for second year running

october We report promising phase II results with RG7204 (BRAF inhibitor), a new targeted medicine for advanced melanoma

November We launch the Operational Excellence initiative to maintain long-term innovation capabilities

october Encouraging new clinical data for Avastin in ovarian, MetMAb in lung and T–DM1 in breast cancer presented at ESMO conference

RG1678 — a first-in-class GRI for schizophrenia

december Creating value for patients means having the courage to go with wherefirst-in-class needs are great and II study Phase others have failed ­c ompound RG1678 shows i­mprovement in negative symptoms of schizophrenia

Available therapies — Effective against positive symptoms — Significant side effects — Positive symptoms often still occur in the stable phases between acute episodes

Affecting nearly 24 million people worldwide, schizophrenia is a severe mental disorder that distorts the way a person thinks, acts, expresses emotions, perceives reality and relates to others. It is a lifelong disease that cannot be cured. On average it shortens life expectancy by 20 years due to the higher risk of suicide and also due to cardiovascular and pulmonary events. Because of negative symptoms, which usually have the greatest impact on quality of life, patients may be unable to live independently, hold jobs, establish personal relationships and manage everyday social situations. Many drugs developed to treat negative symptoms have failed in clinical trials, and the few available treatments offer only modest benefits.

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RG1678 — Effective against negative symptoms — Potential to treat suboptimally controlled positive symptoms — Fewer side effects — New mechanism of action

RG1678, a glycine reuptake inhibitor (GRI) developed at Roche, may be the first drug to treat the negative symptoms of schizophrenia. Representing an entirely novel approach, RG1678 normalises glutamate neurotransmission by increasing synaptic levels of glycine, thereby targeting an important pathway in psychiatric disorders. It has the potential to become first-in-class compound of this type for the treatment of schizophrenia. In addition, RG1678 in combination with current treatments has the potential to treat suboptimally controlled positive symptoms, with little or no increase in side effects. Its novel mode of action could also have valu able therapeutic applications in other psychiatric disorders.

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Pharmaceuticals pipeline | Targeting areas of high unmet medical need Phase I Project ID

Phase II

Project/Product

Indication

Project/Product

Indication

RG3639

dulanermin

cancer

Indication

Project/Product

Indication

RG1273

pertuzumab

early BC, HER2+

RG105

MabThera/Rituxan

NHL, fast infusion

RG7256

BRAF kinase inh

metastatic melanoma

RG1273

pertuzumab

mBC, HER2+, 2nd-line

RG105

MabThera/Rituxan

NHL, SC formulation

RG105

MabThera/Rituxan

indolent NHL, 1st-line maint

RG435*

Avastin

RG7112

MDM2 antag

solid and hematologic tumours

RG3502

trastuzumab–DM1

early BC, HER2+

RG435

Avastin

ovarian cancer, 1st-line

adj breast cancer, HER2+

RG435*

Avastin+Xeloda

met breast cancer, 1st-line

RG7160

anti-EGFR huMAb

RG7167

CIF/MEK dual inh

solid tumours solid tumours

RG3616

hedgehog pathway inh

advanced basal cell carcinoma

RG435

RG3616

hedgehog pathway inh

operable basal cell carcinoma

RG435

Avastin+Herceptin

mBC, HER2+, 1st-line

RG1415*

Tarceva

Avastin

adj NSCLC

NSCLC, EGFR mutationpositive, 1st-line

RG7304

RAF/ MEK dual inh

RG7321

PI3 kinase inh

solid tumours

RG3638

anti-Met MAb

metastatic NSCLC

solid tumours

RG7159

anti-CD20 MAb

NHL, CLL

RG435

Avastin

adj breast cancer, HER2-neg

RG435

Avastin

adj BC, triple negative

RG7334

anti-PlGF MAb

RG7414

anti-EGFL7 MAb

solid tumours

RG7204

BRAF inh

solid tumours

RG7433

navitoclax (ABT-263)

met melanoma, 2nd-/3rd-line

RG435

Avastin

relapsed ovarian cancer

RG105**

MabThera/Rituxan

ANCA-associated vasculitis

solid and hematologic tumours

RG435

Avastin

high-risk carcinoid

RG1569

Actemra/RoActemra

JIA, systemic onset

RG7420 RG7421

MEK inh

solid tumours

CHU

topoisomerase I inh

gastric cancer

MEK inh

solid tumours

RG435

Avastin

GBM, 1st-line

RG435

Avastin

RG7422

PI3 kinase inh

solid and hematologic tumours

met colorectal cancer, treatment through multiple lines

RG7440

AKT inh

solid tumours

RG3637

lebrikizumab

CHU

Epogin (EPOCH)

chemother.-induced anemia

asthma

RG435

Avastin

met breast cancer, 2nd-line

RG7444

anti-FGFR3 MAb

multiple myeloma

RG4930

RG7459

IAP antag

solid tumours, lymphoma

RG7415

OX40L MAb

asthma

RG597

Herceptin

BC, HER2+, SC formulation

rontalizumab

systemic lupus erythematosus

RG597

Herceptin

ADC

RG7593

anti-CD22

hematologic malignancies

adj BC, HER2+, 2-yr treatment

RG7416

anti-LT α MAb

rheumatoid arthritis

RG1273

pertuzumab

NME

RG7594

antiangiogenic

mBC HER2+, 1st-line

solid tumours

RG3648

Xolair

chronic idiopathic urticaria

RG1415

Tarceva

RG7597

adj NSCLC

anti-HER3 MAb

metastatic epithelial tumours

RG7449

anti-M1 prime MAb

asthma

RG1415

Tarceva

RG7686

anti-glypican MAb

liver cancer

NSCLC, EGFR mutationpositive, 1st-line

CHU

ALK inh

NSCLC

CHU



solid tumours

RG3484

HPV16 immunotherapy

cervical neoplasia

RG7128

nucleoside polymerase inh prodrug

hepatitis C

danoprevir

hepatitis C

Oncology

ADC

Oncology

Virology

anti-IL-17 MAb

rheumatoid arthritis

RG7185

CRTH2 antag

asthma

RG7413

anti-β7 rhuMAb

ulcerative colitis

Virology RG7432 CHU

nucleoside polymerase inh

hepatitis C

serine palmitoyltransferase inh

hepatitis C

RG7227

Cardiovascular and metabolic diseases

indolent NHL

RG7204

BRAF inh

metastatic melanoma, 1st-line

SGLT2 inh

type 2 diabetes

RG1569

Actemra/RoActemra

RA, SC formulation

RG1569

Actemra/RoActemra

early rheumatoid arthritis

RG1569

Actemra/RoActemra

RA DMARD inadequate responders (head-to-head)

RG1450

gantenerumab

Alzheimer’s disease

RG1594

ocrelizumab

relapsing-remitting MS

RG3487

nicotinic α7 receptor agonist

Alzheimer’s disease

RG7236

Cat S antag

cardiovascular risk in chronic kidney disease

EVO

NMDA receptor antag

treatment-resistant depression

RG7273

ABCA1 inducer

dyslipidemia

RG7418

anti-oxLDL MAb

secondary prevention of ­c ardiovascular events

RG7685

GIP/GLP-1 dual agonist

type 2 diabetes

Inflammation and autoimmune disorders

Others

Selected abbreviations

RG7201

treatment-resistant depression

cognitive disorders

chronic lymphocytic leukemia

anti-CD20 MAb

ankylosing spondylitis

mGluR5 antag

GABA-A α5 inverse agonist

anti-CD20 MAb

RG7159

Actemra/RoActemra

RG7090

RG1662

RG7159

RG1569

metabolic diseases

depression

mBC, HER2+, 1st-line advanced mBC, HER2+

Inflammation and autoimmune disorders

11β-HSD inh

mGluR2 antag

trastuzumab–DM1 trastuzumab–DM1

cardiovascular disease

RG4929

RG1578

RG3502 RG3502

anti-P selectin MAb

Cardiovascular and metabolic diseases

Central nervous system

ADC ADC

RG1512

Central nervous system

Project ID Oncology

Inflammation and autoimmune disorders

Inflammation and autoimmune disorders RG4934

Project ID

Registration

Project/Product

Oncology

Project ID

Phase III

Cardiovascular and metabolic diseases RG1439

aleglitazar

cardiovascular risk reduction in type 2 diabetes

RG1658

dalcetrapib

atherosclerosis, cardiovascular risk reduction

adj ADC AMD

adjuvant treatment antibody-drug conjugate age-related macular degeneration antag antagonist breast cancer BC CLL chronic lymphocytic leukemia DMARD disease-modifying antirheumatic drug GBM glioblastoma multiforme HER2+ HER2-positive HER2-neg HER2-negative

HPV inh JIA MAb maint m, met MS NHL NME NSCLC RA SC

human papillomavirus inhibitor juvenile idiopathic arthritis monoclonal antibody maintenance treatment metastatic (cancer) multiple sclerosis non-Hodgkin’s lymphoma new molecular entity non-small cell lung cancer rheumatoid arthritis subcutaneous

Central nervous system RG1594

ocrezulimab

primary progressive MS

RG1678

glycine reuptake inh

schizophrenia, negative symptoms

RG1678

glycine reuptake inh

schizophrenia, suboptimally controlled

Ophthalmology

RG7166

triple reuptake inh

depression

RG3645

Lucentis

diabetic macular edema

RG7412

anti-amyloid β-peptide MAb

Alzheimer’s disease

RG3645

Lucentis

AMD, high dose

anti-factor D MAb

geographic atrophy

Legend Therapeutic protein, other biologic Small molecule Blue type

First indication

Black type

Additional indications

RG-No. CHU EVO

Roche and/or Genentech managed Chugai managed Evotec

Phase I

Initial studies in healthy volunteers and possibly in patients

Phase II

Efficacy, tolerability and dose-finding studies in patients

Phase III

Large-scale studies in patients for statistical confirmation of safety and efficacy

Registration

Marketing application(s) filed in EU, US and/or Japan

*

Filed in EU

**

Filed in USA

Ophthalmology RG7417

Current as of January 2011

Our business | Innovation is our answer

to medical challenges. Through our research we create state-of-the-art diagnostics and pioneering medicines that help millions of people around the world.

Focus on personalised healthcare At Roche we aim to develop novel medicines and diagnostics that will help patients live longer, better lives. We constantly strive for scientific excellence so that we can continue developing effective therapeutic options where previously there were none. As the world’s largest biopharmaceutical company and the number one supplier of in vitro diagnostics, Roche has brought many highly effective drugs to market, including the industry’s leading portfolio of cancer medicines. We were also one of the first ­c ompanies to recognise the potential of personalised medicine. Today our expertise in molecular biology is enabling us to develop targeted medicines for ­s pecific patient groups. This contributes to better, safer, more cost-effective healthcare.

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Contents

Inside cover Key figures Inside cover Pharmaceuticals pipeline

1 Highlights 2010 Letters to Shareholders 4 Letter from the Chairman

4

8 Letter from the CEO

12

Roche Group 13 Group Results and Outlook 16 Group Strategy

24

Pharmaceuticals 27 Results 29 Sales review 36 Development highlights 45 Research and development

56

Diagnostics 62 Results 67 Business area highlights 74 Research and development

80

Corporate Governance, Remuneration Report 81 Corporate Governance 91 Remuneration Report

102

Corporate Responsibility 104 Stakeholder engagement 105 Patients 115 People 122 Society 124 Responsible practices 131 Safety, security, health and environmental protection Assurance Report 137 Independent GRI statement 138

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Roche Business Report 2010

Letter to Shareholders

Franz B. Humer

Dear Shareholders 2010 was a challenging year for the pharmaceutical industry. Market conditions, as anticipated for quite some time, became even tougher. In the wake of the financial ­c risis, high government budget deficits added to pricing pressures in the global healthcare sector. In Europe many governments cut drug prices significantly, while healthcare reform in the US resulted in higher rebates on prescription drugs. On the regulatory front, the hurdles for gaining approval of new medicines were raised even higher, dramatically increasing the cost of drug development and delaying access to innovative treatments. Amid these challenges, Roche posted good full-year results. However, we also felt the effects of the market changes I’ve just described. In July the US Food and Drug Administration (FDA) rejected our application for accelerated approval of T–DM1, even though this novel compound is expected to significantly improve the treatment of breast cancer. This will increase the clinical development costs for T–DM1 and delay this

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Letter to Shareholders

Roche Business Report 2010



promising drug’s approval. Late in the year the FDA announced its intention to withdraw approval of Avastin in combination with chemotherapy for first-line treatment of meta­ static HER2-negative breast cancer. While a withdrawal will not affect US patients’ access to Avastin in its other approved cancer indications, it would adversely impact patients with this very serious disease. The day the FDA made its announcement, ­ the European Medicines Agency (EMA) confirmed Avastin’s value in the fight against breast cancer. In Europe women with advanced breast cancer will thus continue to have access to this treatment option. We are closely monitoring developments in healthcare policy around the world. Precisely because we believe our highly innovative products contribute in important ways to ­ more effective, cost-efficient healthcare delivery, we consider it vital for the future that ­ policymakers and health officials look not only at the costs of new medicines but also ­ at the innovation they embody and the benefits they offer patients. Given the many diseases that still cannot be treated satisfactorily, or at all, medical progress should be viewed more as a public good that deserves vigorous political support. When we discuss innovation we must bear in mind that it is inherently risky. Pioneering research and development efforts sometimes produce breakthroughs, but they also can sometimes not achieve the desired endpoints. Taspoglutide is a case in point. We suspended a late-stage development programme on this new treatment for type 2 diabetes at a very late stage of development after careful assessment of the available safety and efficacy data. Our intense research and development activities also yielded some very strong and promising results last year. We currently have twelve new molecular entities in late-stage development, half of which are designed for targeted use in specific patient populations with the help of companion diagnostic tests. We have made enormous progress in personalised healthcare, helped by the close interplay between our Pharmaceuticals and Diagnostics Divisions. These developments represent major strides and make us confident that we will remain an industry leader. Roche convincingly met its sales and earnings targets for 2010. Excluding sales of our influenza medicine, Tamiflu, which as expected were down sharply for the year, Group sales rose 5% in local currencies. Net income attributable to Roche shareholders showed a strong increase, advancing 11% to 8.7 billion Swiss francs despite the costs associated with the ‘Operational Excellence’ programme amounting to a considerable ­ 1.3 billion Swiss francs. Core Earnings per Share, a key indicator of underlying business performance, increased 10% in local currencies (4% in Swiss francs). In view of the company’s healthy cash flow and positive outlook the Board of Directors will propose a dividend increase for 2010 of 10% to 6.60 Swiss francs per share and

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Roche Business Report 2010

Letter to Shareholders

non-voting equity security (up from 6.00 Swiss francs for 2009). Subject to your approval at the Annual General Meeting (AGM), this will be Roche’s 24 th consecutive annual dividend increase. Looking ahead to the Annual General Meeting on 1 March 2011, I would like to mention the upcoming changes on the Board of Directors. Walter Frey and Wolfgang Ruttens­ torfer have decided not to stand for re-election. On behalf of the entire Board, I would like to thank them both for their dedicated service to Roche. During his long tenure on the Board Mr Frey, who runs a highly successful family company, has made significant contributions to the Group’s growth and success. Among the strengths Mr Ruttenstorfer brought to the Board, his expertise on the growth markets in Eastern Europe and the Middle East has been particularly valuable. We intend to use this opportunity to strengthen the Board further by nominating addi-­ tional independent directors. As announced in December, Paul Bulcke (CEO Nestlé S.A.), ­C hristoph Franz (chairman and CEO Deutsche Lufthansa AG) and Peter R. Voser ­ (CEO Royal Dutch Shell plc) will be standing for election as new members of the Board. At the Annual General Meeting we will also propose that the term of Board members ­ be reduced from three to two years. This will enable shareholders to influence the composition of the Board at shorter intervals in future. After ten years of exceptional service on the Corporate Executive Committee, Erich Hunziker has decided to retire from Roche at the end of March 2011. Erich Hunziker was appointed Chief Financial Officer in 2001, becoming Deputy Head of the Corporate Executive Committee in 2005. During his long career at Roche, Erich Hunziker was one of the key architects of the Group’s successful development. I would like to take this opportunity to thank Erich Hunziker sincerely for his outstanding contribution to the Group’s overall success. The Board of Directors has appointed Alan Hippe to succeed Erich Hunziker as Chief Financial Officer. Alan Hippe will join Roche as a member of the Corporate Executive Committee as of April 2011. Alan Hippe served as a member of the executive board of Continental AG from 2002 to 2009. Since April 2009 he has been CFO and a member ­ of the executive board of ThyssenKrupp AG. Our company was honoured last year for outstanding achievements in a number of areas. I am particularly pleased that the Dow Jones Sustainability Indexes named us the Supersector Leader in healthcare for the second year in a row, ranking Roche as the world’s most sustainable healthcare company. We firmly believe that sustainable corporate policies and practices ultimately create long-term value and promote innovation.­

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Letter to Shareholders

Roche Business Report 2010



Our success as a company is built on scientific excellence that benefits patients. The successful integration of Genentech has further strengthened our innovative capa­ bilities as the world’s largest biotech company and the leading supplier of cancer medicines. We lead in personalised healthcare, are the world’s number one supplier of ­ in vitro diagnostics and have outstanding product portfolios in both the Pharmaceuticals and the Diagnostics Division. Our ability to create value for all stakeholders is crucial to our future success and we will continue to vigorously pursue this strategy.

Franz B. Humer Chairman of the Board

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Roche Business Report 2010

Letter to Shareholders

Severin Schwan

Dear Shareholders Sandro B. had been recently diagnosed with malignant melanoma — shortly after his 28 th birthday. Malignant melanoma is one of the deadliest, most aggressive forms of skin cancer, with over 160,000 new cases reported worldwide each year. It is highly likely to metastasise at a very early stage, and once patients have developed metastases there are almost no treatment options available to them. Life expectancy following diagnosis is typically a matter of months. His doctors gave him four months to live. Sandro B. met the inclusion criteria for a phase II clinical trial in which we are testing our novel investigational drug RG7204 in patients with advanced malignant melanoma whose cancer cells carry a specific genetic mutation. A diagnostic test confirmed that he had this mutation. Before reflecting in more details on our clinical trials, I would like to briefly review the Group’s business performance in 2010. Despite strong pressure on prices in the US and in Europe, the Pharmaceuticals and Diagnostics Divisions both posted good results. Excluding Tamiflu sales, which were down 2.3 billion Swiss francs for the year, sales in the Pharma­ ceuticals Division advanced 5%, above the overall market growth. Including Tamiflu, divisional sales declined 2% in local currencies to 37.1 billion Swiss francs. Growth was driven by key

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Roche Business Report 2010



products for oncology, ophthalmology, inflammatory and autoimmune disease and anemia. Thanks to continued strong demand for our anticancer medicines, we expanded our lead in this important market segment. In the Diagnostics Division sales advanced 8% in local ­c urrencies, again significantly outpacing the market and solidifying Roche’s position as the leading supplier of in vitro diagnostics. Professional Diagnostics and Diabetes Care were the division’s primary growth drivers. The Group’s core operating profit grew faster than sales, rising by a robust 7% to 16.6 billion Swiss francs in local currencies. Profitability improved further, with the core operating margins in the Pharmaceuticals and Diagnostics Divisions advancing 1.9 percentage points to 39.9% and 3.8 percentage points to 21.1%, respectively. Once again, the earnings power ­ of our operating businesses was also reflected in the Group’s operating free cash flow, which last year reached a strong 14.1 billion Swiss francs. Thanks to our strong cash flow, by year’s end we had already repaid a third of the debt incurred in connection with the Genentech transaction — earlier than originally planned. Succeeding in our industry is tougher than ever. Pricing pressures are rising sharply and the requirements for approval and reimbursement of new medicines are becoming increasingly stringent. At Roche we additionally experienced setbacks with some of our late-stage development projects last year, including the diabetes drug taspoglutide. In response to these challenges, my colleagues on the Executive Committee and I decided ­ to take appropriate action now to ensure Roche’s long-term success. In November 2010 we launched the comprehensive Group-wide ‘Operational Excellence’ programme, which is designed to strengthen the Group’s productivity and innovative capacity in the years ahead. We have identified a wide range of opportunities to improve processes and raise productivity and efficiency. Implementation of the Operational Excellence programme is already underway and will continue through 2012. As a result of this initiative, the workforce of roughly 82,000 (at 30 June 2010) will be reduced by 4,800 positions, almost 6% of the global workforce. The greatest changes will be in the Pharmaceuticals Division, where we will be adjusting our global sales organisation and taking steps to improve efficiency and productivity in product development and optimise our manufacturing network. In the Diagnostics Division, the co-location of related business, R &  D and operational functions at selected sites will enable the division to streamline its site network. We are taking these measures proactively, from a position of strength. Roche is the world’s biggest biotech company, with 13 products and product lines that generate annual sales ­ of over one billion Swiss francs each. And despite last year’s setbacks, our research and de­velopment pipeline remains one of the strongest in the industry. With our combined strengths in pharmaceuticals and diagnostics and proven expertise in molecular biology, we

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10­

Roche Business Report 2010

Letter to Shareholders

are uniquely positioned to realise the promise of personalised healthcare to make treatments safer and more effective. The revolutionary advances we are starting to see in molecular biology give us a strategic competitive edge across a number of areas, including our ability to raise research productivity. Personalised healthcare paradigms increasingly shape our research and development programmes. We currently have twelve new molecular entities in late-stage development, half ­ of which are tailored to specific patient populations. Our BRAF inhibitor for malignant melanoma, MetMAb for lung cancer, T–DM1 and pertuzumab for breast cancer and other projects in virology and inflammation all represent potential major advances for patients. ­ Similarly, our Diagnostics Division is developing a number of biomarkers to support therapeutic decision-making. Targeted therapies and diagnostic tests that contribute to better medical decisions not only improve patient care but also have health economic benefits that make them attractive to regulators and payers. One of the most impressive examples of personalised healthcare is RG7204, the drug used to treat malignant melanoma which I mentioned earlier. Thanks to insights into specific genetic changes in tumour cells, huge strides are being achieved now in clinical trials in a disease once considered virtually untreatable. Tumours generally develop from just one cell. Every cell continuously undergoes changes, known as mutations, that affect certain signalling pathways within the cell. Most mutations are corrected spontaneously, but some manage to evade the body’s repair mechanisms, causing cells to divide uncontrollably and thus form tumours. Scientists have discovered that in over half of all melanoma patients, the disease is triggered by a highly specific mutation ­ of the gene coding for the BRAF protein, which is involved in cell growth. A BRAF V600E mutation triggers uncontrolled cell growth and these cancer patients — Sandro B. for e­ xample — have virtually no prospect of being cured. RG7204, an oral cancer drug co-developed with our partner company Plexxikon, acts via ­ a highly innovative mechanism to inhibit the BRAF protein implicated in the disease. The new drug specifically destroys those cells carrying the V600E mutation and does not attack healthy cells without the mutation. We have developed a diagnostic assay for use with the drug which is capable of detecting the V600E mutation in tumours, and will thus help identify patients who are very likely to respond to the new drug. This means the new drug will be used only in patients likely to benefit from the new treatment. The interim results of a phase III trial, which we published in January 2011, are very e­ ncouraging. For the first time, a personalised investigational medicine, RG7204, has shown a significant survival benefit in metastatic melanoma. This is an important advance ­

Letter to Shareholders

Roche Business Report 2010

11­

for people with the BRAF V600 mutation-positive form of the disease who have had extremely limited treatment options. Full data will be presented at a medical meeting later this year. Roche is working closely with global health authorities so that patients world-­ wide can already be treated with the new drug. The pursuit of treatments offering real benefits to patients is the core of our corporate ­s trategy. Consistent with that strategy, we will continue to drive progress on our promising development portfolio. We expect results from a total of 19 phase II and phase III trials ­ in 2011 and 2012. Based on our current late-stage portfolio, we expect to submit up to eight regu­latory filings for approval of new molecular entities by the end of 2013. Moreover, ­ we are currently working on more than 20 additional indications for existing products. Going forward, innovations that benefit patients will continue to drive our success. Through excellence in science, we strive to develop pioneering treatments and diagnostic tests that prolong patients’ lives and tangibly improve their quality of life. Roche owes its success to its employees. Thanks to their tremendous dedication and hard work we once again achieved our goals last year, despite an increasingly challenging market environment. On behalf of the entire Executive Committee, I would like to thank all our employees for their important contributions. Making sure that Roche remains an employer of choice is an important priority for me. So ­ I am especially pleased to report that in 2010 our company was again voted a top employer ­ in polls in a number of countries. Being a top employer is not just about giving as many employees as possible opportunities to develop professionally and make things happen in the company. Innovation depends on a diversity of views and approaches. One of the ways we’re promoting diversity at Roche is by filling more managerial positions with women. At the start of 2010, we set ourselves the goal of increasing the proportion of women in the top ­ 400 leadership positions by half to 20% over the next five years. I am happy to report that ­ we made progress on this front as well last year.­ What happened to the young man with melanoma? Like many of the other trial participants, Sandro B. has responded well to our new drug for skin cancer. He is still alive and doing well. This is exactly what we have in mind when we talk about helping patients through excellence in science.­

Severin Schwan Chief Executive Officer

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Roche Group | Our Group posted

solid overall results in a challenging market in 2010. Core operating profit grew faster than sales, and Core Earnings per Share increased at a double-digit rate. We are steadily making progress in personalised healthcare. Of the twelve new molecular entities now in our ­ late-stage pipeline, half are targeted at specific patient populations.

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Roche Group

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 health-­ care 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 con-­ tributed 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 ­c urrencies (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 prod­ uctivity improvements. Core operating profit growth

04_Roche_AR10_ENG_Group.indd 13

Roche Business Report 2010

13­

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.

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 for approval at the Annual General Meeting. Of the debt raised in early 2009, 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. 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 for approval at the Annual General Meeting.

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Roche Business Report 2010

Roche Group

This would be the 24 th consecutive increase of the dividend and corresponds to an increase in payout ratio from 49% in 2009 to 52% for 2010. 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 ­s avings of 2.4 billion Swiss francs from 2012 onwards. Implementation is scheduled to be substantially ­c ompleted 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.­ The Group has expanded the presentation of its core results for 2010. Previously only Core EPS was shown, but now the full income statement for the Group and the operating results of the divisions are shown on both an IFRS and core basis. This allows a transparent assessment of both the actual results and the underlying performance of the business. The core results concept is fully described on pages 144–147 of the Finance Report and reconciliations between the IFRS and core results are given there.

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 therefore 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 in 2011 at constant exchange rates. Roche aims to increase the dividend 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.

Roche Group

Roche Business Report 2010

15­

Key achievements in 2010 Business/Finance

Pharmaceuticals sales (excluding Tamiflu) increased above market growth

achievements

Diagnostics sales growth significantly ahead of market Core operating profit margin up significantly in both divisions Double-digit rise in Core Earnings per Share (at constant exchange rates) 10% dividend increase proposed for reporting year 2010

Products and pipeline

18 key drug approvals, including approved new indications for Actemra, Herceptin, Lucentis and MabThera/Rituxan Twelve new molecular entities in late-stage development, six with a personalised healthcare approach Four new molecular entities moved into late-stage clinical development: lebrikizumab (asthma), MetMAb (lung cancer) and RG7128 (hepatitis C), Ocrelizumab (multiple sclerosis) Fifty diagnostic tests and instruments launched in key markets

Patients and access

Defined new pricing arrangements to increase patient access to our medicines

to healthcare

in emerging markets Expanded commitment not to file or enforce patents in Low Income Coutries (LIC) as defined by the World Bank Launched EDUCARE progamme in Africa with International Atomic Energy Agency (IAEA) to establish online university to provide oncology training to doctors

People

Genentech voted Science magazine’s top employer for the eighth time, Roche rose from 17 th to 5 th place Increased percentage of women in key positions from 13% to 16% Published more than 1,200 scientific articles, nearly 60 in high-impact journals such as Nature, Science and Cell

Society

Employees generated over 1.2 million Swiss francs in annual ‘Children’s Walk’ to support AIDS orphans in Malawi Refurbished the primary health coach of the Phelophepa health train in South Africa

Responsible practices First year of the Roche SpeakUp line for reporting violations of our Code of Conduct demonstrated responsible use by employees Launched global marketing and sales compliance questionnaire to further promote good business conduct Rolled out Supplier Code of Coduct to over 500 suppliers and received their commitment Introduced online procurement training, completed by over 3,000 employees Roche named Healthcare Supersector Leader in Dow Jones Sustainability Indexes for second year running Safety, security, health Reduced our eco-balance measure of total environmental impact by 10%, and environmental

five years ahead of target

protection

Kept greenhouse gas emissions stable despite significant growth of the company

To learn more about Roche’s achievements in the area of Corporate Responsibility see pages 102–137.

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Roche Business Report 2010

Roche Group

Group Strategy

A changing healthcare sector The dynamic of the healthcare markets is more and more impacted by the tension between steadily rising demand and limited financial resources. The growing pressure on healthcare budgets means that increasingly new funds will only be available for real innovations — products that offer patients significant added value compared with conventional treatments. Despite the current challenges, the pharmaceutical industry has excellent prospects over the long term. Key drivers of this success include rising life expectancy, increasing prosperity in developing countries, numerous diseases for which there are as yet no effective therapies and, last but not least, rapid scientific and technological advances. The world’s population continues to expand, and people are living longer on average. Greater life expectancy means a rise in age-related diseases such as cancer, diabetes, rheumatoid arthritis, ­Parkinson’s and Alzheimer’s. This is true not only ­ of the industrialised world but increasingly of ­ developing countries and emerging markets too. Moreover, there are still no effective therapies ­ for some 5,000 diseases, and patient response to existing drugs is often unsatisfactory. There is ­ consequently substantial unmet medical need and increasing demand for more targeted diagnostics ­ and more effective and better-tolerated therapies.

A shift in the growth dynamic from Western to Far Eastern and Latin American markets has been apparent for some time. This trend will become even stronger in future: by 2013 the emerging markets will account for some 50% of the growth in the global pharmaceutical market, and their share of the world market will increase to around 25%. The Asian pharmaceutical market, for example, has grown twice ­ as fast as the overall global market in recent years. China — where Roche again expanded its presence significantly in 2010 — has become the thirdlargest pharmaceutical market after the United ­ States and Japan in 2010.

Demographic changes and growing demands on medical care are placing an ever greater burden on healthcare systems. The recent financial and economic crisis and the resulting government deficits in Europe and the United States have further exacerbated the situation. Political pressure to curb healthcare costs has therefore grown. In Europe, several countries imposed significant price reductions on pharmaceutical products in 2010. Healthcare reform in the United States has led to an increase in drug rebates under government health insurance plans, and a new consumption tax on pharmaceutical sales is planned for 2011. In addition, US and European regulatory authorities have significantly raised the bar ­ for approval of new products and are taking a much more critical look at the therapeutic benefits and safety of new drugs. Decisions about which medicines to administer are being made increasingly ­ by public agencies and health insurers rather than ­ by physicians.­

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Roche Group

Roche Business Report 2010

17­

Transforming the practice of medicine Tapping the vast potential of modern science

Personalised healthcare: tailoring treatment to patients

In order to remain competitive in the future despite a tougher global environment in the healthcare industry, Roche is pursuing a clear innovation strategy based on outstanding scientific achievements. We have con-­ fidence in modern science’s vast potential for developing therapies and diagnostic tests that will reduce suffering and help people to live longer, healthier lives. In particular, we see significant opportunities in the fast-growing body of knowledge about the molecular basis of diseases. A deeper understanding of disease mechanisms and the growing range of established and new therapeutic approaches is enabling ­ us to develop more specific, targeted products.

Patients with the same clinical diagnosis may re­spond very differently to the same medicines. While treatment may be effective and successful in some patients, others may experience undesirable side effects or the desired clinical benefit does not occur. This phenomenon is due in many cases to genetic and other molecular differences between individual patients.

Through our medically differentiated therapies we want to offer patients and doctors significant medical benefit in terms of effectiveness, quality and safety, to provide laboratories with efficiency gains and to give payers health economic benefits. We also strive to ensure patients’ access to treatments. Targeted, cost-effective therapies can play a key role in overcoming current challenges in the healthcare sector. State-of-the-art diagnostics will also become increasingly significant in a rational healthcare system: diagnostics currently account for only around 2% of healthcare spending, yet around 70% of all med-­ ical decisions depend on accurate, fast diagnosis. Here, too, there is vast potential.

05_Roche_AR10_ENG_Strategy.indd 17

Treatments tailored to different patient populations have medical and economic advantages and are consequently not only important for patients and phy-­ sicians but are also welcomed by regulatory agencies and health insurers. In addition, early selection of patients who are highly likely to respond to a new compound increases the success rate in drug development while also lowering development costs.­ Combining strengths in pharmaceuticals and diag-­ nostics with proven expertise in molecular biology, Roche is uniquely positioned to make its personalised healthcare strategy a reality. Thanks to the close cooperation between the Pharmaceuticals and ­ Diagnostics Divisions, under a single roof, on everything from research to sales, Roche is committed ­ to the systematic pursuit of personalised healthcare. This concept is becoming a reality for more and ­ more of our development projects.

28.01.2011 10:39:10

18­

Roche Business Report 2010

Roche Group

Pairing targeted therapies with companion diagnostics Roche already has a number of products that are custom-made for specific patient populations and have become established standard treatments, including therapies for HER2-positive breast and stomach cancer and for infections caused by hepatitis B and hepatitis C viruses. Our late-stage pipeline contains twelve new molecular entities, six of which are tailored to specific patient groups and have a companion diagnostic test. These include new drugs for skin, lung and breast cancer and for viral and infectious diseases (see features on page 19 and 21). Encouraging results in the battle against ­m alignant melanoma Roche’s developmental drug RG7204 (BRAF inhib­ itor) is currently being tested in patients with advanced malignant melanoma in a final phase III ­ clinical trial. Diagnosed worldwide in about 160,000 people each year, malignant melanoma is the most aggressive form of skin cancer. Thanks to insights into specific genetic changes in tumour cells, huge strides are being achieved now in a disease once considered virtually untreatable. Developed on the basis of biomolecular findings, RG7204 is an oral drug that specifically inhibits the deadly chain of events associated with the development of melanoma. In roughly half of all melanoma patients, the disease is triggered by a dangerous mutation of the BRAF gene. A Roche assay developed to detect this mutation will help identify patients very likely to respond ­ to RG7204. Initial phase II trial data are encouraging: disease progression was significantly delayed, tu-­ mours shrank markedly in over 50% of patients and there was a noticeable improvement in patients’ quality of life.­ Extending the lives of lung cancer patients Non-small cell lung cancer (NSCLC) is the most ­ frequent tumour-related cause of death in the world. According to preliminary data from a phase II trial, combining the novel monoclonal antibody MetMAb with Tarceva (erlotinib) nearly doubles progres-­ sion-free survival in certain patients with non-small cell lung cancer. These patients’ tumour cells ­ carry an abnormally high concentration of a cell ­ surface protein known as the Met receptor.

05_Roche_AR10_ENG_Strategy.indd 18

These receptors can be identified using molecular tis-­ sue tests. The monoclonal antibody MetMAb binds specifically to Met receptors and prevents activation of a cancer-promoting growth factor. Roche is also developing a diagnostic test for detecting epidermal growth factor receptor (EGFR) mutations for pa-­ tients with NSCLC. Patients with EGFR mutations re-­ spond especially well to the anticancer drug Tarceva, so determining EGFR mutation status would help oncologists to personalise and optimise cancer treatment (see also personalised healthcare for lung ­ cancer on page 22 and 23).­ Progress in the fight against stomach cancer Stomach (gastric) cancer is the second-leading ­ cause of cancer-related deaths in the world, with over 900,000 new cases diagnosed each year. ­ In 2010 European, US and South Korean regulators approved Herceptin for use in HER2-positive metastatic stomach cancer. Already an established therapeutic option in breast cancer, Herceptin is one of the most successful examples of personalised healthcare to date. The HER2 biomarker is detected in about 16–18% of ­ gastric tumours. A fast, reliable test for HER2 status provides critical guidance in both approved Her-­ ceptin indications, helping doctors to identify the patients most likely to respond to the drug. Her-­ ceptin plus chemotherapy has been shown to prolong the lives of patients with stomach cancer by up to 35%.

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Roche Group

MAPK signalling

Met signalling

HER signalling

Roche Business Report 2010

Diagnostics

Therapeutics

Molecular test * (PCR) ­ identifies patients carrying ­ a mutated BRAF gene

Active ingredient (BRAF inhibitor RG7204) targets melanoma cancer cells ­ in patients with mutated ­ BRAF gene

Diagnostics

Therapeutics

Tissue test * identifies ­ tumours with high expression of the Met receptor

Antibody (MetMAb RG3638) docks on Met receptor and inhibits ­ cancer-triggering growth ­factor

Diagnostics

Therapeutics

Tissue test* determines ­ HER2 receptors or HER2 ­ gene expression

Antibody-drug conjugate binds to HER2 receptors ­ (Herceptin) and linked chemo­t herapy agent penetrates cancer cell (T–DM1, RG3502)

19­

* These tests are being developed by Roche Diagnostics.

Precision two-pronged attack on breast cancer Preliminary results from a phase II study of trastuzumab-DM1 (T–DM1) in HER2-positive metastatic breast cancer show that the drug shrank tumours in one-third of the women who had failed prior ther-­ apies. Known as an antibody-drug conjugate, T–DM1 links trastuzumab, the active ingredient of Hercep-­ tin, with the potent chemotherapeutic agent DM1. This represents a new targeted ‘two-in-one’ approach to treating cancer:

05_Roche_AR10_ENG_Strategy.indd 19

The antibody trastuzumab binds to HER2-positive cancer cells and blocks a signalling pathway that makes tumours grow, while the chemotherapy agent DM1 penetrates and destroys the cancer cells. Another potential new weapon against breast cancer is pertuzumab (RG1273), the first of a novel class ­ of targeted therapeutics known as HER dimerisation inhibitors. RG1273 blocks HER2 from pairing with other HER proteins, thus preventing the abnormal ac-­ tivation of signal cascades that occurs in cancer cells.­

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20­

Roche Business Report 2010

Roche Group

Combining forces against hepatitis C Hepatitis C virus (HCV) causes acute and chronic liver diseases that can lead to liver failure, cirrhosis and cancer. There are currently over 180 million ­ people infected with HCV worldwide. Diagnostic tests based on PCR technology can now measure viral load in the blood of patients with chronic hepatitis C infection and determine which of the four different HCV subgroups (genotypes) is present. The disease can then be treated by pegylated interferons tailored to the respective genotype and viral load level, such as the Roche product Pegasys. The viral load test is also used after a few weeks to check treatment response. In many patients, the virus can be completely eliminated. For chronic hepatitis C patients who do fail to benefit from interferon-based therapy, several small antiviral molecules are in clinical development at Roche. The focus here is on hepatitis C subtype 1 infection, which is very difficult to treat. Initial results show that in patients who have not responded to interferons, the new combined treatment can achieve a 99.9% reduction in blood viral load within just two weeks.­

Hope for asthma sufferers Asthma still represents a major unmet medical need. Moreover, the underlying disease mechanisms are not the same in all cases. Our scientists have discovered that, in a particular set of patients, certain genes are activated in the wrong place and at the wrong time by the chemical messenger interleukin-13 (IL-13), a key mediator in asthma reactions. Reducing IL-13 levels could thus be a way of relieving asthma symptoms in this patient subpopulation. ­ This approach is currently being tested in a phase II trial with lebrikizumab (RG3637), involving the ­ measurement of a key biomarker called periostin. ­ It may make it possible to identify the patients most likely to respond to an anti-IL-13 antibody like RG3637. Roche Diagnostics is currently developing an appropriate assay. Once just a vision, personalised healthcare is increas­ingly becoming a reality, helped by pioneering efforts at Roche. For years we have been working ­ to advance more personalised treatment options across all our therapeutic areas of interest. Going for-­ ward, we are ideally equipped to remain at the forefront of this groundbreaking new approach to healthcare — and to continue realising its tremendous potential for all our stakeholders.

­

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Roche Group

HER signalling

Hepatitis C virus

Lebrikizumab

Roche Business Report 2010

Diagnostics

Therapeutics

Tissue test* determines ­ HER2 receptors or HER2 gene expression

Antibody (pertuzumab RG1273) inhibits pairing of HER1, HER2 and HER3 ­ receptors and thus prevents fatal signalling in cancer ­ cells

Diagnostics

Therapeutics

Molecular test* (PCR) to determine levels of circulating Hepatitis C virus

HCV nucleoside polymerase inhibitor (RG7128) prevents reproduction of hepatitis C viruses

Diagnostics

Therapeutics

Immunoassay* measures ­ the serum level of the protein periostin (an IL-13 gene product) and thus detects lung inflammation driven ­ by IL-13

Antibody (lebrikizumab RG3637) inhibits chemical messenger interleukin-13 ­ that triggers inflammation in asthmatic reactions

21­

IL-13 molecule

* These tests are being developed by Roche Diagnostics.

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Roche Business Report 2010

Roche Group

From precise diagnosis to more personalised therapy Non-small cell lung cancer (NSCLC) is the world’s number one cause of cancerrelated death, the most common form being adenocarcinoma. The illustrations show how diagnostic tests can provide patients suffering from NSCLC and their physicians with information about a tumour’s molecular profile, the likelihood of response to drug therapy and the most appropriate therapeutic options.

The diagnosis of lung cancer is complex. Imaging technologies are often used for an initial examination.

Roche has developed several immunohistochemistry and in situ hybridisation tests to determine the exact type of tumour present.

2

1

1 Initial diagnosis Tissue samples from the patient are first examined ­ in the pathology laboratory to see whether cancer cells are present. If irregularities in cellular shape or structure are found, more extensive tests are required.

3 Prognosis The pathologist then characterises the tumour on ­ the basis of cell differentiation and other criteria. Roche is currently developing a number of molecular biomarkers that will enable physicians to predict ­ the course of cancers as accurately as possible.

2 Specific cancer diagnosis Roche has developed several immunohistochemistry and in situ hybridisation tests for use on the BenchMark family of instruments that reliably determine the type and subtype of lung tumour present.

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Roche Group

The pathologist grades the tumour by looking at the individual cells and determining the extent of cell differentiation.

4 3

Roche has tests on the market and in development to help physicians understand the mechanisms driving cancer growth and thus select the treatments most likely to benefit specific patients.

Roche Business Report 2010

23­

Roche’s Avastin and Tarceva have become pillars in the treatment of lung cancer. Roche continues to develop new compounds for targeted cancer therapy.

5

4 Tests A number of genes have been identified as growth drivers in non-small cell lung cancer (NSCLC). These include the EGFR gene, the Met receptors and the Pl3 kinase. Tests from Roche help doctors understand the mechanisms driving tumour growth and thus to select drugs most likely to work best for a particular patient. Roche has several tests on the market or in devel­ opment which use three key technologies — immunohistochemistry (IHC), in situ hybridisation (ISH) and the polymerase chain reaction (PCR).

05_Roche_AR10_ENG_Strategy.indd 23

5 Therapy Roche’s anticancer medicines Avastin (bevacizumab) and Tarceva (erlotinib) play a crucial role in the ­ treatment of lung cancer. And the company is currently developing a number of new innovative drugs to address cancer-specific pathways and offer patients targeted therapies. In addition, Roche Diagnostics offers a blood test enabling physicians to monitor responses to cancer treatment.

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Pharmaceuticals | Solid local-

currency growth in sales of strategic products and core operating profit despite lower Tamiflu revenues and a tougher market environment, additional approvals for key medicines and progress with promising projects in our late-stage development pipeline made 2010 a successful year. The Pharmaceuticals Division is focused on translating excellence in science into effective medicines for patients. It combines cuttingedge research at Roche, Genentech in the US, Chugai in Japan and over 150 partners worldwide with global scale and reach in clinical development, manufacturing and commercial operations.

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Pharmaceuticals

Roche Business Report 2010

25­

Pharmaceuticals Division in brief

Sales |

in millions of CHF

38,996 35,961

Core operating profit |

37,058

13,594

08

09

10

08

14,836

14,776

09

10

in millions of CHF

Number of employees

54,141

54,813

53,187

08

09

10

Key figures In millions of CHF

% change in CHF

% change in local currencies

% of sales

Sales

37,058

–5

–2

100

—  United States

14,071

–5

–1

38

—  Western Europe

9,467

–13

–5

25

—  Japan

4,319

–9

–12

12

— International (Asia—Pacific, CEMAI 1,

9,201

7

8

25

Latin America, Canada, Others) Core operating profit

14,776

0

4

39.9

Operating free cash flow

12,933

–13

–9

34.9

8,160

–5

–2

22.0

Research and development (core basis)

1 CEMAI: Central and Eastern Europe, Middle East, Africa, Central Asia, Indian Subcontinent.

Pharmaceuticals Management Team | Pascal Soriot 1, 2

31 December 2010

Chief Operating Officer Pharmaceuticals, Head of Pharma Medicines

Hal Barron 2

Global Product Development, Chief Medical Officer

Ian Clark 2

Commercial Operations, North America and CEO, Genentech

Tuygan Göker 2

Commercial Operations, CEMAI

Meeta Gulyani 2

Global Portfolio Management

Peter

Hug 2

Commercial Operations, Western Europe

Michael Knierim 2

Human Resources

David Loew 2

Global Product Strategy

Luke Miels 2

Commercial Operations, Asia—Pacific

Patrick Mongrolle 2

Finance

Jörg

Rupp 2

Patrick Yang 2

Commercial Operations, Latin America Global Technical Operations

Jean-Jacques Garaud 1

Pharma Research and Early Development (pRED)

Osamu Nagayama 1

President and CEO, Chugai

Richard

Scheller 1

Dan Zabrowski 1

Genentech Research and Early Development (gRED) Roche Partnering

1 Member of the Corporate Executive Committee — see Corporate Governance, p. 84–85. 2 Member of the Pharma Medicines Leadership Team.

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Roche Business Report 2010

Pharmaceuticals

Pharmaceuticals Division Solid local-currency growth 1 in sales of strategic products and core operating profit, additional marketing approvals for strategic products, and progress with a range of promising projects in our late-stage R &  D pipeline made 2010 a successful year overall for the Pharmaceuticals Division. Growth was driven primarily by strong demand for key medicines from the Group’s oncology and inflammatory disease portfolios. Following the end of the influenza A (H1N1) pandemic and completion of government stockpiling orders, sales of Tamiflu declined strongly. We achieved important product development successes in 2010, including expanded marketing ap­p rov­a ls for Actemra/RoActemra for rheumatoid arthritis in the US and the EU, Herceptin for stomach cancer (EU and US), MabThera/Rituxan for chronic lymphocytic leukemia (US) and maintenance treatment of follicular lymphoma (EU), and Lucentis for macular edema following retinal vein occlusion (US). Key regulatory filings included marketing applications for Actemra/RoActemra for juvenile idiopathic arthritis in the EU and US, Herceptin for stomach cancer in Japan and Avastin for advanced ovarian cancer in the EU. During the year we made decisions to move several projects into late-stage development, including ­o crelizumab for multiple sclerosis, RG7128 for hep-­ atitis C, lebrikizumab for asthma and RG3638 ­ (MetMAb) for lung cancer. Positive results from clin-­ ical trials with other late-stage compounds such ­ as RG7204 (BRAF inhibitor) for melanoma, RG7159 (GA101) for non-Hodgkin’s lymphoma and chronic lymphocytic leukemia, and T–DM1 and pertuzumab for HER2-positive breast cancer were published or presented at major medical conferences during 2010. These targeted compounds are designed to move ­ the standard of care for these diseases and improve patient survival. Roche’s pharmaceutical pipeline ­c urrently includes 12 new molecular entities in latestage development. At the same time, 2010 was a year of significant ­c hallenges. Pressure on healthcare budgets in many countries and healthcare reforms in the United States, the world’s largest market for pharmaceuticals, translated into mandatory reductions in reim-

06_Roche_AR10_ENG_Pharmaceuticals.indd 26

Sales by region

United States 38% (–1%) Asia—Pacific

6% (+8%)

Latin America

7% (+20%)

Other regions

3% (–9%)

CEMAI

9% (+4%)

Western Europe 25% (–5%) Japan

12% (–12%)

Italics = growth rates (local currencies). CEMAI: Central and Eastern Europe, Middle East, Africa, Central Asia, Indian Subcontinent.

bursement prices or higher rebates on medicines under statutory health insurance or governmentfunded programmes. These developments already had a noticeable impact on sales in 2010, and ­ we expect this to continue into 2011 and beyond. ­ In addition, we experienced several product devel­ opment setbacks in 2010. The most serious of ­ these were the decision to suspend phase III testing of taspoglutide for type 2 diabetes, and regulatory developments in the US and EU concerning Avastin as a treatment for advanced breast cancer. In December the European and US health authorities announced decisions that are pivotal in determining whether Avastin remains available as a treatment ­ for metastatic breast cancer. We believe strongly that patients should have this option and are pleased ­ that the European authorities continue to support the use of Avastin in this indication. It is disappointing that the US Food and Drug Administration (FDA) has come to a different conclusion after reviewing the same set of data. We believe that women with HER2negative metastatic breast cancer living in the US should also have Avastin as a treatment option, and we have requested a hearing with the FDA accordingly (see p. 37). Responding to the tougher operating environment and setbacks outlined above, we continued to strengthen our Pharmaceuticals organisation to

1 Unless otherwise stated, all growth rates are in local currencies.

28.01.2011 14:50:42

Pharmaceuticals

increase efficiency and maintain its focus on inno­ vation. We believe that the measures now being implemented through the Group’s Operational Excellence programme will enhance Roche’s ability to deliver breakthrough medicines for patients, allowing us to expand further in high-growth emerging economies while strengthening our presence in established markets.

Results and main business developments Sales by the Pharmaceuticals Division in 2010 declined 2% in local currencies (–5% in Swiss francs, –1% in US dollars) compared with 2009 to 37.1 billion Swiss francs. Excluding Tamiflu, the division’s local-currency sales grew 5%, above the global ­ market. In addition to the Group’s five main cancer medicines, the primary sales drivers were Lucentis, Actemra/RoActemra and Mircera. Growth from these and other pharmaceuticals largely compensated ­ for lower sales of Tamiflu, CellCept and NeoRecormon/Epogin. Together, the top six sales drivers — Avastin, MabThera/Rituxan, Herceptin, Lucentis, Actemra/RoActemra and Xeloda — contributed over 1.3 billion Swiss francs in additional sales in 2010. Due to the passing of the influenza A (H1N1) pandemic, a relatively mild influenza season and the completion of most government stockpiling orders, sales of Tamiflu declined strongly, to 873 million Swiss francs (2.3 billion francs lower than in 2009). Sales expanded fastest in the International region (8%, or 11% excluding Tamiflu), driven by demand for MabThera, Herceptin, Avastin and other key medicines in emerging markets. Particularly strong growth was recorded in Latin America (20%), led by Brazil and Venezuela. Solid growth in the Asia—Pacific region (8%) was led by China and Taiwan. A slight decrease in the United States (–1%) reflects sig­ nificantly lower sales of Tamiflu and CellCept, as well as healthcare reform impacts affecting all major products. A 5% decline in sales in Western Europe was due primarily to markedly lower sales of Tamiflu and NeoRecormon and the effects of government austerity measures introduced in a number of countries, including Greece and Spain in the second quarter and Germany in the third quarter. Together,

06_Roche_AR10_ENG_Pharmaceuticals.indd 27

Roche Business Report 2010

27­

Excluding Tamiflu, Pharma­ ceuticals Division sales grew 5%, above the global market. healthcare reforms in the United States and austerity measures in Europe had a negative impact on total sales of approximately 530 million Swiss francs or ­ 1.5 percentage points. Excluding Tamiflu, sales in the ­ US and Western Europe increased 4% and 2%, respectively, compared with market growth 2 of 3% and 2%. A decline in sales of 12% in Japan reflects both significantly lower demand for Tamiflu and ­ the impact of revised National Health Insurance reimbursement prices that came into effect in April. Excluding Tamiflu, Japanese sales grew 3% in a vir­ tually flat market. Core operating profit 3 grew 4% in local currencies and was stable in Swiss francs at 14.8 billion Swiss francs. The corresponding margin increased 1.9 ­p ercentage points to 39.9%, driven by synergies from the merger with Genentech and productivity improvements. This was achieved despite the expected sharp decline in Tamiflu sales and the impact of health­­-­ care reforms and austerity measures. A reduction of 1% in marketing expenses was achieved through tight cost management, which more than covered ­ an increase in allowances for bad debts in Southern Europe. Research and development expenses declined 2% versus 2009 thanks to resource priori-­ tisation while securing long-term growth through ­ the rich R &  D pipeline. In addition to investments in phase III initiations, the metabolism franchise and ­ the earlier-stage neurology portfolio, research and development expenses included costs associated with the discontinuation of the ocrelizumab rheumatoid arthritis programme (see p. 51, below) and project termination costs associated with the Operational Excellence programme.

2 Pharmaceutical market growth according to IMS (to end of September 2010). 3 Unless otherwise stated all results are on a core basis (see p. 14, above, and p. 144 of the Finance Report).

28.01.2011 14:50:42

28­

Roche Business Report 2010

Pharmaceuticals

The core operating profit margin increased 1.9 percentage points to 39.9%. The division’s full-year operating free cash flow remained strong at 12.9 billion Swiss francs. The decrease of 9% compared with 2009 primarily reflects the payment in 2010 of certain large 2009 year-end accruals, including employee retention ­ and severance payments, and high royalty payments relating to strong Tamiflu sales in the second half ­ of 2009. The Pharmaceuticals Division is on track to achieve its goal of pre-tax annual synergies from ­ the Genentech merger of approximately 1 billion Swiss francs by 2011. Synergies of over 800 million Swiss francs were achieved in 2010. For more ­information on the division’s operating results, ­ see the Finance Report (Part 2 of this Annual ­ Report). In the year under review the Pharmaceuticals ­ Division incurred significant non-core costs associated with restructuring measures implemented ­ under the Operational Excellence programme. Most of these costs relate to severance payments fol­ lowing reductions in positions in sales and marketing, global manufacturing, global development, ­ and research and early development, as well as impairments of intangible assets.

Manufacturing infrastructure Integration of the Roche and Genentech manufacturing and supply networks continued in 2010, as ­initiatives were implemented to ensure that global demand for commercial and clinical supplies of ­ our medicines can be met and that necessary adaptations to our growing pipeline are made in time. A number of important milestones were achieved ­ in 2010. In April Hillsboro Operations (Oregon, USA) was officially inaugurated. By 2013 Hillsboro will ­ be the US commercial filling and packaging facility for our medicines, supplementing facilities in

06_Roche_AR10_ENG_Pharmaceuticals.indd 28

­ ermany and Switzerland. In addition, expansion ­ G of the Kentucky Distribution Center was completed in 2010. The facility now serves as the primary ­d istribution centre for all products marketed in the United States. In all, Global Technical Operations facilities passed more than 30 health authority inspections in 2010. Our biotech production facility in Singapore received its first approvals by the US Food and Drug Admin­ istration (FDA), to manufacture Lucentis and Avastin biologic bulk drug substance for commercial use ­ in the US. Approval by the EU authorities is targeted for 2011. Our Kaiseraugst (Switzerland) facility ­s uccessfully launched Actemra product for commercialisation in the United States 14 days after FDA approval. Our bulk drug manufacturing facilities in South San Francisco, Vacaville and Oceanside ­ (California, USA) received Class A certification, an international business award recognising system­-­ atic process improvements. As part of the continuous evaluation of our global manufacturing network, we are always reviewing and analysing our structures, organisations, processes and operations. In 2010 we sold facilities located in Isando (South Africa) and Karachi (Pakistan). In addition, plants in Montevideo (Uruguay) and Nutley (New Jersey, USA) were closed, and we continue ­ to plan for the closure of certain operations in Mann­ heim (Germany) and Basel (Switzerland). Following a detailed analysis of organisational s­ tructures and processes as part of the Group-wide Operational Excellence programme, Global Technical Operations will further refine its organisational ­s tructure to improve operational efficiencies, optimise manufacturing assets and consolidate the ­t echnical development and clinical supply network. Some activities will be reorganised in California, Mannheim and other sites by the end of 2013, resulting in a reduction of approximately 750 positions. ­ In addition, Roche intends to seek buyers for its US sites in Florence, South Carolina, and Boulder, ­C olorado, potentially affecting an additional 600 jobs. Together with activities initiated in the last two ­ years, these changes will reduce the number of ­m anufacturing locations from 21 to 15 by the ­ end of 2013.

28.01.2011 14:50:42

Pharmaceuticals

Roche Business Report 2010

29­

Sales by therapeutic area

Oncology

57% (+7%)

Inflammatory and autoimmune diseases, transplantation

8% (+3%)

Central nervous system

3% (+2%)

Respiratory

3% (+7%)

Metabolic diseases, bone diseases

7% (–1%)

Infectious diseases

1% (–2%)

Cardiovascular diseases Virology

3% (–3%) 10% (–39%)

Others

1% (–10%)

Renal anemia

3% (–6%)

Ophthalmology

4% (+27%)

Italics = growth rates (local currencies).

Partnering activities Collaboration with external partners has long been ­ a cornerstone of Roche’s R &  D strategy. Access ­ to external innovation through licensing and targeted acquisitions is a significant means of strengthening the R &  D portfolio and expanding the Group’s technology capabilities. In 2010 Roche Partnering signed a total of 52 new agreements, including one prod­­-­ uct transaction and 40 research and technology col­ laborations. In addition, ten product outlicensing agreements were signed. Among Roche Partnering’s main transactions in 2010 were an agreement with Belgian company reMYND to develop novel therapeutics that could slow down neurodegeneration in Parkinson’s and Alzheimer’s patients. A new collaboration was agreed with Aileron Therapeutics to discover, develop and commercial-­ ise a novel class of drugs called stapled peptide ther-­ apeutics, a potentially transfor­m ative technology ­ to create drugs for important disease targets that are intractable to currently available modalities. In December Roche acquired Marcadia Biotech, a privately owned US company focusing on the devel-­ opment of innovative therapeutics for ­m etabolic ­ diseases. Marcadia’s research and development programmes on new peptide therapies for the treatment of type 2 diabetes and obesity will be integrated ­ into Roche’s R &  D portfolio. These include next gener-­ ation peptides such as MAR701, currently in phase I development for type 2 diabetes. Several partners were added to Roche’s Expanding the Innovation

06_Roche_AR10_ENG_Pharmaceuticals.indd 29

Network (EIN) project, which is designed to create and deepen relations with leading academic insti-­ tutions worldwide. Under a new EIN partnership with Harvard University, Roche provides strategic questions and know-how to Harvard, with Harvard providing innovative solutions. Genentech Partnering completed four product transactions and 16 research and technology collabo­ rations in 2010, supporting the cutting-edge work ­ of Genentech Research and Early Development. Among these is an expansion of the antibody-drug conjugate collaboration with Seattle Genetics in oncology. New collaborations in immunology included an exclusive licensing agreement with Swiss-based antibody specialist NovImmune, covering an anti-IL-17 antibody that has the potential ­ to benefit patients across a range of autoimmune diseases. A novel research programme was agreed ­ with US company Adimab, which will use its propri­ etary discovery platform to identify fully human antibodies against two targets selected by Genentech. Under the agreement, Genentech has rights to ­c ommercialise antibodies generated from the collab­ oration.

Sales review — selected key products The Pharmaceuticals Division’s broad-based portfolio of marketed products includes ten medicines from

28.01.2011 14:50:43

30­

Roche Business Report 2010

Pharmaceuticals

Top-selling pharmaceuticals — Roche Group |

in millions of CHF

6,461

6,356

5,429

1,645

1,458

Avastin

MabThera/Rituxan

Herceptin

Pegasys

Lucentis **

+9% *

+9% *

+7% *

+2% *

+27% *

Active substance:

Active substance:

Active substance:

Active substance:

Active substance:

bevacizumab 1

rituximab 1

trastuzumab 1

peginterferon alfa-2a 1

ranibizumab 1

Indications:

Indications:

Indications:

Indications:

Indications:

colorectal cancer, breast cancer, non-small cell lung cancer, kidney cancer, glioblastoma

non-Hodgkin’s lymphoma, chronic lymphocytic leukemia, rheumatoid arthritis

HER2-positive breast cancer, advanced HER2-positive stomach cancer

hepatitis B and C

wet age-related macular degeneration, macular edema following retinal vein occlusion

06_Roche_AR10_ENG_Pharmaceuticals.indd 30

28.01.2011 14:50:46

Pharmaceuticals

Roche Business Report 2010

31­

Thanks to the Pharmaceuticals Division’s broad-based portfolio, Roche is one of the world’s leading providers of clinically differentiated medicines for cancer, viral and inflammatory diseases, and metabolic disorders.

1,426

1,325

1,290

1,285

1,013

Xeloda

Tarceva

CellCept

NeoRecormon, Epogin

Bonviva/Boniva

+17% *

+6% *

–15% *

–15% *

+1% *

Active substance:

Active substance:

Active substance:

Active substance:

Active substance:

capecitabine 2

erlotinib 2

mycophenolate mofetil 2

epoetin beta 1

ibandronate 2

Indications:

Indications:

Indications:

Indications:

Indications:

colorectal cancer, breast cancer, stomach cancer

advanced non-small cell lung cancer, advanced pancreatic cancer

transplantation

anemia

osteoporosis

1,2 The images above show molecular diagrams representing the active ­substance of each medicine (1 = therapeutic protein, 2 = small molecule). * Year-on-year sales growth in local currencies. ** US sales. Lucentis is marketed outside the United States by Novartis.

06_Roche_AR10_ENG_Pharmaceuticals.indd 31

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32­

Roche Business Report 2010

Pharmaceuticals

six therapeutic areas that generated sales of over ­ 1 billion Swiss francs each in 2010. Of these, the top three recorded sales of well over 5 billion Swiss francs each. Combined sales of the Group’s top 20 pharmaceuticals amounted to 32.6 billion Swiss francs, or 88% of divisional sales. Sales of the division’s oncology portfolio rose 7% to 21.3 billion Swiss francs in 2010, led by key products Avastin, MabThera/Rituxan, Herceptin, Xeloda and Tarceva. Together, these five medicines accounted for over half of total pharmaceutical sales. Sales of ­a ntiviral medicines declined 39%, for a full-year total of 3.5 billion Swiss francs, due mainly to the sharp decline in sales of Tamiflu. Overall sales of the renal anemia portfolio declined by 6% to 1.2 billion francs, with strong demand for Mircera outweighed by decreasing sales of NeoRecormon/Epogin. Sales in the combined inflammation/autoimmune/transplan­ tation portfolio rose 3% to 3.0 billion francs: growing demand for MabThera/Rituxan for rheumatoid ­ arthritis and strong uptake of Actemra/RoActemra offset continued generic erosion of CellCept in the United States. Oncology Global sales of Avastin (bevacizumab), for advanced colorectal, breast, lung and kidney cancer, and for relapsed glioblastoma (a type of brain tumour), rose 9% to 6.5 billion Swiss francs, reflecting continued positive uptake of the product overall. Sales growth in Western Europe (7%) was driven primarily by ­c ontinued uptake for breast cancer and improved uptake for colorectal and lung cancer. Austerity measures introduced during the year in Greece, Spain, Germany and other markets resulted in a progressive flattening of growth in the region as a ­ whole that was particularly noticeable in the fourth quarter. Sales in the US were flat for the year, reflecting reserve adjustments due to the healthcare reforms enacted in 2010 and regulatory and reimbursement uncertainty regarding the metastatic breast cancer indication (see p. 37); together these factors led to a decline in sales in the second ­h alf-year, especially the fourth quarter. Avastin maintained its high US market share in its metastatic colorectal and lung cancer indications. Very strong sales growth in Japan (51%) was driven by continued good uptake in colorectal and non-small cell lung cancer. Very strong growth was also recorded in

Latin America (42%). In the third quarter Avastin ­ was launched in China in its first indication, first-line treatment of metastatic colorectal cancer; initial uptake has been very encouraging. Full-year sales (oncology and autoimmune diseases) of MabThera/Rituxan (rituximab), for non-Hodgkin’s lymphoma (NHL), chronic lymphocytic leukemia (CLL) and rheumatoid arthritis (RA), totalled 6.4 billion Swiss francs in 2010, an increase of 9% versus 2009. Sustained growth in the oncology segment was driven by uptake in CLL and continued strong use ­ in NHL in Western Europe and the US. Solid doubledigit growth in the International region, including strong gains in key emerging markets, reflects uptake of the medicine in its NHL indications. The European rollout of MabThera in a new indication, first-line maintenance treatment of patients with follicular lymphoma, commenced in the fourth quarter. Estimated sales of MabThera/Rituxan in the RA segment reached the 1 billion Swiss franc mark in 2010 (16% of the product’s total sales), 17% higher than in 2009. Growth is being driven by increased use in patients with an inadequate response to one or more tumour necrosis factor inhibitors and by growing acceptance of six-month repeat treatment intervals. Global sales of Herceptin (trastuzumab), for HER2positive breast cancer and HER2-positive metastatic stomach cancer, rose 7% to 5.4 billion Swiss francs on sustained, solid single-digit growth in the United States and Western Europe, and double-digit gains ­ in the International region. Herceptin maintained ­ its high market penetration in breast cancer, with ­ sales also benefitting from initial uptake for stomach ­c ancer in EU countries and other markets. In addition, improvements in the quality of HER2 testing ­ are expanding the population of patients eligible for treatment with Herceptin. In Japan, where Herceptin has a market share of approximately 90% in its ­ breast cancer indications, a stable sales volume and revised reimbursement prices from April resulted ­ in a significant decline in sales revenue compared with 2009. Xeloda (capecitabine), for colorectal, stomach and breast cancer, generated total sales of 1.4 billion Swiss francs, an increase of 17% compared with 2009. Growth was driven primarily by strong gains in the United States, Japan and China, the product’s

Pharmaceuticals

three largest markets. Global sales of Xeloda are benefitting from a number of new indications, ­including stomach cancer in China, an expanded metastatic colorectal cancer indication in Japan, ­ and adjuvant 4 colon cancer in Europe, as well as increased patient share in metastatic breast ­ cancer in the US and EU. Sales of Tarceva (erlotinib), for advanced lung and pancreatic cancer, increased 6% to 1.3 billion Swiss francs, driven mainly by increased use in ­ the second-line non-small cell lung cancer setting. The main contributions to growth came from the International region, Japan and the US. Mid-singledigit growth in the US reflects steady demand in ­ the lung and pancreatic cancer indications and the impact of government healthcare reforms. Against ­ a background of stable demand, sales in Western Europe declined slightly, mainly as a result of government-mandated price reductions and rebates in ­s everal major markets. Sustained strong sales growth in Japan (37%) reflects continued market pene­­ tration and oncologists’ increasing confidence in the benefits of treatment with Tarceva. Virology Worldwide sales of Pegasys (peginterferon alfa-2a), for hepatitis B and C, increased 2% to 1.6 billion Swiss francs in 2010. Flat sales in the United States and sales decreases in Western Europe, Japan ­ and certain other mature markets were offset by growth in the International region, especially ­ Asia—Pacific and CEMAI 5 countries. The product’s market share continued to expand in the main ­E uropean markets, the US and Japan. Global sales continued to benefit from clinical data reinforcing ­ the superiority of Pegasys over other treatment options and increased use in hepatitis B. The hepatitis C market is poised for major expansion, with the introduction of a new generation of direct-acting antiviral agents expected from 2011 onwards. Because Pegasys — the leading pegylated interferon — is used in most hepatitis treatment development programmes today, it is expected to become the backbone of future combination therapies with the new antivirals (see also p. 51, below). Following exceptional demand in 2009 due to the influenza A (H1N1) pandemic, sales of Tamiflu (oseltamivir), for influenza A and B, totalled 873 million

06_Roche_AR10_ENG_Pharmaceuticals.indd 33

Roche Business Report 2010

33­

Swiss francs in 2010, 73% (2.3 billion francs) lower than in 2009. With government stockpiling orders largely completed by early 2010 and the influenza A (H1N1) pandemic passing its peak, sales fell sharply in the last three quarters. Sales were also affected ­ by relatively mild influenza seasons in both hemispheres during 2010. Roche remains ready to address ­p otential threats posed by influenza and is main­ taining production capacity in cooperation with ­e xter­n al manufacturing partners to enable a rapid response to future significant outbreaks or government stockpiling orders. Ophthalmology US sales of Lucentis (ranibizumab), for wet agerelated macular degeneration and macular edema following retinal vein occlusion, rose 27% to ­ 1.5 billion Swiss francs. Strong growth throughout 2010 was driven primarily by increases in the ­ total number of patients receiving Lucentis and the time patients are on treatment. The US launch of Lucentis for the treatment of macular edema (swelling in the retina) following retinal vein occlusion began in late June, and initial uptake is encouraging. Lucentis was ­d iscovered by Genentech, which retains commer­­c ial rights in the United States. Novartis has exclusive commercial rights for the ­ rest of the world. Inflammation and autoimmune disorders As the global rollout of the novel rheumatoid ­ arthritis medicine Actemra (tocilizumab, known as RoActemra in the EU) continued, sales in 2010 totalled 397 million Swiss francs, a rise of 177% over 2009. Uptake of Actemra/RoActemra in the EU, ­ the United States and other launch markets remains very encouraging. Around 60% of US rheumatol­ ogists have already prescribed the medicine. Continued strong sales growth in Japan reflects increas­­-­ ing use of Actemra as a first-line biologic. Chugai announced in August that the Japanese health authorities had removed the approval conditions for Actemra for the rheumatoid arthritis and polyar­t ic­ ular-course juvenile idiopathic arthritis indica­t ions.

4 Adjuvant treatment is given after surgical removal of the tumour to lower the risk of relapse. 5 CEMAI: Central and Eastern Europe, Middle East, Africa, Central Asia, Indian Subcontinent.

28.01.2011 14:50:50

Clinical development — a long process that continues even after market launch

Creating value for patients means investing skill and resources in a long, uncertain journey

10,000 molecules

investment

10

molecules

≤ 50

volunteers or patients

Preclinical development

Phase I

3–6 years

1–2 years

Preclinical testing evaluates a drug’s safety profile and pharmacological effects in the laboratory. Every promising new compound must pass rigourous preclinical testing before it can be studied in humans. New drugs usually undergo both in vitro (in test tubes, cell cultures and isolated organs) and in vivo (animal) testing. Computer models are playing an increasingly important role in preclinical development. Data from preclinical tests are essential for determining whether a drug is safe enough to be administered to people in clinical trials.

Phase I trials test the safety of ­various doses of a new drug. During phase I trials researchers are looking at how the drug is absorbed, distributed and changed (metabolised) in the body, how it is eliminated, how long these processes take, and whether there are any unwanted effects. These trials involve only a small number of people — usually healthy volunteers. In some cases people whose disease is very advanced (cancer, for example) may also participate.

06_Roche_AR10_ENG_Pharmaceuticals.indd 34

28.01.2011 14:50:53

100–1,000 * patients

≤ 15 ,000  patients

≤ 500 

2–3

patients

1–2

molecules

1

molecules

molecule

Phase II

Phase III

Phase IV

1.5–2 years

3–3.5 (or more) years

from market entry on

Phase II trials test the new drug in people who have the disease it is designed to treat. The number of patients in phase II trials is limited but usually larger than in phase I studies. In addition to further safety testing, these trials identify appropriate dose ranges and test whether the drug demonstrates clinical efficacy (proof of concept). Many new drugs fail in phase II testing.

A new drug moves into phase III clinical trials only if the phase I and phase II trial results suggest it might benefit patients in signficant ways. Phase III trials compare the new drug with current treatments or, in some trials, with a placebo. Many phase III trials last a long time, typically a year or more, and may involve several thousand patients in several countries. Phase III trials must include a large number of patients so that investigators can evaluate the differences between types of treatment. Regulatory agencies normally require results from phase III trials before approving a new drug.

Phase IV trials are conducted after a drug has been approved by regulatory agencies and launched on the market. Also known as post-marketing trials, they are designed to gather broader, ‘real-world’ experience with the new drug in routine medical practice. Phase IV trials generate additional data on safety and efficacy in large numbers of patients and in particular patient subgroups. They can also provide further information on how the drug works in comparison or in combination with other treatments. Even large phase III trials cannot identify all potential side effects: this is another area where phase IV trials provide essential additional information. Roche maintains a system of risk assessment programmes to identify and evaluate side effects that did not appear in phase I–III trials.

* Patients per trial; 5–20 (or more) trials.

06_Roche_AR10_ENG_Pharmaceuticals.indd 35

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Roche Business Report 2010

Pharmaceuticals

Further major approvals for Actemra/RoActemra, Herceptin, MabThera/Rituxan and ­Lucentis. The decision gives more patients access to Actemra and follows positive results from a routine post-­ marketing surveillance programme. Actemra/ RoActemra is now available in some 50 countries worldwide. Anemia and transplantation Sales of the renal anemia medication Mircera (me­thoxy polyethylene glycol-epoetin beta) rose 51% to 255 million Swiss francs. Demand for Mircera, which is now available in over 100 countries worldwide, ­ is coming mainly from the predialysis segment and new patient commencements. Combined sales of ­ the Group’s established anemia medicines, Roche’s NeoRecormon and Chugai’s Epogin (epoetin beta), declined 15% to 1.3 billion Swiss francs. Roche ­P harmaceuticals’ overall share of the European anemia market remained stable despite increasing biosimilar competition, due mainly to the strong performance of Mircera in the major EU countries ­ and a robust market share by volume for NeoRecormon in the renal indication. A 10% decline in sales ­ of Epogin in Japan was due mainly to competition in the dialysis market and a lower National Health Insurance reimbursement price, factors which outweighed increased demand for the medicine in ­ the predialysis segment. At 1.3 billion Swiss francs for the full year, sales r­ evenue from CellCept (mycophenolate mofetil), for the prevention of solid organ transplant rejection, remained significant. The sales decrease of 15% was due primarily to the loss of patent exclusivity in ­ the United States in 2009. The resulting losses to competition from generic versions were partly offset by sales growth in Japan and the International region.

06_Roche_AR10_ENG_Pharmaceuticals.indd 36

Development highlights — key marketed products In 2010 the Pharmaceuticals Division filed 20 major new marketing applications and gained 18 major ­regulatory approvals (see tables, pp. 38 and 39). The following summaries present approvals, filings and major clinical trial results for key marketed products, by indication. Actemra/RoActemra Approvals | In January 2010 the US Food and Drug Administration (FDA) approved Actemra for ­ the treatment of adult patients with moderately to severely active rheumatoid arthritis (RA) who ­ have had an inadequate response to one or more tumour necrosis factor (TNF) inhibitors. Actemra, ­ the first interleukin-6 receptor-inhibiting monoclonal antibody approved to treat RA, may be used alone ­ or in combination with methotrexate or other disease modifying antirheumatic drugs. In June the Euro­­pean Commission extended the product’s existing marketing approval to include treatment with RoActemra plus methotrexate to reduce the rate of progression of joint damage and improve physical function in patients with rheumatoid arthritis. The new indication, which is based on two-year data from a global phase III study (LITHE), came just over a year after the medicine’s initial EU approval, further reinforcing its value as an effective treatment for ­ RA. In January 2011 the FDA approved Actemra for ­ a similar indication (inhibition and slowing of ­s tructural joint damage, improvement of physical function, and achievement of major clinical response in adults with moderately to severely active RA), based on a supplemental Biologics License Appli­ cation (sBLA) submitted by Genentech in March 2010. Filings | In October Genentech submitted a second sBLA to the FDA and Roche submitted an Accel­ erated Assessment application to the European ­M edicines Agency (EMA), seeking to extend the approved indications of Actemra/RoActemra to include treatment of systemic juvenile idiopathic arthritis (sJIA). Both applications are based on positive data from the global phase III TENDER study. There are currently no approved therapies in the EU or US for sJIA, a debilitating and difficult-to-treat

28.01.2011 14:50:56

Pharmaceuticals

disease that affects the whole body and represents an area of high unmet medical need. Avastin Since its initial approval in 2004 in the United States for advanced colorectal cancer, Avastin has made anti-angiogenic therapy a fundamental pillar of cancer treatment. Avastin is approved in many countries ­ for the treatment of advanced stages of colorectal, breast, non-small cell lung and kidney cancer. It is also available in the US and 29 other countries for the treatment of patients with glioblastoma (a type of brain cancer). Nearly a million patients have been treated with Avastin so far. More than 1,000 ongoing Roche-sponsored or -supported, or independently conducted clinical trials are investigating the use of Avastin in over 50 tumour types (including colorectal, breast, non-small cell lung, brain, gastric, ovarian and others) and different settings (advanced or early-stage disease). Breast cancer | In December, following a review of all relevant data, the European Committee for Medicinal Products for Human Use (CHMP) supported the continued first-line use of Avastin in ­c ombination with paclitaxel chemotherapy, describing it as a valuable treatment option for patients ­s uffering from metastatic breast cancer. Paclitaxel is the chemotherapy most frequently used and also most frequently partnered with Avastin to control the disease. The committee also considered combinations of Avastin with two other types of chemotherapy, based on data from the AVADO and RIBBON-1 trials. The CHMP recommended that the combination with docetaxel be removed from the Avastin label and that the combination with capecitabine (Xeloda) not be approved. A decision by the European Commission on these recommendations is expected early in 2011. The CHMP opinion does not affect the ­ other approved uses of Avastin in the European Union for advanced colorectal, kidney and lung cancer. Also in December the FDA announced a number ­ of regulatory decisions concerning the use of Avastin for metastatic breast cancer in the US. The most important of these is the agency’s decision to initiate the process to withdraw the current conditional (‘accelerated’) approval for Avastin for first-line treatment of metastatic breast cancer. Roche and Genentech have requested a hearing pursuant to ­

06_Roche_AR10_ENG_Pharmaceuticals.indd 37

Roche Business Report 2010

37­

the FDA’s ‘Notice of Opportunity for Hearing’. We believe this would provide an opportunity to present our views that the data are clinically meaningful ­ and meet the applicable legal and regulatory stan­ dards for continued approval. Until the conclusion ­ of these proceedings, Avastin remains FDA-approved for use in combination with paclitaxel for metastatic HER2-negative breast cancer. At the same time the FDA issued complete responses for all other pending applications concerning Avastin in metastatic breast cancer, saying that the applications failed to support the extension of the proposed indications: for firstline treatment in combination with docetaxel (based on AVADO) and in combination with standard chemotherapy (based on RIBBON-1), and for second-­ line treatment in combination with standard chemotherapy (based on RIBBON-2). These decisions do not affect the availability of Avastin for its approved uses in other types of cancer in the United States. Approvals | In February the Chinese health author­ ities approved Avastin for the treatment of metastatic colorectal cancer, its first indication in this important market. Filings | In December Roche filed an application with the EU authorities for approval of Avastin ­ as frontline treatment for ovarian cancer, based on the results of the phase III GOG218 and ICON-7 ­t rials (see below, Clinical Milestones). Clinical milestones | Two large phase III trials involving some 3,400 patients have demonstrated the potential of Avastin in ovarian cancer. Results from GOG218 were presented at the annual meeting of the American Society of Clinical Oncology (ASCO) in June. The trial met its primary endpoint of extending progression-free survival (the period a patient ­ lives without the disease getting worse) in women with previously untreated advanced ovarian cancer. ICON-7, a further trial with Avastin in ovarian cancer, reported positive results in early July. The data ­ were presented at the European Society for Medical Oncology (ESMO) conference in October. In addition to the EU filing in December, Roche plans to use ­ the results of both trials to support a regulatory application for this additional indication in the US in 2011. Clinical trial results led to a number of adjustments ­ in the Avastin development programme in 2010. As

28.01.2011 14:50:56

38­

Roche Business Report 2010

Pharmaceuticals

Major regulatory filings in 2010 1 Product

Clinical data supporting filing

Indication and/or dosage form

Actemra/

LITHE (2-year data)

rheumatoid arthritis, reduction or inhibition of progression

RoActemra

Country

USA

of joint damage and improvement of physical function ML21753

rheumatoid arthritis signs and symptoms,

China (refiled)

progressive joint damage Avastin

TENDER

systemic onset juvenile idiopathic arthritis

RIBBON-2

metastatic breast cancer, second-line treatment

EU, USA USA

ICON-7, GOG 218

metastatic ovarian cancer

Herceptin

ToGA

advanced HER2-positive gastric cancer

USA, China

EU

Herceptin

ToGA

advanced HER2-positive gastric cancer

Japan

+ Xeloda MabThera/

PRIMA

Rituxan

advanced follicular lymphoma, first-line maintenance ­f ollowing induction treatment with MabThera/Rituxan

EU, USA, Switzerland

plus chemotherapy Mircera

RAVE

ANCA-associated vasculitis

ML20680

renal anemia

CORDATUS

correction of symptomatic anemia in adults with chronic

(NH20052)

kidney disease who do not yet need dialysis, once-monthly

USA China EU, Switzerland

administration Tarceva

emerging data

metastatic non-small cell lung cancer with EGFR-­

from clinical trials,

activating mutations, first-line treatment

EU

ongoing clinical experience Xeloda

NO16968 (XELOXA)

adjuvant colon cancer, combination with oxaliplatin

data in the public

advanced or refractory gastric cancer in patients who

domain

are not candidates for curative surgery

XELOX (NO16966)

metastatic colorectal cancer, combination with oxaliplatin

Switzerland Japan China (refiled)

1 Includes supplemental indications.

phase III trials with Avastin in stomach (AVAGAST) and prostate (CALGB 90401) cancer did not meet their primary endpoints of extending overall survival, Roche has decided not to pursue regulatory filings for these indications. A phase III programme inves­ tigating the addition of Avastin to standard treatment with MabThera/Rituxan plus chemotherapy ­ for diffuse large B cell lymphoma, an aggressive ­ form of non-Hodgkin’s lymphoma, was discontinued after a safety and efficacy analysis showed an unfavourable benefit–risk assessment. Following eval­ uation of phase III data (AVANT), Roche has discontinued development of Avastin in adjuvant colorectal cancer. The results and decision on adjuvant colo­ rectal cancer do not affect the use of Avastin in ­ the metastatic (advanced) colorectal cancer setting, where the medicine has demonstrated a clinically

06_Roche_AR10_ENG_Pharmaceuticals.indd 38

meaningful progression-free and overall survival ­ enefit in both first- and second-line treatment. b Avastin has shown a positive benefit–risk ratio in these and all other approved metastatic cancer ­indications. Herceptin Approvals | The European Commission approved Herceptin in combination with chemotherapy for use in patients with metastatic stomach (gastric) cancer exhibiting high levels of HER2, in January 2010. Approvals for the same indication were received in Switzerland in May and the US in October, following priority review by the FDA. Filings | In June the Japanese health authorities gave priority review status to an application sub­-­

28.01.2011 14:50:56

Pharmaceuticals

Roche Business Report 2010

39­

Major regulatory approvals in 2010 1 Product

Clinical data supporting filing

Indication and/or dosage form

Actemra/

OPTION, TOWARD,

rheumatoid arthritis signs and symptoms

RoActemra

RADIATE, ­A MBITION,

Country

USA

LITHE (6-month data) LITHE (2-year data) Avastin

AVF 2107, E3200,

rheumatoid arthritis, reduction or inhibition of progression

EU, Switzerland,

of joint damage and improvement of physical function

USA 2

metastatic colorectal cancer

China

NO16966 (global); ARTIST (China) Herceptin

ToGA

advanced HER2-positive gastric cancer

Lucentis

CRUISE, BRAVO

macular edema following retinal vein occlusion

EU, USA, Switzerland USA

MabThera/

CLL-8

first-line chronic lymphocytic leukemia

USA

REACH

relapsed or refractory chronic lymphocytic leukemia

PRIMA

advanced follicular lymphoma, first-line maintenance

Rituxan USA EU, Switzerland

­f ollowing induction treatment with MabThera/Rituxan plus chemotherapy REFLEX

rheumatoid arthritis, inhibition of progression of joint

EU

damage and improvement of physical function Mircera

CORDATUS

correction of symptomatic anemia in adults with

(NH20052)

chronic kidney disease who do not yet need dialysis,

EU, Switzerland

once-monthly administration Tarceva

SATURN

non-small cell lung cancer, first-line maintenance after

Xeloda

NO16968 (XELOXA)

adjuvant colon cancer, combination with oxaliplatin

USA, EU

chemotherapy EU

1 Includes supplemental indications. 2 January 2011.

mitted in March by Chugai, for approval of Herceptin for advanced HER2-positive stomach cancer. In ­ June Roche submitted an application for approval ­ of the same indication in China. Clinical milestones | In December patient enrolment was completed for a phase III study with a new subcutaneous formulation of Herceptin in women with HER2-positive breast cancer. Herceptin is currently given intravenously over 30 to 90 minutes. ­ The innovative subcutaneous formulation, which is based on Halozyme’s Enhanze technology (see ­ p. 128), is expected to take less than five minutes ­ to administer and may allow patients with HER2-­ positive breast cancer to receive treatment in their physician’s office or at home, without having to ­ go to a hospital.

06_Roche_AR10_ENG_Pharmaceuticals.indd 39

Lucentis Approvals | In June the US Food and Drug Admin­ istration (FDA) approved Lucentis for the treatment ­ of patients with macular edema (swelling in the ­retina) following retinal vein occlusion (RVO). The approval followed a six-month priority review by ­ the FDA. RVO occurs when blood flow through a retinal vein becomes blocked, causing swelling (macular edema) and hemorrhages in the retina, which may result in blurring or vision loss in all or part of one eye. MabThera/Rituxan (oncology) Approvals | In February the FDA approved Rituxan combined with fludarabine and cyclophosphamide chemotherapy for people with either previously untreated (first-line) or previously treated (relapsed ­

28.01.2011 14:50:56

Will it

Disease area

Oncology

Indication

Second-line HER2-positive metastatic breast cancer

Trials

EMILIA (TDM4370g / BO21977)

No. of patients

551 (recruited as of December 2010)

No. of study sites

216

No. of countries

22

Jone F., participant in the EMILIA study (T–DM1), Houston

06_Roche_AR10_ENG_Pharmaceuticals.indd 40

28.01.2011 14:51:34

work   ?

Wayne C., T–DM1 Medical Director, Genentech, South San Francisco

06_Roche_AR10_ENG_Pharmaceuticals.indd 41

28.01.2011 14:51:57

T–DM1 — an antibody–drug conjugate

Creating value for patients means building on good treatments to make them even better

1970s

2000

The future?

Non-specific chemotherapy agents

Herceptin (trastuzumab) — the new standard of care for HER2-positive metastatic breast cancer

ADC targets chemotherapy specifically to tumour cells

Points of attack Cancer cell

Healthy cell

Chemotherapy Attacks both healthy and cancerous cells

Trastuzumab + chemo The monoclonal antibody trastuzumab specifically targets HER2-positive tumour cells

T–DM1 Attacks cancer cells only, no conventional chemotherapy burden

As the first therapeutic antibody targeting a specific cancer-related biomarker to receive FDA approval, Herceptin (trastuzumab) launched a revolution in the ­t reatment of breast cancer. We continue to build on that breakthrough with trastuzumab–DM1 (T–DM1), a novel antibody-drug conjugate (ADC) being developed T–DM1 to treat HER2-positive breast cancer. T–DM1 combines two powerful anticancer approaches in one medicine. The trastuzumab antibody component Trastuzumab blocks the signals that make HER2-positive cancer cells more aggressive and sends a message to the patient’s immune system to destroy the cancer cells. It also delivers DM1, a potent chemotherapy agent, directly to the tumour cells to induce cell death.

DM1

Stable linker

06_Roche_AR10_ENG_Pharmaceuticals.indd 42

T–DM1 may offer patients with HER2-positive breast cancer effective treatment that spares them the burden and side effects of conventional chemotherapy. EMILIA is a phase III registration trial comparing single-agent T–DM1 treatment with combined lapatinib (another HER2-targeted drug) plus capecitabine (Xeloda) chemotherapy in women with advanced HER2-positive breast cancer. Further trials are testing T–DM1 in combination with Roche’s pertuzumab, ­ another next-generation HER-targeting antibody therapy.

28.01.2011 14:51:59

Pharmaceuticals

or refractory) CD20-positive chronic lymphocytic leukemia, based on the results of the CLL-8 and REACH trials. Following regulatory applications by Roche and Genentech in the first quarter, in Octo-­ ber the European Medicines Agency (EMA) approved MabThera as maintenance treatment for people with follicular lymphoma who have re-­ sponded to induction therapy; the FDA is currently reviewing Genentech’s sBLA for the same indica-­ tion and has set an action date in late January 2011. Both submissions were based on the results of ­ the PRIMA study, which showed that ­c ontinuing MabThera/Rituxan for two years (maintenance ­ therapy) in patients who responded to initial treatment with MabThera/Rituxan plus chemotherapy nearly doubled progression-free survival, compared with those who did not receive maintenance ­ treatment. Clinical milestones | Based on positive results from a phase Ib study in patients with follicular lymphoma, in July Roche decided to advance a new subcuta­n e­o us formulation of MabThera, also based on ­H alozyme’s Enhanze technology, into phase ­ III development. Subcutaneous administration has the potential to significantly simplify treatment ­ by shortening administration time to less than ten minutes and improving patient comfort. A phase ­ III trial is expected to start in the first quarter of 2011. Positive data from a phase III study of MabThera/ Rituxan in patients with advanced follicular lymphoma who did not have symptoms (asymptomatic disease) were presented at the annual meeting ­ of the American Society of Hematology in December. The study showed that immediate administration ­ of single-agent MabThera/Rituxan as induction therapy followed by continued (maintenance) treatment with MabThera/Rituxan delayed the need for chemoor radiotherapy and extended progression-free ­s urvival, compared with watchful waiting. These are the first phase III data to show that initial use ­ of MabThera/Rituxan monotherapy as induction followed by maintenance can provide clinical benefit ­ for patients with asymptomatic follicular lymphoma, ­ a disease that is commonly treated only when ­s ymptoms appear (an approach known as ‘watchful waiting’).

06_Roche_AR10_ENG_Pharmaceuticals.indd 43

Roche Business Report 2010

43­

MabThera/Rituxan (inflammation) Approvals | Roche received regulatory approval in October for two additions to the existing EU ­ marketing authorisation for MabThera in rheumatoid arthritis: based primarily on data from the REFLEX study, the indications were expanded to include ­inhibition of progression of joint damage and im-­ prove­m ent of physical function; and information ­ on enhanced treatment responses in seropositive ­ RA patients (see below, Clinical milestones) was added to the product’s prescribing information. Filings | In October, based on data from the phase II/III RAVE study, Genentech and Biogen Idec ­s ubmitted a supplemental Biologics License Appli­ cation to the FDA for approval of Rituxan for ANCAassociated vasculitis, a group of rare, severe, lifethreatening autoimmune diseases characterised by inflammation of blood vessels leading to organ ­d amage. There are currently no approved therapies for the condition, and treatment-associated toxicities are common with the unapproved standard of care, cyclophosphamide. Clinical milestones | An analysis of samples from patients with RA who participated in two phase III trials was presented at the European League Against Rheumatism (EULAR) annual congress in June. It showed that testing for specific blood markers at the time of diagnosis could have a significant impact ­ on treatment decisions and lead to improved patient quality of life. Approximately 80% of RA patients ­ have at least one of two characteristic biomarkers produced by autoreactive B cells — rheumatoid ­factor (RF) and anticyclic citrullinated peptide (antiCCP) — in their blood. Such patients are referred to as ‘seropositive’. Data from a pooled cohort of the two studies showed that, while both seropositive ­ and seronegative patients benefitted from treatment with MabThera/Rituxan, the response was enhanced in the seropositive population. Additional biomarker analyses from other phase III studies are pending. MabThera/Rituxan is the first and only selective B cell targeted therapy available for RA. Tarceva Approvals | In April the US Food and Drug Administration (FDA) approved Tarceva as a maintenance treatment for patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) whose

28.01.2011 14:51:59

44­

Roche Business Report 2010

Pharmaceuticals

Roche has 12 innovative new molecular entities in late-stage development, including six potential personalised healthcare medicines with planned ­companion diagnostic tests. disease has not progressed after four cycles of ­p latinum-based first-line chemotherapy. In April the European Commission approved Tarceva as monotherapy for maintenance treatment in patients with advanced non-small cell lung cancer (NSCLC) whose disease remains largely unchanged (known ­ as stable disease) after platinum-based initial ­c hemotherapy. Both approvals are based on data from the phase III SATURN study, which showed that, compared with placebo, Tarceva significantly improved overall survival in patients with stable ­d isease. Patients with advanced NSCLC and stable disease after initial chemotherapy have tumours ­ that progress faster, are more resistant to further lines of chemotherapy and have a poorer prognosis compared with patients who have a complete or ­ partial response to initial chemotherapy. Filings | In June Roche submitted an application to the European Medicines Agency (EMA) to extend the current marketing approval for Tarceva to include first-line treatment of patients with advanced NSCLC with EGFR-activating mutations. The application ­ is supported by emerging data from clinical trials and ongoing clinical experience, including new data ­ from the OPTIMAL trial presented at ESMO (see below). Tarceva is the only epidermal growth factor receptor (EGFR) inhibitor approved for use in m ­ aintenance and second-line treatment settings ­ in patients with advanced or metastatic NSCLC, ­ irrespective of the presence of EGFR-activating mutations. A licence for Tarceva for use in the firstline setting would allow physicians to personalise early treatment according to EGFR activating mutation status, while people with NSCLC without

06_Roche_AR10_ENG_Pharmaceuticals.indd 44

EGFR-activating mutations would continue to benefit from treatment with Tarceva in later lines of therapy. Clinical milestones | Results from a randomised phase III study (OPTIMAL) presented at the ­E uropean Society for Medical Oncology (ESMO) congress in October demonstrated that first-line treatment with Tarceva extended progression-­­ free survival in patients with advanced NSCLC with EGFR-activating mutations to more than one year, almost three times longer than patients who received conventional chemotherapy. Interim results from ­ a second trial investigating Tarceva in this indication (EURTAC) are expected in the first quarter of 2011. As many as 30% of Asian patients with lung cancer and an estimated 10% of lung cancer patients in Western countries have this distinct form of NSCLC. Xeloda Approvals | In March the EU authorities approved Xeloda in combination with oxaliplatin (a com­-­ bin­­a tion known as XELOX) for the adjuvant (post­ surgical) treatment of patients with early colon ­c ancer. The approval was based on results from ­ the NO16968 (XELOXA) study, one of the largest ­ studies of patients with stage III (early) colon cancer, which showed that patients taking XELOX imme­ diately after surgery lived disease-free for longer ­c ompared with those treated with a chemotherapy regimen consisting of 5-fluorouracil plus leucovorin. Filings | In Japan Chugai filed marketing applications with the Ministry for Health, Labour and ­ Welfare in March for approval of Xeloda combined with ­H erceptin for the treatment of advanced ­ HER2-positive stomach cancer and in September ­ for Xeloda in advanced or refractory gastric ­( stomach) cancer in patients who are not candi­-­ dates for ­c urative surgery. Clinical milestones | A data analysis completed in June showed that NO17629, a phase III trial investigating Xeloda in combination with docetaxel for ­ the adjuvant (postsurgical) treatment of women with early breast cancer, did not meet its primary endpoint of extending disease-free survival but did meet the secondary endpoint of extending overall sur­vival. Roche has decided not to pursue regulatory ­f ilings for this indication.

28.01.2011 14:51:59

Pharmaceuticals

Research and development Roche’s Pharmaceuticals Division is committed ­ to discovering and commercialising innovative medicines that represent true medical value in areas ­ of high unmet need. To ensure a strong flow of suit­ able candidate molecules into its development pipeline, Roche has built a unique innovation network of independent research and development centres. In addition to Roche and Genentech, it includes Chugai in Japan and alliances with more than 150 partner organisations worldwide. This promotes a diversity ­ of research approaches and enables access to new technologies and promising drug candidates. Close cooperation between the Pharmaceuticals Division and Roche Diagnostics is a key strategic advantage for our company. It ensures that diagnostics expertise is seamlessly integrated into all parts­ of the pharmaceutical R &  D process. This is central to Roche’s goal of advancing personalised healthcare (PHC), an approach that seeks to tailor treatments ­ to specific patient subpopulations based on growing scientific understanding of biology and disease at ­ the molecular level.

Roche Business Report 2010

lations. Roche’s research on antibody–drug conjugates as a means of treating cancer is another ­e xample of a highly targeted approach with the potential of improving outcomes while reducing ­ the side ­e ffects of treatment. T–DM1, for HER2-­ positive breast cancer, is the most advanced ­ of these projects. For more information, see below, Oncology, and also pp. 18 and 19 of this report. As part of the Group’s Operational Excellence programme, the Pharmaceuticals Division is prioritising its R &  D investments in order to dedicate resources to projects with the highest potential. Following ­ a comprehensive portfolio review, Roche decided to discontinue R &  D activities in RNA interference, ­c onsolidate internal functional resources and reduce the number of Pharma Research and Early Devel­ opment sites from 11 to seven, thereby reducing fixed costs and making funds available for additional external research partnerships and promising new programmes entering phase II clinical development.

Two recent examples of the progress that Roche is making towards PHC in the development of therapies for difficult-to-treat diseases are RG3638 (MetMAb) for lung cancer and RG7204 (BRAF inhibitor) for malignant melanoma. Roche Diagnostics is developing diagnostic tests designed to guide appropriate use of both compounds in their target patient popu-

At the beginning of 2011 the division’s R &  D pipe-­ line included 102 projects in clinical development ­ (phase I to III and filed for regulatory review). Of these, 62 involved new molecular entities (NMEs) and 40 involved additional indications. Twelve ­ NMEs are in late-stage development (see table, ­ p. 47). Twenty-two projects investigating additional indications for existing products are in phase III. ­ The Pharmaceuticals pipeline is shown in the fold-out inside the front cover of this report. Further details are available at www.roche.com.

Roche and Genentech — 376 projects in research and early development (discovery, phases 0–II) | January 2011

Roche and Genentech — 39 projects in phase III (or marketing applications filed) | January 2011

Inflammation

65

Oncology

26

Metabolic

29

Metabolic

2

Others

12

CNS

3

Ophthalmology

2

Inflammation

6

Ophthalmology Virology

CNS Oncology

06_Roche_AR10_ENG_Pharmaceuticals.indd 45

45­

3 65

63 139

28.01.2011 14:52:00

46­

Roche Business Report 2010

Pharmaceuticals

Four additional NMEs advance into late-stage development: MetMAb (lung cancer), lebrikizumab (asthma), RG7128 ­(hepatitis C), ocrelizumab (MS). Oncology Roche’s clinical development pipeline in oncology includes 29 new molecular entities. The Pharma­ ceuticals Division is further strengthening its oncology portfolio through new targeted therapeutic options and expanding into new indications. Six oncology NMEs are now in late-stage clinical testing. Pertuzumab (RG1273) is a HER2 dimerisation inhi­b ­ itor that is being studied with the current standard ­ of care, Herceptin plus chemotherapy, in HER2-­ positive breast cancer. Data from a phase II trial (NEOSPHERE) investigating pertuzumab and H ­ erceptin plus docetaxel chemotherapy in HER2positive early breast cancer were presented at ­ the San Antonio Breast Cancer Symposium in De-­ cem­b er. The results showed that the two antibodies plus docetaxel given in the neoadjuvant setting (before surgery) improved the rate of complete tumour ­d isappearance in the breast by more than half compared with Herceptin plus docetaxel chemotherapy. Based on the encouraging efficacy results from NEOSPHERE, pertuzumab will also be studied as adjuvant (postsurgical) therapy in HER2-positive early breast cancer. The phase III clinical programme in this setting is scheduled to start in late 2011. Results and related regulatory filings are expected ­ in 2011 from a phase III study (CLEOPATRA) eval­ uating the addition of pertuzumab to Herceptin and chemotherapy in the first-line treatment of patients with advanced (metastatic) disease. Trastuzumab–DM1 (T–DM1, RG3502) is a novel anti­b ody–drug conjugate that combines the therapeutic effect of trastuzumab (the active substance ­ of ­H erceptin) with intracellular delivery of DM1, ­ a highly potent chemotherapy agent, to specifically

06_Roche_AR10_ENG_Pharmaceuticals.indd 46

target HER2-positive tumours (see p. 42). Data from ­ a randomised phase II trial (TDM4450g) with T–DM1 in previously untreated HER2-positive metastatic breast cancer presented at the ESMO conference in October showed efficacy comparable to Herceptin plus chemotherapy, the standard of care, along with a significantly reduced side effect burden. Final results from this study are expected in 2011. Two phase III registration studies in metastatic HER2-­p ositive breast cancer are ongoing, and we plan to submit global marketing applications in ­ 2012. EMILIA, investigating T–DM1 in pretreated patients, is expected to yield data on progressionfree survival in 2012 and overall survival in 2013. MARIANNE, a comparative trial of first-line treatment with either T–DM1 alone or T–DM1 plus ­p ertuzumab versus Herceptin plus chemotherapy, began in July. Both trials are investigating therapeu-­ tic options that target HER2-positive tumours ­ while sparing patients the burden and side effects ­ of conventional chemotherapy. RG7204 (PLX4032, collaboration with Plexxikon) is a first-in-class molecule designed to selectively inhibit a cancer-causing, mutated form of the BRAF protein found in approximately half of metastatic melanoma tumours. Promising results from a phase ­ II clinical trial (BRIM2) were presented in November ­ at the International Melanoma Research Congress. The data showed that RG7204 shrank tumours ­ in over half of patients with previously treated BRAF V600E mutation-positive metastatic melanoma. Median progression-free survival in the study was 6.2 months. Typically, progression-free survival for these patients is approximately two months. A phase III trial (BRIM3) in previously untreated BRAF ­m utation-positive metastatic melanoma patients met its primary endpoints in January 2011, with an ­ interim analysis showing significantly improved overall and progression-free survival in patients who received RG7204 compared with those treated with dacarbazine, the current standard of care. Roche Molecular Diagnostics is developing a companion diagnostic, cobas 4800 BRAF V600 Mutation ­ Test (see pp. 59, 69, 78), to identify patients whose tumours carry the abnormal BRAF gene and are therefore appropriate for treatment with RG7204.

28.01.2011 14:52:00

Pharmaceuticals

Roche Business Report 2010

47­

Twelve new molecular entities in ongoing or planned late-stage studies Compound

Indication

Status

pertuzumab

HER2-positive metastatic

phase III started in 2008

Expected first filing

2011

phase III started in first quarter 2009

2012

phase III trial in first-line treatment met primary

2011

breast cancer, first line trastuzumab–DM1

HER2-positive metastatic breast cancer, first and second line

RG7204 (BRAF

metastatic melanoma

inhibitor)

endpoints in January 2011

RG3616 (hedgehog advanced basal cell

pivotal phase II started in first quarter 2009

2011

chronic lymphocytic

phase III started in fourth quarter 2009

2013

­leukemia, non-Hodgkin’s

(chronic ­lymphocytic leukemia)

pathway inhibitor) RG7159 (GA101)

­c arcinoma

lymphoma RG3638 (MetMAb)

solid tumours

LIP 1 decision made, preparing for phase III

post-2013

lebrikizumab

asthma

LIP 1 decision made, preparing for phase III

post-2013

aleglitazar

cardiovascular risk reduc-

phase III initiated in first quarter 2010

post-2013

tion in type 2 diabetes dalcetrapib

dyslipidemia, cardio­

phase III enrolment completed in second quarter

vascular high risk

2010

hepatitis C

LIP 1 decision made, preparing for phase III

2013

RG1678 (glycine

negative symptoms of

phase III started November 2010

2013

reuptake inhibitor)

schizophrenia, subopti-

RG7128 (HCV po-

2013

lymerase inhibitor)

mally controlled positive symptoms of schizophrenia ocrelizumab

multiple sclerosis

phase III planned to start in first quarter (PPMS)

(RRMS and PPMS)

and second quarter (RRMS) 2011

post-2013

1 Lifecycle investment point (decision to commence late-stage development leading to submission of marketing applications).

RG3616 (GDC-0499; collaboration with Curis) is a novel compound targeting the hedgehog signalling pathway, which is thought to be implicated in ­s ev­e ral cancers. A pivotal phase II study with reg­ istration potential is currently investigating RG3616 as a potential treatment for advanced basal cell ­c arcinoma (BCC). RG3616 is also being evaluated ­ in a phase II study as a therapy for operable BCC. ­ In the fourth quarter Roche decided to discontinue development of the compound in ovarian and colo­ rectal cancer due to lack of benefit in phase II trials. RG7159 (GA101) is the first type II, glycoengineered, anti-CD20 monoclonal antibody being investigated ­ in late-stage clinical trials as a potential treatment for non-Hodgkin’s lymphoma (NHL) and chronic lymphocytic leukemia (CLL). It has been specifically designed to enhance the destruction of cancerous B

06_Roche_AR10_ENG_Pharmaceuticals.indd 47

cells by activating other immune cells to attack ­ the cancer cells and by inducing direct cell death. ­ In two phase II studies presented at the American ­S ociety of Hematology annual meeting in Decem-­ ber, treatment with RG7159 produced promising response rates in very difficult-to-treat patients with either indolent or aggressive NHL who had not responded to multiple prior treatments, including MabThera/Rituxan. Further clinical data for RG7159 in NHL and CLL are expected in 2011. Phase III studies of RG7159 versus MabThera/Rituxan in aggressive and indolent NHL are scheduled to start in 2011. RG3638 (MetMAb) is a unique monoclonal antibody that binds specifically to the c-Met protein receptor. The Met pathway can be inappropriately activated ­ in cancer and lead to invasive growth. New phase II

28.01.2011 14:52:00

What are the

Disease area

Metabolic and cardiovascular diseases

Indication

CV risk reduction in patients with type 2 diabetes

Trials

ALECARDIO

No. of patients

6,000

No. of study sites

750

No. of countries

24

Ragnar B., participant in the ALECARDIO (aleglitazar) trial, Stockholm

06_Roche_AR10_ENG_Pharmaceuticals.indd 48

28.01.2011 14:52:43

implications  ?

Anita M.-W., Operations Program Leader, Roche Basel

06_Roche_AR10_ENG_Pharmaceuticals.indd 49

28.01.2011 14:53:21

Aleglitazar

Creating value for patients means focusing on the unsolved issues For patients with type 2 diabetes (T2D), blood glucose control is no longer the biggest concern. More than 60% of patients with diabetes die from heart disease and stroke, not from an inability to control blood glucose. And 10% of patients who experience an acute coronary syndrome (ACS) event, such as a heart attack, die within one year. Currently, there are no drugs on the market that specifically and effectively control their high risk of cardiovascular disease.

Aleglitazar, a dual PPAR α/γ co-agonist developed at Roche, may become the first compound with the potential to reduce cardiovascular morbidity and mortality specifically in high-risk patients with T2D. Aleglitazar is an excellent example of translational medicine: biochemical parameters, animal data, and biomarkers of efficacy and safety consistently supported hypotheses that were later proven in clinical settings.

Increased risk of heart attack and stroke associated with T2D

ALECARDIO, an innovative global, randomised, controlled phase III clinical trial with some 6,000 patients, is now testing the hypothesis that aleglitazar can reduce cardiovascular morbidity and mortality in patients with T2D who have suffered a recent ACS event.

Healthy people People who have had a heart attack or stroke

People with T2D People with T2D who have had a heart attack or stroke

Risk

Demonstrating the multiple effects of aleglitazar

1–2 years

Conventional trial in people with T2D

Reduction of blood glucose levels 5 years

Trial with aleglitazar in T2D high-risk subpopulation

Blood glucose

Blood fats

Hypertension

Focused on reducing cardiovascular risk in people with type 2 diabetes

Saving lives

06_Roche_AR10_ENG_Pharmaceuticals.indd 50

28.01.2011 14:53:22

Pharmaceuticals

data presented at the annual European Society for Medical Oncology (ESMO) conference in October showed a significant increase in progression-free survival for patients with high Met-expressing nonsmall cell lung cancer (NSCLC) who were treated with MetMAb plus Tarceva. Based on this data, in September Roche advanced the compound into latestage development for the second- and third-line treatment of NSCLC. A phase III study in patients with high Met-expressing NSCLC is expected to start in 2011. Roche Tissue Diagnostics is developing a companion diagnostic test to identify patients ­ with high Met-expressing NSCLC who are most likely to respond to treatment with RG3638 (see pp. 19, 59, 74). A phase II study to investigate the addition of MetMAb to chemotherapy, with or without Avastin, for the treatment of triple negative metastatic breast cancer is expected to enrol its first patient in the ­ first quarter of 2011. Inflammation and autoimmune disorders Roche has eight new compounds in development ­ for chronic and progressive autoimmune and inflammatory diseases such as rheumatoid arthritis (RA) and asthma, five of which are in phase II clinical testing. Lebrikizumab is a humanised monoclonal antibody designed to bind specifically to interleukin-13, a protein thought to play a key role in the airway inflammation, hyperresponsiveness and obstruction experienced by asthma patients. The compound ­ is being developed for the treatment of moderate to severe persistent asthma. Patient recruitment for ­ two key phase II trials (MOLLY and MILLY) has been completed. Based on promising phase II results with lebrikizumab in patients whose symptoms remained uncontrolled on inhaled corticosteroids, with or ­w ithout a second controller, Roche has decided to advance the molecule into late-stage clinical testing. In May Roche and Biogen Idec announced their decision to discontinue development of ocrelizumab (RG1594) for rheumatoid arthritis (RA). Following ­ a detailed analysis of the efficacy and safety results from the RA programme, the companies concluded that the overall benefit–risk profile of ocrelizumab was not favourable in RA, taking into account ­c urrently available treatment options, including MabThera/Rituxan. Development of ocrelizumab ­ as a therapy for multiple sclerosis is continuing ­ (see p. 52).

06_Roche_AR10_ENG_Pharmaceuticals.indd 51

Roche Business Report 2010

51­

Metabolic and cardiovascular diseases Roche has nine new compounds in development for metabolic and cardiovascular diseases. ­D alcetrapib (RG1658, JTT-705; licensed from Japan Tobacco) is ­ a novel cholesteryl ester transfer protein (CETP) modulator being tested for its ability to reduce cardio­ vascular events in patients with ­s table coronary heart disease following a recent acute coronary syndrome event. The phase III dal-HEART programme ­ is on track: recruitment for the phase III dal-OUTCOMES trial has been completed, with over 15,600 participants enrolled. Results from two phase IIb studies (dal-VESSEL and dal-PLAQUE) are expected in 2011, and recruitment for a further phase III study (dal-PLAQUE 2) is ongoing. These supporting studies are investigating the potential impact of dalcetrapib treatment on atherosclerotic plaque burden, using imaging techniques and functional tests. Aleglitazar (RG1439) is an innovative investigational treatment designed to reduce the incidence and impact of cardiovascular mortality, non-fatal heart attack and stroke in patients with a recent acute coronary syndrome and type 2 diabetes. A global phase III programme (ALECARDIO) began recruitment early in 2010. Aleglitazar has the potential to be the first therapy to specifically reduce cardiovascular ­ risk in people with type 2 diabetes. Taspoglutide (RG1583, BIM51077; licensed from Ipsen) is a once-weekly human glucagon-like peptide-1 (GLP-1) hormone analogue in development ­ for the treatment of type 2 diabetes. In September Roche communicated its decision to stop administering taspoglutide to patients in global phase III ­c linical trials, based on higher than expected patient discontinuation rates observed in analyses of data from the T-emerge programme, and also due to ­ the antibody-monitoring plan implemented to address serious hypersensitivity reactions. After careful assessment of the relevance of the T-emerge safety and efficacy data to support future regulatory approval in type 2 diabetes, including consideration of the current portfolio evaluation initiative, ­ Roche has decided to discontinue the taspoglutide T-emerge development programme.

28.01.2011 14:53:23

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Roche Business Report 2010

Pharmaceuticals

As the first in a new class of medicines, RG1678 has the potential to redefine the therapeutic approach to a range of psychiatric disorders. Virology Roche currently has two direct-acting antiviral agents in late-stage development for hepatitis C: the nucle­ oside polymerase inhibitor RG7128 (partnered with Pharmasset) and the protease inhibitor danoprevir (RG7227). Both of these oral agents are being investigated in combination with Pegasys and ribavirin, and in combination with each other in an interferonfree regimen. RG7128 interim phase IIb results showed good efficacy and tolerability, with no evidence of viral resistance after three months’ therapy in combination with Pegasys and ribavirin. A phase I trial (INFORM-1) of RG7128 and danoprevir as an interferon-free combination showed significant viral suppression. A phase III programme with RG7128 ­ is expected to begin in 2011. In October 2010 Roche acquired the global rights to danoprevir, to increase the strategic flexibility of the Group’s hepatitis C portfolio.

there are currently no approved treatments. The ­ first of six planned trials began in November 2010. As the first in a new class of medicines, RG1678 ­ has the potential to redefine the therapeutic approach to a range of psychiatric disorders and deliver clinical benefits beyond those achievable ­ with current treatment options. In October Roche and Biogen Idec reported posi­-­ tive results from a phase II trial with the humanised anti-CD20 monoclonal antibody ocrelizumab (RG1594) in patients with relapsing-remitting mul­ tiple sclerosis (RRMS), one of the leading causes ­ of neurological disability in young adults. Data presented at the annual meeting of the European ­C ommittee for Treatment and Research in Multiple Sclerosis (ECTRIMS) showed that, compared with placebo, ocrelizumab significantly reduced signs of disease activity, as measured by brain lesions and annualised relapse rate, with no opportunistic infections reported. Two phase III ­s tudies will begin in the ­s econd quarter of 2011 to explore the drug’s efficacy in RRMS compared with interferon, the current standard of care. A phase III study investigating the potential of ocrelizumab in patients with primary ­p rogressive multiple sclerosis (PPMS) is planned to start in the first quarter of 2011. In October Genentech and Biogen Idec amended their collaboration on antibodies targeting CD20 and agreed that Genentech will have respon­s ibility for the further development of ocrelizumab in multiple sclerosis in the US.

Central nervous system The Roche portfolio has 10 novel compounds in development for disorders of the central nervous system, including schizophrenia, multiple sclerosis and other serious conditions. One of these compounds is RG1678, a novel glycine reuptake inhibitor being developed for the treatment of schizophrenia, an area of high unmet medical need. Promising data from ­ a phase II proof-of-concept study with RG1678 in patients with negative symptoms of schizophrenia were presented at the annual meeting of the Amer­ ican College of Neuropsychopharmacology in December. A global phase III programme has been initiated to investigate RG1678 in combination ­ with antipsychotics in patients with either negative symptoms or suboptimally controlled positive s­ ymptoms of schizophrenia, indications for which

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Pharmaceuticals

Focus on unmet medical needs Cancer | According to the latest International Agency for Research on Cancer (IARC) estimate, in 2008 over 12 million people worldwide were diagnosed with cancer, and some 7.6 million died of the disease. The IARC anticipated then that cancer would surpass heart disease as the leading cause ­ of death worldwide in 2010. The agency also forecasts that by 2030 there will be over 26 million new cases and 17 million deaths per year from cancer. ­ In Europe alone, one in three people can expect to develop cancer in their lifetime. Cancer is not one disease but a group of more than 100 distinct disorders, each with its own medical challenges.

Roche Business Report 2010

Breast cancer | The most common cancer among women worldwide. Over 1.4 million women are newly diagnosed and over 450,000 die from the disease each year. As there are several different types of breast cancer, knowledge of tumour characteristics is important for treatment decisions. Some 15–25% of women with breast cancer have tumours with abnormally high levels of a protein known as HER2. HER2-positive tumours are particularly aggressive, fast-growing and likely to recur. Lung cancer | The most common form of cancer worldwide 6 and the leading cause of cancer deaths. There are an estimated 1.4 million new cases annually. Non-small cell lung cancer is the most common ­ form, accounting for approximately 80% of all cases.

Chronic lymphocytic leukemia | The most common type of leukemia in adults, accounting for 25–30% ­ of all forms of leukemia. The incidence of CLL in Western countries is approximately 3 per 100,000, and it is twice as common in men as in women.

Malignant melanoma | The deadliest and most aggressive form of skin cancer. The life expectancy of people with advanced melanoma is usually ­ short, with less than one in four expected to be ­ alive one year after diagnosis. Every year an ­e stimated 40,000 people worldwide die from the ­d isease; the number of new cases in developed countries is expected to double, to 227,000 per year, by 2019. Approximately 50% of melanomas carry activating mutations in the BRAF protein, a key component of the RAS–RAF signalling pathway involved in normal cell growth and survival. These mutations cause the pathway to be overactive, which may ­ lead to excessive growth and cancer. It is estimated that approximately 8% of all solid tumours carry BRAF V600 mutations.

Colorectal cancer | Cancer of the large intestine or rectum, which accounts for over 1 million new cases (around 10% of all newly diagnosed cancers) worldwide each year. It is the second most common cause of cancer deaths in Europe and the third ­ most common worldwide.

Pancreatic cancer | A particularly aggressive disease that is extremely difficult to treat. It kills a higher proportion of patients in the first year after diagnosis than any other cancer. The fifth leading cause of cancer deaths in the developed world, pancreatic cancer claims nearly 80,000 lives every year.

Non-Hodgkin’s lymphoma | A group of over 30 cancers that affect the lymphatic system. This class of cancer currently affects over 1.5 million people worldwide, and some 350,000 new diagnoses ­ are made each year. Follicular lymphoma accounts for about one in four of all cases of non-Hodgkin’s lymphoma. It can occur at any time during adulthood, though people are typically diagnosed during their sixties, and it affects as many men as it does women.

53­

Kidney cancer | This type of cancer is newly diagnosed in around 200,000 people and causes 100,000 deaths worldwide every year, rates that are expected to increase. Renal cell carcinoma accounts for 90% of all kidney cancers.

6 Excluding non-melanoma skin cancers, most of which are easily treated and not life-threatening.

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Roche Business Report 2010

Pharmaceuticals

Gastric (stomach) cancer | Stomach cancer is the second most common cause of cancer-related deaths in the world and the fourth most commonly diagnosed cancer. It accounts for over 1 million ­ new cases and some 800,000 deaths each year. The vast majority of cases occur in Asia, where, with ­ lung cancer, it is the leading malignancy. Advanced (metastatic) stomach cancer is associated with a poor prognosis: the median survival time after diagnosis is 10–11 months with currently available ther­ apies. Early diagnosis of this disease is challenging because most patients with early-stage disease do not show symptoms. Age-related macular degeneration (AMD) | A major cause of gradual or sudden, painless, central visual loss in the elderly and a leading cause of ­ vision loss in people aged 60 and older. There are two forms of AMD — wet and dry. All cases begin as the dry form, but 10–15% progress to the wet form, which can result in sudden and severe central vision loss. In wet AMD, new blood vessels grow under the retina and leak blood and fluid, causing deterioration of the macula, the portion of the ­ eye responsible for fine, detailed central vision. More than 1.7 million Americans have the advanced form ­ of this condition. Anemia | Occurs when the number of red blood cells or the hemoglobin molecules they contain ­ falls below normal, resulting in insufficient oxygen reaching organs and tissues. It is seen in up to ­ 80% of patients with chronic kidney (renal) disease, which affects more than 500 million people worldwide. In addition, anemia affects three out of four cancer patients undergoing chemotherapy. Patients with untreated anemia may need blood transfusions. The potential long-term effects of anemia include cardiovascular disease in renal patients, while in patients with cancer it is associated with diminished quality of life.

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Hepatitis B and C | The hepatitis B and C viruses (HBV, HCV), which are commonly transmitted through blood-to-blood contact, cause acute and chronic liver disease, potentially leading to liver ­failure, cirrhosis liver cancer, and death. Worldwide, 350 million people are thought to be chronically infected with HBV, a highly infectious virus that is responsible for an estimated one million deaths annually. More than 170 million people around the world are infected with HCV, and three to four ­ million new cases occur each year. Hepatitis C is ­ the main reason for liver transplantation. A recent study on the HCV-related burden of disease in ­ 22 European countries estimated that between seven and nine million people, or over 1% of the popula­tion, are infected with HCV. Autoimmune disorders | Occur as a result of a mistaken immune response to the body’s own tissues. The causes are unknown. Rheumatoid arthritis, mul­ tiple sclerosis and lupus erythematosus are among ­ the most common autoimmune disorders, which affect millions of people worldwide. Rheumatoid arthritis (RA) | An autoimmune disease characterised by inflammation that leads to stiff, swollen and painful joints, ultimately resulting in ­irreversible joint damage and disability. More than ­ 20 million people worldwide and twice as many women as men suffer from RA. In addition to inflammation of the joints, such as the hands, feet and wrists, RA can cause fatigue, heart disease and increase the likelihood of developing other complications such as osteoporosis, anemia, and problems with the lungs and eyes. It can shorten life expec­ tancy by 6–10 years. B cells (a type of immune cell) are known to play a key role in the inflammation associated with RA. Several key cytokines, or proteins, are also involved, including interleukin-6 (IL-6), TNF alfa and interleukin-1 (IL-1). IL-6 has been identified as having a pivotal role in the ­inflammation process.

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Pharmaceuticals

Multiple sclerosis (MS) | An often debilitating autoimmune disease in which nerve impulses passing through the central nervous system are disrupted due to damage to the brain and spinal chord. This leads to unpredictable and highly variable symptoms ranging from abnormal sensations and reduced coordination to pain, paralysis, visual impairment and a decline in cognitive and other functions. According to WHO estimates, approximately 1.3 million people worldwide are living with the disorder, which is ­u sually diagnosed in adults aged between 20 and ­ 40 years. Relapsing-remitting multiple sclerosis (RRMS), the most common form, is characterised by acute exacerbations with full or partial recovery between attacks. Primary progressive multiple scle­ rosis (PPMS) is characterised by neurological ­d isability from onset, with symptoms gradually worsening over time. Diabetes | Recognised as a global epidemic by the World Health Organization. The International ­ Diabetes Federation estimates that some 360 million people worldwide will have diabetes by 2030. According to the WHO, type 2 (adult onset) diabetes accounts for around 90% of all cases. Uncontrolled type 2 ­d iabetes can lead to severe complications such as cardiovascular disease, stroke, blindness, amputations, and kidney failure, resulting in significant healthcare burdens to society. Schizophrenia | A severe mental disorder that ­ istorts the way a person thinks, acts, expresses d emotions, perceives reality and relates to others. According to WHO estimates, schizophrenia affects approximately 24 million people worldwide and is usually diagnosed in adults aged between 15 and 35 years. The symptoms of schizophrenia are broadly categorised as positive, negative and cognitive. Positive symptoms are psychotic behaviours such as ­ hallucinations and delusions. Negative symptoms include apathy, social withdrawal, lack of drive ­ and reduced ability to feel pleasure in everyday life. Cognitive deficits include difficulty concentrating ­ or following instructions, difficulty completing tasks, memory problems, and disorganised thinking. ­Persistent negative symptoms are a major cause of burden for patients and caregivers.

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Roche Business Report 2010

55­

Glossary Adjuvant treatment | Treatment given after surgical removal of a tumour to lower the risk of relapse. Disease-free survival | The length of time after treatment for a specific disease during which ­ a patient survives with no sign of the disease. First-line treatment | The initial treatment given after diagnosis, including the first treatment ­ given after metastatic cancer has been diagnosed. Maintenance treatment | Treatment given to­ prevent a disease getting worse or to prevent a cancer from recurring when it has disappeared following ­initial therapy. Metastatic disease | Cancer that has spread from the original site of a tumour to other parts of ­ the body. Also referred to as advanced disease. Neoadjuvant treatment | Treatment given to reduce the size of a tumour before surgical removal ­ is attempted. Overall survival | The time from the start of t­ reatment until the patient dies. Progression-free survival | The length of time ­d uring and after treatment during which a patient lives without the disease getting worse. Second-line treatment | Treatment given if the i­nitial, or first-line, treatment does not work, or if ­ the cancer stops responding to it.

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Diagnostics | In 2010 sales again

grew well ahead of the market, with market share gains in key segments such as immunoassays and tissue diagnostics. Efforts to enhance operational efficiency continue throughout the division and contributed to higher operating profit in 2010. All business areas launched new products that will help drive abovemarket growth in 2011.

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Diagnostics

Roche Business Report 2010

57­

Diagnostics Division in brief

Sales |

in millions of CHF

9,656

10,055

08

09

Core operating profit |

in millions of CHF

2,202

10,415

10

1,754

1,742

08

09

Number of employees

25,404

25,508

26,194

08

09

10

10

Key figures In millions of CHF

% change in CHF

% change in local currencies

% of sales

10,415

4

8

100

—  Professional Diagnostics

4,858

7

11

47

—  Diabetes Care

2,959

0

4

28

—  Molecular Diagnostics

12

Sales

1,189

1

4

—  Applied Science

868

0

4

8

—  Tissue Diagnostics

541

13

17

5

Core operating profit

2,202

26

30

21.1

Operating free cash flow

1,634

42

48

15.7

890

–6

–2

8.6

Research and development (core basis)

Diagnostics Leadership Team | Daniel O’Day

31 December 2010

Chief Operating Officer Roche Diagnostics

Manfred Baier

Applied Science

Colin Brown * (Dirk H. Ehlers)

Professional Diagnostics

Paul Brown

Molecular Diagnostics

Roland Diggelmann

Asia—Pacific

Peter Finckh

Platforms & Support

Christian Hebich

Finance and Services

Michael Heuer

EMEA (Europe, Middle East, Africa) and Latin America

David LaPré

Operations

Annette Luther

Communications

Kent Kost

Quality and Regulatory

Hany Massarany

Tissue Diagnostics

Wataru Ogawa

Japan

Jack Phillips

North America

Burkhard G. Piper * *

Diabetes Care

Claus-Joerg Ruetsch

Legal

Cris Wilbur

Human Resources

Robert Yates

Business Development

* From 1 June 2010. ** To 31 December 2010.

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Roche Business Report 2010

Diagnostics

Diagnostics Division Roche’s Diagnostics Division is the world’s leading supplier of in vitro diagnostics (IVDs). Performed in ­ a laboratory or at the point of care on blood, tissue and other samples from patients, IVD tests are a ­c rit-­ ical source of objective information helping doctors detect diseases, select appropriate treatments and monitor patients’ responses to care. In addition, scientists use the division’s research products to gain ­ a better understanding of the causes of disease and to discover new treatments. In over 130 countries Roche Diagnostics serves customers spanning the entire healthcare spectrum — from hospitals and commercial medical labs, to physicians, to patients with conditions requiring them to self-test. The d ­ ivision offers a wide range of technologies allowing ­t he detection and analysis of DNA, RNA and ­ proteins ­o n a large base of instruments installed worldwide. Already among the broadest in the ­ industry, Roche’s IVD test menu is steadily expand-­ ing and drawing on the latest scientific advances. ­ In 2010 Roche had approximately a 20% share of the global IVD market, which is valued at an estimated 44 billion US dollars in annual sales. 1

Strategic priorities Scientific progress, new technologies and changing demographics are among the trends expanding ­ the healthcare market. On the other hand, there is mounting pressure on healthcare budgets and ­ costs worldwide. Diagnostics can capitalise on all these trends by translating scientific insights into products that bring patients real medical benefit and, at the same time, contribute to significant cost ­ savings. Enabling precise and timely disease diagnosis and treatments to be targeted at the patients most likely to benefit is of great value, both for the well-being ­o f the patient and in allocating medical resources where they will be most effective. The Diagnostics Division’s strategic priorities:

• Improving testing efficiency is one pillar of the division’s strategy. Roche’s automated diagnostic systems embody decades of engineering inno-­ vation. Testing components, visualisation and ana­-­ lysis units and workflow management systems have continuously improved to include new tech-­

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Sales by region

Europe/Middle East /Africa Japan Asia—Pacific Latin America

50% (+6%) 5% (+4%) 12% (+20%) 7% (+16%)

North America 26% (+5%) Italics = growth rates (in local currencies).

nologies and simplify processes, meeting the requirements of all customers regardless of lab size, location or testing experience. • Demonstrating medical value is becoming the main driver of differentiation in the diagnostics market, contributing to the revaluation of IVDs. Despite their fundamental impact on the majority of clinical decisions, IVDs currently account for less than 2% of medical spending and are clearly undervalued. There are two main categories of diagnostics that contribute to better healthcare decisions. Stand-alone diagnostics offer value by enabling the precise and timely diagnosis ­ of diseases and facilitating early screening for dis-­ ease predisposition and prognosis. Examples include the molecular human papillomavirus (HPV) test in screening for cervical cancer, the MRSA test to diagnose infection with methicillin-resistant Staphylococcus aureus, and the PIGF and sFlt-1 immunoassays in testing for pre­e clampsia. Companion diagnostics are tests that enable doctors to identify the patients most likely to benefit from a particular treatment or to monitor responses to it. Roche already markets com­ panion diagnostics for a number of indications, with more in late stage development (see list ­ on page 59). • Deploying diagnostic tests in drug development is crucial to help increase R &  D productivity and develop more targeted medicines. Roche Diagnostics is collaborating closely with the ­P harmaceuticals Division and external pharma

1 Market size based on company and independent reports.

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Diagnostics

Roche Business Report 2010

59­

Roche companion diagnostics on the market or in late development Disease Area

Disease

Drug

Diagnostic Test *

Technology

Application

Virology

CMV HBV

CMV viral load HBV viral load

PCR PCR

Monitoring Monitoring

HBsAg levels

Immunoassay

Monitoring

HCV viral load

PCR

Monitoring

HCV viral load HCV viral load HIV viral load HLA-B 5701 genotype HER2 expression/ gene amplification ER/PgR expression

PCR PCR PCR PCR

Monitoring Monitoring Monitoring Screening

IHC, ISH

Selection

IHC

Selection

Breast cancer

Valcyte Pegasys and other antivirals Pegasys, peginterferon alpha-2b (Merck/SP) Pegasys, peginterferon alpha-2b (Merck/SP) Polymerase inhibitor (R7128) Protease inhibitor (R7227) Antivirals abacavir (GlaxoSmithKline) Herceptin, lapatinib (GlaxoSmithKline) Tamoxifen and other hormonal therapies pertuzumab (RG1273)

IHC, ISH

Selection

Breast cancer

T–DM1 (RG3502)

IHC, ISH

Selection

Cancer Colon cancer

compound (Merck) cetuximab (Merck), panitumumab (Amgen) cetuximab (Merck), panitumumab (Amgen) Herceptin

HER2 expression/ gene amplification HER2 expression/ gene amplification p53 mutations KRAS mutations (TheraScreen) KRAS mutations

Microarray PCR

Selection Selection

PCR

Selection

HER2 expression/ gene amplification BRAF V600E mutation

IHC, ISH

Selection

PCR

Selection

EGFR mutations (TheraScreen) EGFR mutations

PCR

Selection

PCR

Selection

MET expression MUC1 expression hENT1 expression

IHC IHC IHC

Selection Selection Selection

Immunoassay

Selection

MabThera/Rituxan

Serum periostin levels, CEA, IgE RF, anti-CCP Ab

Immunoassay

Selection

rontalizumab (RG7415) Bonviva/Boniva and other bisphosphonates CellCept

IFN-induced genes B-Crosslaps; P1NP levels MPA levels

PCR Immunoassay

Selection Monitoring

Immunoassay

Monitoring

HBV HCV HCV HCV HIV HIV Oncology

Breast cancer Breast cancer

Colon cancer Gastric cancer Melanoma NSCLC NSCLC

Inflammation

NSCLC NSCLC Pancreatic ­c ancer Asthma

Others

Rheumatoid arthritis SLE Osteoporosis Transplantation

BRAF inhibitor (RG7204) gefitinib (AstraZeneca), Tarceva ** Tarceva **, gefitinib (AstraZeneca) MetMAb (RG3638) TG4010 (Transgene) CP-4126 (Clovis Oncology) lebrikizumab (RG3637)

black type = on the market, grey type = in development; * not available in all markets. monitoring = monitoring of patient’s response to a particular treatment; screening = screening of patients for a particular genetic variation of HLA-associated with hypersensitivity to abacavir; selection = selection of patients eligible for a particular treatment (** = selection of patients eligible for earlier treatment). anti-CCP = antibodies against cyclic citrullinated peptide; BRAF = B-isoform of the rapidly growing fibrosarcoma oncogene; CEA = carcinoembryonic antigen; CMV = cytomegalovirus; HBV = hepatitis B; HBsAg = HBV surface antigen; HCV = hepatitis C; HER2 = human epidermal growth factor receptor 2; HIV = human immunodeficiency virus; hENT1 = human equilibrative nucleoside transporter; EGFR = epithelial growth factor receptor; ER = estrogene receptor; IHC = immunohistochemistry; ISH = in situ hybridisation; IFN = interferon; KRAS = member of the Ras family of oncogenes; MPA = mycophenolic acid; NSCLC = non-small cell lung cancer; PCR = polymerase chain reaction; P1NP = procollagen type 1 N-terminal propeptide; PgR = progesterone receptor; RF = rheumatoid factor; SLE = systemic lupus erythematosus; SP = Schering Plough.

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Roche Business Report 2010

Diagnostics

Roche’s top-selling diagnostics |

Accu-Chek Aviva Nano

sales in millions of CHF

cobas e 602

cobas c 502

cobas TaqMan 48

Ventana IHC reagents

2,718

1,957

1,475

561

452

Accu-Chek

cobas e modules,

cobas c modules,

Cobas AmpliPrep/

immunohistochemistry

monitoring systems

Modular Analytics,

Modular Analytics,

Cobas TaqMan

and in situ hybridisation

Elecsys

Cobas Integra

+4% *

+17% *

+5% *

+2% *

+17% *

Market segment:

Market segment:

Market segment:

Market segment:

Market segment:

Blood glucose monitoring

Immunoassays

Clinical chemistry

Virology (hepatitis C, hepatitis B, HIV)

Advanced tissue staining

Business unit:

Business area:

Business area:

Business area:

Business area:

Diabetes Care

Professional Diagnostics

Professional Diagnostics

Molecular Diagnostics

Tissue Diagnostics

07_Roche_AR10_ENG_Diagnostics.indd 60

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Diagnostics

Roche Business Report 2010

61­

An industry-leading portfolio of diagnostic tests and instruments for clinical testing and life science research.

CoaguChek XS

cobas TaqScreen DPX Test

cobas b 123 POC

Accu-Chek Combo

MagNA Pure LC2.0

330

305

278

241

236

CoaguChek

Cobas AmpliScreen,

cobas systems for blood

Accu-Chek insulin

MagNA Pure,

cobas TaqScreen

gases, hospital blood

delivery systems

LightCycler

glucose systems

+19% *

0% *

+4% *

+11% *

–12% *

Market segment:

Market segment:

Market segment:

Market segment:

Market segment:

Coagulation monitoring

Blood screening

Intensive care

Insulin Delivery Systems

DNA purification and gene expression

Business area:

Business area:

Business area:

Business unit:

Business area:

Professional Diagnostics

Molecular Diagnostics

Professional Diagnostics

Diabetes Care

Applied Science

Images are not to scale. * Year-on-year sales growth in local currencies.

07_Roche_AR10_ENG_Diagnostics.indd 61

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Roche Business Report 2010

Diagnostics

partners on new medicines and their use in per­­s onalised settings (see also the R &  D section on page 74). • To further accelerate growth in emerging seven (E7) countries 2 the division is expanding its local organisations and investing in programmes to bring products to local markets more quickly. • The division intends to further improve its prof­ itability through a combination of strong ­s ales growth and efficiency initiatives targeting virtually every area of operations. This report contains information on the progress made in 2010.

both mature and emerging EMEA 5 economies (6%), helped by strong performances by Professional ­ Diagnostics and Diabetes Care. Professional Diagnostics and Tissue Diagnostics were the primary growth drivers in North America (5%). In Japan (4%) overall divisional sales grew faster than the market with Professional Diagnostics’ strong performance off-­ setting continuing challenges in Diabetes Care. Increased investment and strong demand for immunoassays and other leading-edge Roche products contributed to robust above-market growth in the E7 emerging markets (21%), which in 2010 accounted for almost 13% of total divisional revenues.

Results and main business developments

On a Swiss franc basis, the division’s core operating profit for 2010 increased 26% (30% in local cur-­ rencies) to 2,202 million Swiss francs, while the core operating profit margin advanced 3.8 percentage points to 21.1%. These increases largely reflect the strong performance of Roche’s key diagnostic ­p roducts as well as ongoing initiatives to improve operational excellence. For more information on the ­d ivision’s operating results, see the Finance Report.

In 2010 the Diagnostics Division recorded sales of 10.4 billion Swiss francs, an increase of 8% in local currencies over 2009 3 (4% in Swiss francs; 8% in U ­ S dollars). This was significantly above the estimat-­ ed IVD market growth rate (5%) 4 .

Diagnostics sales increase 8%, significantly ahead of the market. All five divisional business areas contributed to sales growth, led by Professional Diagnostics and Diabetes Care. Immunoassays and blood glucose monitoring systems remained these businesses’ primary growth drivers. Strong demand for advanced tissue stain-­ ing products continued to fuel above-market growth in Tissue Diagnostics. Virology was the main con-­ tributor to sustained sales growth in Molecular Diagnostics. Strong sales of cell analysis and genomics ­s ystems were Applied Science’s main growth drivers. Instrument placements were again up significantly ­ for the division as a whole and were a major growth driver in all segments. Sales again outpaced the market in all regions. Growth was very strong in Asia—Pacific (20%) — p ­ articularly in China and South Korea — driven mainly by Professional Diagnostics. Despite pricing challenges, sales outperformed the market in ­

07_Roche_AR10_ENG_Diagnostics.indd 62

The division launched a total of 39 tests, which ex­-­ panded the immunoassay menu in infectious diseases, extended the molecular test panel in virology and further strengthened the tissue assay port-­ folio in oncology. In addition, 11 instruments were launched in key markets facilitating maximum ­ efficiency in state-of-the-art testing in clinical labo-­ ratories, re­s earch centres and point-of-care units ­( see table of product launches on page 76). In 2011 the division plans to launch 18 key products, including the US introduction of Accu-Chek Combo for ­ the management of blood glucose in diabetes, the cobas 4800 HPV Test for cervical cancer screen-­ ing and the cobas 4800 BRAF Mutation Test in mela­ noma (see table of product launches on page 78). Data from three clinical studies were presented at major scientific congresses: ATHENA, a large registration trial investigating the benefits of HPV testing

2 E7 countries = Brazil, Russia, India, China, South Korea, Mexico, Turkey. 3 Unless otherwise stated, all growth rates are in local currencies. 4 Market growth based on company and independent reports (to end of September 2010). 5 EMEA = Europe, Middle East, Africa.

28.01.2011 11:13:44

Diagnostics

Roche Business Report 2010

in screening for cervical cancer, PROTECT, a randomised trial studying the NT-proBNP biomarkerguided approach in treatment of heart failure, ­ and the STeP trial aiming at improvement of diabetes management through structured testing. All three ­t rials demonstrated the high medical value of Roche diagnostic products (see R &  D section on page 74).

zerland) and the Diabetes Care R &  D activities on insulin delivery systems from Burgdorf (Switzerland) to Mann­h eim (Germany). The division believes ­ that these measures, which are part of the Groupwide Operational Excellence programm, will enable ­ it to enhance system integration, leverage exist-­ ing capacities and reduce infrastructure costs while maintaining the focus on customers and innovation.

Operations

The division regularly assesses the mix of in-sourcing and out-sourcing in its manufacturing and supply chain operations. In general, activities which involve proprietary technology or enable Roche to leverage internal expertise are in-sourced. Operations are ­o ut-sourced when this offers economies of scale or other advantages while ensuring the continued integrity of Roche’s products and services. In recent years the level of out-sourcing has grown in line with sales.

Roche Diagnostics’ Business Areas (BAs) are innovation engines, translating our growing understanding of diseases into new products and applications. The BA headquarter sites in Rotkreuz, Switzerland (Professional Diagnostics), Mannheim, Germany (Dia-­ betes Care), Pleasanton, USA (Molecular Diagnostics), Penzberg, Germany (Applied Science), ­a nd Tucson, USA (Tissue Diagnostics), are the division’s main R &  D sites, with additional centres of excel-­ lence located in Branford, USA (454 Life Sciences), ­M adison, USA (NimbleGen), and Indianapolis, USA (Diabetes Care). In September Roche opened a new Diagnostics Operations Complex for R &  D and production in Penzberg. A new immunoassay production unit in Mannheim was inaugurated in October. In 2010 a lifecycle management approach was in-­ troduced to establish a stronger connection be­­t ween each BA and its markets. Lifecycle teams are ac-­ count­a ble for the development, filing, approval ­a nd launch of new products to maximise their value ­ from launch to obsolescence. In addition, two new global cross-BA functions have been created to ­ help maintain the focus on product profitability and pro­c ess efficiency. Global Operations will drive ­ operational excellence in manufacturing, supply chain and direct procurement, while Global Quality & Regulatory will ensure submission quality and reduce time to approval. The established Global Platforms and Support function will continue to play a key role in instrument and software development and customer service. As announced in November over the next two to three years Roche Diagnostics intends to transfer­ the production of chemical raw materials and ­a nalytics services from Mannheim to Penzberg ­( both in ­G ermany), blood gas and electrolytes monitor-­ ing activities from Graz (Austria) to Rotkreuz (Swit-­

07_Roche_AR10_ENG_Diagnostics.indd 63

63­

Business development Collaborations with academia, research institutes and other private and commercial organisations give Roche Diagnostics rapid access to relevant medical, scientific and technological advances. Intellectual property (IP) exchange is a strategic component of Roche’s ability to offer customers the most extensive portfolio of tests and technologies year after year. ­In-licensing is an important opportunity for Roche to access markers and technologies, whereas outlicensing of IP can help establish novel markers and technologies from Roche more rapidly in the marketplace by involving more players to develop and ­ educate the market. It is thus vital for Roche Diagnostics to have excellent internal processes to identify ­ IP rapidly and to maintain close contact with partner companies for both in- and out-licensing agreements. In 2010 Roche completed major acquisitions in ­D iabetes Care (Medingo Ltd.) and Tissue Diagnostics (BioImagene Inc.) and entered into a number ­ of research and technology collaborations in Diabetes Care (with InterComponentWare), Molecular Diagnostics (with the German Cancer Research Centre) and Applied Science (with IBM and DNA Electronics). Moreover, the division signed over 80 licensing agreements, approximately half of them in-licensing ­ IP to broaden Roche’s innovation base (see Business area highlights for more details).

28.01.2011 11:13:45

Can we find

Disease area

Virology / Oncology

Indication

HPV (as a risk factor for cervical cancer)

Trial

Registration trial ATHENA

No. of participants

47,208

No. of study sites

61

No. of countries

1 (USA)

Chantal H., a potential participant in the ATHENA trial, Basel

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28.01.2011 11:14:15

out sooner   ?

Rita S., Head of Assay Development, Roche Pleasanton

07_Roche_AR10_ENG_Diagnostics.indd 65

28.01.2011 11:14:48

cobas 4800 HPV Test

Creating value for patients means proving the medical value of a diagnostic test in a rigorous clinical trial

Biomarker identification and clinical validation

Collaborations with research groups in academia and industry

Development of diagnostic test

Education of healthcare professionals

Regulatory approval

Show sensitivity and specificity Reimbursement

Health economics

Successful diagnostic test on market

Demonstrate medical value

The Roche ATHENA trial enrolled over 47,000 women, screening participants for cervical cell changes using both the Pap smear and the cobas 4800 HPV DNA Test (for 14 high-risk HPV genotypes). The results revealed that one in ten women of those aged 30 years or older who tested positive for HPV genotypes 16 or 18 were found to have cervical pre-cancer despite normal Pap smear tests. The cobas 4800 HPV Test enables physicians to identify women with cervical pre-cancer missed using cytology alone.

07_Roche_AR10_ENG_Diagnostics.indd 66

Persistent infection with high-risk human papillomavirus (HPV) is the leading cause of cervical cancer, implicated in more than 99% of all cases. Screening enables early identification and removal of pre-cancerous lesions, dramatically reducing the incidence and mortality of cervical cancer worldwide. However, many studies have shown that the Pap smear, which samples cells from the cervix and is currently the most common test used to detect cervical cancer, does not have ­a dequate sensitivity, and that up to 50% of precancerous lesions are missed with a single Pap smear. Thousands of women ultimately diagnosed with cervical cancer had normal Pap smear results.

28.01.2011 11:14:49

Diagnostics

Business area highlights Professional Diagnostics Professional Diagnostics is a leading supplier of instruments, tests, software and services for clinical laboratories and decentralised testing products to support clinical decision making at the point of care (POC). In 2010 it had a 15% share of a growing ­ global market worth 30 billion US dollars. Professional Diagnostics’ full-year sales grew ­ about twice as fast as the global market, rising 11% to 4,858 million Swiss francs and outpacing market growth in all regions. Immunoassays were a key growth driver, with sales up 17% in 2010. For a ­ decade this segment has consistently grown at double-digit rates, thanks to a strong installed base ­ and an ever-expanding test menu. Sales of clinical chemistry and coagulation monitoring products ­ grew 5% and 19%, respectively. In 2010 Professional Diagnostics launched eight new or next-generation immunoassays in the US or ­ markets recognising the CE Mark, including six tests to diagnose or monitor infectious diseases — hepatitis A and C, HIV, herpes simplex virus (HSV-1 and HSV-2) and rubella (see table of product launches ­ on page 76). Three new or next-generation clinical chemistry products were also introduced in CE ­ markets. In 2011 Professional Diagnostics will expand its immunoassay menu further, with new assays ­ covering a range of disease areas, including infectious diseases and oncology. Demand for the cobas 8000 modular analyser series remained strong in 2010. First launched in 2009, this platform for high-throughput testing is now available in all key markets, including the US. Following the introduction of the cobas e 602 immunoassay module, high-volume laboratories are now able to fully consolidate their serum work areas. Roche offers a ­c om-­ prehensive portfolio of standardised integrated systems for clinical laboratories of all types and sizes, from the stand-alone, low-volume cobas 4000 and the medium-volume cobas 6000 to the cobas 8000 ­ modular analyser series for high-volume laboratories. In the US Professional Diagnostics also launched the cobas p 501 and p 701 post-analytical units, which automate the storage and retrieval of sample tubes,

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and cobas u 411, a semi-automated urine test strip analyser. The rollout of the new cobas b 123 POC blood gas analyser commenced in Europe and ­s everal markets in Latin America and Asia—Pacific. Targeting specifically at the POC segment and capable of delivering many vital results in time-critical ­s itua-­ tions, this instrument is an important advance in blood gas analysis, the leading segment in hospital POC testing. The US launch of cobas b 123 POC ­ ­is expected in 2011. Strong growth in coagulation monitoring reinforced Roche’s leading position in this segment. Continued strong demand for portable testing systems, such as the top-selling CoaguChek XS system, and expanded Medicare coverage for home coagulation testing ­ in the US were key factors contributing to growth. Studies have repeatedly shown that self-testing helps patients on anticoagulants to keep their medica-­ tion within the therapeutic range and can minimise the risk of complications. Delivering on the promise of personalised healthcare, the PROTECT trial, presented at the American Heart Association meeting in November, demonstrated a significant reduction in total cardiovascular events when heart failure therapy was guided by concen­t rations of the cardiac biomarker NT-proBNP. Because of this strong clinical benefit, the trial was stopped early to allow all patients access to this new treatment strategy (see R &  D section on page 74). To further strengthen its cardiology portfolio, Roche signed a cross-license agreement with Alere Inc. ­g iving each party semi-exclusive worldwide rights for ­ natriuretic peptide biomarkers proven for their diagnostic usefulness in a variety of cardiovascular ­ diseases. In collaboration with the American College of Cardiology, Professional Diagnostics is developing a web portal for biomarkers, allowing physicians to access the latest information on cardiac biomarkers and encouraging its application in clinical practice. Diabetes Care Diabetes Care develops and commercialises blood glucose (BG) monitoring and insulin delivery systems that enable people with diabetes to manage their condition more effectively. The goal of diabetes therapy is to maintain the BG levels in a (near-) normal range and thus avoid diabetes-related complications. Diabetes Care not only offers individual product

28.01.2011 11:14:50

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Roche Business Report 2010

Diagnostics

innovations, but combines these to form integrated solutions that encompass all areas of diabetes management. It is the industry leader with a 32% share ­ of a global BG monitoring market worth over 8 billion US dollars. In 2010 Diabetes Care’s sales rose 4% to 2,959 million Swiss francs. This was well above the global market growth rate in an environment that remains challenging due to the uncertain economic recov-­ ery and general price pressure. Sales of BG monitoring systems (4%) were driven by Accu-Chek Aviva and Accu-Chek Performa, which showed strong double-digit growth, supported by strong market up-­ take of the sleek versions Accu-Chek Aviva Nano and ­ Accu-Chek Performa Nano especially designed for young high-frequency testers. By the end of 2010 these devices were available in 36 countries across Europe, Latin America and Asia—Pacific. The AccuChek Mobile also posted significant sales growth. This BG monitoring system’s strip-free technology is particularly appreciated by insulin-dependent pa-­ tients who measure their blood glucose frequently and thus benefit most from enhanced testing convenience. Introduced in 2009, the Accu-Chek Mobile is now available in 12 countries in Europe and ­ Asia—Pacific. In the EU maltose-independent strip chemistries for the Accu-Chek Aviva, Accu-Chek Performa, Accu-Chek Compact and Accu-Chek Mobile product lines received regulatory approval ­ in June and were immediately rolled out.

acquired micropump specialist Medingo, enhancing its portfolio with an innovative micropump. This acquisition will enable Roche to bring integrated ­ insulin delivery systems to a broader range of people with diabetes and offer users a wider range of options to suit their needs. Diabetes Care remains committed to exploring and developing new diabetes management concepts ­ as demonstrated by the Structured Testing Protocol (STeP) clinical study in type 2 diabetic patients ­ not using insulin. Presented at the Annual Meeting ­ of the European Association for the Study of Dia-­ betes (EASD) in September, the STeP study shows that ­g lycemic control can be significantly improved when therapy is adjusted on the basis of structured BG monitoring and pattern analysis (see R &  D section on page 74). The visualisation and assessment of BG and in-­ sulin data are pivotal to effective diabetes management, yet sharing the data continues to pose sig-­ nificant challenges for people with diabetes and healthcare professionals alike. To address this issue, Diabetes Care is partnering with eHealth specialist InterComponentWare to develop a web-based diabetes management solution that improves the inter-­ action between patients and their caregivers based on securely shared, well-structured information.

Diabetes Care posted strong growth in Europe, Latin America and Asia—Pacific, with significant contributions from emerging markets. In the US sales de-­ creased 2% slightly underperforming the market, which remained negatively impacted by the macroeconomic environment, resulting in price pressures and slow volume growth. US and Japanese regu-­ latory approvals for the maltose-free strip chemistries, expected in 2011, will enable the latest additions ­ to the Accu-Chek portfolio to be launched in the US and Japan and are anticipated to boost sales in ­ these key markets.

Molecular Diagnostics Molecular Diagnostics develops and commercial-­ ises advanced diagnostic and blood screening platforms and tests based on Roche’s proprietary real-time polymerase chain reaction (PCR) tech-­ nology. With ­a 32% market share, Roche is the leader in the highly competitive molecular diagnostics market, valued ­a t 4 billion US dollars and growing 7%. This year marks the 25th anniversary of PCR’s debut to the scientific community. PCR’s unique ability to exponentially amplify small amounts of target DNA has resulted ­in numerous diagnostic techniques which would otherwise be too time consuming or impossible to perform.

Insulin delivery systems posted double-digit sales growth, driven mainly by continued strong uptake of the new interactive insulin pump system Accu-Chek Combo, now available in 27 countries in Europe, Latin America and Asia—Pacific. In May Diabetes Care

Molecular Diagnostics continued its steady per-­ formance in 2010, with sales advancing 4% to ­ 1,189 million Swiss francs. Growth was led by virology (2%), which currently accounts for about half ­ of the business area’s sales. Demand for the cobas

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Diagnostics

4800 system, launched in late 2009, was strong with the system now installed in 25 countries in Europe, Asia—Pacific, Latin America and Canada. cobas 4800 offers full automation for mid- to high-throughput testing; the menu currently includes dual target tests for Chlamydia trachomatis and Neisseria gonorrhoeae and a screening and genotyping test for human ­ papillomavirus (HPV). Regionally, North America sales showed good growth, while sales held steady in ­ the EU. Latin America and Asia—Pacific posted excellent double-digit growth. Strong contribution from the E7 markets was led by Russia and Mexico. In 2010 Molecular Diagnostics added four new or next-generation tests to its portfolio in virology and infectious diseases. Thanks to the first-of-its-kind dual-PCR target HIV viral-load test, which greatly im-­ proves the ability of physicians to make informed treatment decisions, Molecular Diagnostics won ­ a major contract in South Africa for over half a million tests per year. Roche’s next-generation HBV ­ test, which received the CE Mark in 2008, is now also available in the US. This test enables broader genotype detection and increased workflow flexibility in the management of HBV. In the blood screening segment, the first duplex assay for simultaneous de-­ tection of parvovirus B19 and the hepatitis A virus was successfully launched in the EU and other ­ markets recognising the CE Mark, contributing to im-­ proved safety of human plasma products. FDA ap-­ proval of this test is expected in 2011. The LightCycler­ MRSA Advanced Test, Roche’s flagship product in the hospital-acquired infections market, was approved and launched in the US in July. Studies indicate that the test’s speed — it identifies methicillin-resistant Staphylococcus aureus (MRSA) carriers in less than two hours, versus one to three days using conventional culture-based methods — can help significantly reduce the spread of this potentially deadly microbe in hospitals. Screening for MRSA is one of the fastest-growing segments in the North American molecular diagnostics market. The test was launched in the EU and other markets which recognise the CE Mark in 2009 (see table of product launches on page 76). Data from ATHENA, a Roche-sponsored US registration trial assessing the utility of the cobas 4800 HPV Test in screening for cervical cancer, were presented at the International Papillomavirus Conference in Montreal. The data confirm the increased accuracy

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69­

of human papillomavirus (HPV) DNA testing, including 16/18 genotyping, over conventional cytologic Pap testing (see R &  D section on page 74). Supported by the ATHENA results, Roche filed the HPV test in the US in June, with approval expected in the second half of 2011. This test received CE Mark certification in late 2009 and experienced a strong market uptake in CE markets throughout 2010. To further expand ­ its testing potential in cervical cancer, Roche entered into a research collaboration with the ­G erman Cancer Research Center (DKFZ). Recent findings by the DKFZ indicate that the relative amounts of specific RNA markers in HPV-infected cells enable highly accurate discrimination of cervical cancer and highgrade from low-grade lesions and thus facilitate ­ more specific prediction of women’s risk for developing cervical cancer. Molecular Diagnostics is building a best-in-class oncology portfolio by securing relevant intellectual property, developing robust assays and providing complete in vitro diagnostics solutions covering ­s ample preparation, through to results analyses and reporting. In 2010 Roche obtained a worldwide ­c o-­ exclusive licence from Johns Hopkins University ­ and Qiagen for the development of diagnostic assays for the biomarker phosphoinositide 3-kinase (PI3K). The PI3K pathway plays a major role in several ­ cancers, including colorectal, gastric, breast and endometrial, and is currently a central focus of ­ cancer drug deve-lopment. Roche has also obtained a license from Genzyme Corporation to develop a test for epidermal growth factor receptor (EGFR) mutations as a companion diagnostic for Tarceva. In recent studies patients with non-small cell lung ­ cancer (NSCLC) carrying mutations in the EGFR gene showed enhanced response to and may benefit ­ most from treatment with Tarceva. The EGFR mutation test, along with further oncology tests for the BRAF V600 mutation and KRAS mutations, are scheduled for launch on cobas 4800 in 2011. Applied Science Applied Science supplies scientists in academia and the biotech and pharmaceutical industries with instruments, reagents and test kits for a broad range of research applications. The global life science research market, valued at 8 billion US dollars, grew approximately 8% in 2010. Applied Science has roughly 10% share of this market.

28.01.2011 11:14:50

Have I chosen

Disease area

Central Nervous System

Indication

Schizophrenia

Trials

6 phase III trials

No. of patients

3,600

No. of study sites

240

No. of countries

27

Kenneth B., participant in a clinical trial with RG1678, New York 

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28.01.2011 11:15:17

wisely ?

Daniela A., Research Project Leader in Central Nervous System (CNS), Roche Basel

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28.01.2011 11:15:41

RG1678 — a first-in-class GRI for schizophrenia

Creating value for patients means having the courage to go where needs are great and others have failed Available therapies — Effective against positive symptoms — Significant side effects — Positive symptoms often still occur in the stable phases between acute episodes

Affecting nearly 24 million people worldwide, schizophrenia is a severe mental disorder that distorts the way a person thinks, acts, expresses emotions, perceives reality and relates to others. It is a lifelong disease that cannot be cured. On average it shortens ­life expectancy by 20 years due to the higher risk of suicide and also due to cardiovascular and pulmonary events. Because of negative symptoms, which usually have the greatest impact on quality of life, patients may be unable to live independently, hold jobs, establish personal relationships and manage everyday social situations. Many drugs developed to treat negative symptoms have failed in clinical trials, and the few available treatments offer only modest benefits.

07_Roche_AR10_ENG_Diagnostics.indd 72

RG1678 — Effective against negative symptoms — Potential to treat suboptimally controlled positive symptoms — Fewer side effects — New mechanism of action

RG1678, a glycine reuptake inhibitor (GRI) developed at Roche, may be the first drug to treat the negative symptoms of schizophrenia. Representing an entirely novel approach, RG1678 normalises glutamate neurotransmission by increasing synaptic levels of glycine, thereby targeting an important pathway in psychiatric disorders. It has the potential to become first-in-class compound of this type for the treatment of schizophrenia. In addition, RG1678 in combination with current treatments has the potential to treat suboptimally controlled positive symptoms, with little or no increase in side effects. Its novel mode of action could also have valu­a ble therapeutic applications in other psychiatric disorders.

28.01.2011 11:15:58

Diagnostics

Applied Science posted 4% growth on sales totalling 868 million Swiss francs. Growth drivers were the ­ ­c ell analysis segment (thanks to increased demand for solutions in oncology and stem cell research), genomics (formerly reported as sequencing and mi-­ croarray businesses) and custom biotech (due ­t o recovery of the global economy). Sales of the MagNA Pure and LightCycler product lines for sample pre­ paration and quantitative PCR analysis declined due to dramatically lower demand for influenza A (H1N1) virus testing. All regions showed sales increases except Latin America, where the negative effect of decreased H1N1 testing was particularly pronounced. Sales in Asia—Pacific were exceptionally strong (15%), led by China and India. Sales for cell analysis systems remained robust, fuelled by full integration of the innovatis product portfolio and steadily increasing demand for ­x CELLigence automated real-time cell analysers (RTCA). In September Applied Science expanded this product line by launching the RTCA HT In-­ strument for high-throughput analysis and the ­ RTCA ­C ardio Instrument for label-free cardiotoxic-­ ity testing. Double-digit increases in sequencing reagent and microarrays sales fuelled growth in genomics ­ (17%), helped by strong worldwide demand for the GS ­J unior DNA sequencer, launched in May. This medium-throughput benchtop version of the Genome Sequencer FLX System bridges the gap between lowand high-throughput sequencing and offers solutions in nearly every field of biological research. Thanks ­ to its size, efficiency and competitive price, it puts next-generation sequencing technology within the reach of thousands of researchers around the world. In response to the worldwide surge in research projects involving resequencing of the human genome to study diseases in large populations, Applied ­S cience is making additional investments to develop systems targeting this application. In November Applied Science entered into an exclusive partnership with DNA Electronics for the development of a ­ low-cost, high-throughput DNA sequencer. The ­s ys-­ tem will combine 454 Life Sciences’ long-read sequencing technology with DNA Electronics’ inexpensive, highly scalable method for electrochemical detection. Moreover, the third generation of se-­

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73­

quencing is already on the horizon and promises the next leap in performance. In June Roche and IBM signed an agreement to develop a nano­p ore-based single molecule sequencer to directly read and decode human DNA, based on IBM’s DNA ­t ransistor technology. This approach promises gains ­in costefficiency, throughput, scalability and speed compared with other sequencing technologies currently available or in development. NimbleGen complemented its offering on the cyto­ genetics microarray workflow system, including arrays for simultaneous analysis of multiple samples, instruments, reagents, as well as analysis and vi-­ sualisation software, now providing a comprehensive solution for high-resolution cytogenetic analyses ­ of chromosomal abnormalities. Applied Science took further steps towards transition of its products from pure research use into routine diagnostic tools (IVDs). A pre-Investigational Device Exemption (pre-IDE) submission for NimbleGen’s microarray platform has been filed with the FDA; its approval is the pre-requisite for obtaining FDA ­ clearance for Roche’s cytogenetic microarrays ­ for use ­a s IVDs. These microarrays, which detect ­ chromosomal abnormalities, could spearhead a ­ product transition into IVDs and are currently under development ­t o demonstrate their medical value ­ and diagnostic ­u tility. Tissue Diagnostics Tissue Diagnostics (Ventana Medical Systems in North America) is the world’s leading supplier ­ of ­t issue-based cancer diagnostics. Its instruments and reagent systems are used in histology, cytol-­ ogy and drug discovery laboratories worldwide. In 2010 the unit had a 25% share of the tissue diag-­ nostics ­m arket, which is valued at over 2 billion US dollars and grew approximately 9–10%. Tissue Diagnostics significantly outpaced the ­ market in 2010, recording sales of 541 million Swiss francs, an increase of 17% compared to the year-­ earlier period. Advanced tissue staining — immunohistochemistry (IHC) and in situ hybridisation (ISH) — was the main growth driver (17%), reflecting strong reagent sales and robust uptake of ­ the fully automated BenchMark ULTRA system for simultaneous IHC and ISH testing on a single ­

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Diagnostics

platform. This system, which is now available in 51 countries worldwide, sets new standards in terms of random slide access, user-friendliness and highquality results. The business area performed strongly worldwide, growing two to four times as fast as ­ the market in Europe, Latin America and Asia—Pacific. Sales in these regions benefited from intensified commercialisation efforts outside the US, synergies with Roche Pharmaceuticals in HER2 testing in breast and gastric cancer and the introduction of BenchMark GX at an economic price in emerg-­ ing markets. In 2010 Tissue Diagnostics launched 15 new antibodies for IHC testing to support the diagnosis of various cancer types (see table of product launches on page 76). Six DNA probes for ISH testing were added to the molecular assay menu in the EU and other markets recognising the CE Mark, including two new molecular DNA tests for the human epidermal growth factor receptor 2 (HER2) gene, enabling accurate, timely assessment of the likelihood of re-­ sponse to treatment with Herceptin in breast and gastric cancer. A DNA probe targeting the insulinlike growth factor 1 receptor (IGF-1R) gene was added to Tissue Diagnostics’ non-small cell lung cancer biomarker panel, which also includes assays for EGFR and Met. Strengthening its position in ­p rostate cancer testing, Tissue Diagnostics secured the exclusive rights from AsymmetRx Inc. for use ­ of the p63 biomarker and launched two DNA probes enabling the determination of ERG genomic rearrangements on a single slide. While the p63 biomarker is the gold standard for the differential diagno-­ sis of prostate cancer, ERG genomic rearrangements have been shown to be a reliable prognostic marker of prostate cancer-specific mortality in certain patient groups. The advanced staining instrument portfolio was ­b olstered worldwide with two new additions: Dis­ covery ULTRA, an automated IHC and ISH platform designed for use in the research setting and offering improvements in ease of use, workflow and system flexibility, and BenchMark GX, a low-volume, automated tissue staining instrument designed for cancer diagnostics professionals who want to expand ­ their test menu and adopt automation with reduced investment. With placements in over 25 countries ­ by the end of 2010, acceptance of BenchMark GX

07_Roche_AR10_ENG_Diagnostics.indd 74

has been very strong, particularly in developing ­ markets. VANTAGE, an advanced workflow management ­s ystem for improved productivity and patient safety, launched in 2008–2009, continued to gain momentum with sales more than doubling compared to ­t he year-earlier period. Tissue Diagnostics completed two acquisitions: ­B ioImagene Inc., a leader in digital pathology analysis and workflow, with products enabling generation of high-resolution whole-slide digital images from glass microscope slides as well as software to view, analyse and manage tissue images, complementing and strengthening the offering in image analysis ­ and information management; and Mariposa BioScience, an innovator in the field of antibody production to support Roche’s production of best-in-­ class antibodies.

Research and development In 2010 research and development (R &  D ) costs (core­ basis) in the Diagnostics Division totalled 890 mil-­ lion Swiss francs, a decline of 2% in local ­c urrencies compared to 2009. R &  D costs as a percentage of sales decreased to 8.6%. In line with overall divisional strategy, the focus was on developing next-gene-­ ration platforms to improve testing ­e fficiency and on developing new tests and demonstrating their med­ ical value with robust clinical data. Clinical validation is relatively new in the IVD industry. Besides signif-­ icant investment, it requires expertise in clinical devel-­ opment and increased interaction with non-traditional customers such as payers and healthcare professionals (see feature on page 66). Being able ­t o draw on Roche Pharmaceuticals’ long-standing ex-­ pertise in clinical validation gives Roche Diagnostics an advantage over most other IVD companies. In 2010 three major clinical trials demonstrating the significant medical value of Roche products were presented at scientific congresses: Data from the ATHENA trial were presented at the International Papillomavirus Conference in Montreal in July. This Roche-sponsored US registration trial, the largest ever performed in this indication, aimed ­t o assess the utility of the cobas 4800 HPV Test in screening for cervical cancer. The data clearly con-

28.01.2011 11:16:09

Diagnostics

firmed the increased accuracy of human papilloma-­ virus (HPV) DNA testing over conventional cytologic Pap testing. Out of 47,000 women enrolled in this trial, one in ten of those aged 30 years or older who tested positive for HPV genotypes 16 or 18 were found to have cervical pre-cancer despite normal Pap tests. The cobas 4800 HPV Test detects 14 high-­ risk genotypes of HPV, twelve as a pooled result, and genotypes 16 and 18 individually. As demonstrated by ATHENA, this test helps physicians to recognise and treat precursors of cervical cancer earlier, possibly before it spreads in the body. Each year around half a million women worldwide are diagnosed with cervical cancer and more than 250,000 succumb ­ to the disease. Final results of PROTECT (Pro-BNP Outpatient Tailored Chronic Heart Failure Therapy), a prospective randomised clinical trial in 151 patients, were presented at the American Heart Association congress in Chicago in November by the main study inves-­ tigators from Harvard University and Massachusetts General Hospital. Promoting a new paradigm in ­ the management of heart failure, the results demonstrated that NT-proBNP-guided heart failure care was associated with a significant 56% reduction in total cardiovascular events, such as worsening ­ heart failure, heart failure hospitalisation, and cardio-­ vas­c ular death, as compared with standard treatment. As heart failure ranks among the most costly chronic conditions in developed countries, reducing the ­ risk of cardiovascular events not only contributes to ­b etter patient outcomes but is also likely to reduce healthcare costs. The Roche NT-proBNP test is ­a vailable at the point-of-care and in laboratories worldwide where it runs on the cobas platforms. It is estimated that as many as 23 million people worldwide have heart failure with 550,000 new cases diagnosed each year in the US alone and a mortality ­ rate that exceeds that of many cancers.

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therapy adjustments contributes significantly to ­a reduction of HbA1c values, improves glycemic ­c ontrol and helps to reduce diabetes-specific psychological distress and depression. While SMBG ­ is widely accepted as a core component of effective diabetes management in people on insulin therapy, the value of SMBG has so far remained controversial for insulin-naive people, representing a large part ­ of all people with type 2 diabetes. In addition to the medical value of IVD tests applied in the clinic, diagnostics today play a number of ­c ritical roles in drug development, from identifying new therapeutic targets and screening out un-­ promising drug candidates to selecting appropriate patient populations for clinical trials. Some may ­ also become companion diagnostics for patient selec-­ tion, response prediction or therapeutic monitor-­ ing. Every drug under development at Roche has its own associated biomarker programme, and Diag-­ nostics expertise and advice are made available for each of these ­p rogrammes. In 2010 the Diagnostics and Pharmaceuticals Divisions, including pRED, gRED, Pharma Medicines and Chugai, collaborated on more than 160 projects across all disease areas ­ of interest at Roche. More than half of these projects were in oncology, followed by inflammation, CNS, virology and metabolic diseases. In addition, the Diagnostics Division collaborated with several ­ other pharma­c eutical companies to develop com­ panion diagnostics for key biomarkers, particularly ­ in on­c ology.

The STeP (Structured Testing Protocol) study, a prospective 12-month clinical trial in 483 non-insulintreated people with type 2 diabetes, was present-­ ed at the Annual Meeting of the European Association for the Study of Diabetes (EASD) in Stockholm ­in September. The study demonstrated that the use ­o f this new diabetes management approach including structured self-monitoring of blood glucose (SMBG), data visualisation, pattern analysis and derived­

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Diagnostics

Product launches in the Diagnostics Division Major product launches in 2010 Business area

Product name

Product description

Market

Professional Diagnostics

Six immunoassays in virology and infectious diseases

— H IV combi 27 min: for improved combined testing of HIV-antigen and HIV-antibodies enabling more reliable early detection of HIV infection — H SV-1 IgG and HSV-2 IgG: for quantitative detection of IgG antibodies to HSV — Rubella IgM: to diagnose rubella infection in women — anti-HCV: for presumptive diagnosis of HCV infection — anti HAV: to diagnose HAV — free ß-HCG and PAPP-A: to evaluate a risk of trisomy 21 in pregnancy — STAT NT-proBNP: to evaluate the risk of heart failure next-generation tests for HbA1c and ferritin, and new MultiControl ClinChem immunoassay module with over 80 immunoassays and ­a throughput of 170 tests/hour for very high volume laboratories

EU, APAC, LATAM

Q4

EU, APAC, LATAM US US US EU, APAC, LATAM US EU, APAC, LATAM EU

Q4

Two immunoassays in other disease areas Three clinical chemistry products cobas e 602 module for cobas 8000 modular analyser series cobas b 123 POC system cobas c 701/ cobas c 502/cobas e 602 modules for cobas 8000 modular analyser series cobas u 411 cobas p 501/cobas p 701 Diabetes Care Molecular Diagnostics

Applied Science

Maltose-independent strip chemistries Four molecular tests in virology and infectious diseases

NimbleGen CGX-6 multiplex array GS Junior NimbleGen cytogenetic workflow system RTCA Cardio Instrument RTCA HT Instrument

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multi-parameter blood gas analyser for use at the point of care and in laboratories clinical chemistry and immunoassay modules for very high volume laboratories

EU, APAC, LATAM US

semi-automated urine test strip analyser post-analytical units for automated storage and retrieval of bar-coded primary and secondary sample tubes for Accu-Chek Aviva, Accu-Chek Performa, Accu-Chek Mobile, Accu-Chek Compact — Cobas AmpliPrep/Cobas TaqMan Dual Target HIV-1 Test v2.0: for simultaneous detection of two regions of the HIV genome — LightCycler MRSA Advanced Test: automated real-time PCR-based test for MRSA — cobas TaqScreen DPX Test: for simultaneous quantitative detection of parvovirus B19 and a qualitative result for HAV — Cobas AmpliPrep/Cobas TaqMan HBV Test v2.0: new-generation HBV viral-load test, which enables broader genotype detection and improved workflow flexibility for high-resolution analysis of chromosomal abnormalities, capable of analysing six samples simultaneously economic benchtop next-generation sequencing system for smaller laboratories complete solution for high-resolution cytogenetic analysis, including instruments, arrays, analysis and visualisation ­software for real-time cell analysis for functional monitoring of cardiotoxicity and arrhythmic effects for real-time high-throughput label-free impedance-based cell analysis

US US EU, APAC, LATAM US

Timelines

Q1 Q2 Q4 Q1 Q1 Q1–2 Q3–4

Q4 Q3–4

Q4 Q4 Q3–4 Q3

US

Q3

EU

Q3

US

Q4

WW

Q1

WW

Q2

WW

Q2

WW

Q3

WW

Q3

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Diagnostics

Roche Business Report 2010

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Major product launches in 2010 Business area

Product name

Product description

Market

Timelines

Tissue Diagnostics

Fifteen antibodies for IHC testing in cancer

anti-E-cadherin, anti-p63, Basal Cell Cocktail (anti-p63 and anti-keratin), anti-p120 catenin, anti-cyclin D1, anti-CD44, anti-CK5/6, anti-CAM5.2, anti-CD7, anti-CD10, anti-CK17, anti-hENT1, anti-MOC-31, anti-GPC3, anti-CK10 anti-Helicobacter pylori

US, EU

Q1–4

EU

Q1

DDISH HER2 Probe, SISH HER2 Probe, IGF-1R Probe, TOP2A Probe, 5pERG Probe, 3pERG Probe for economical low-volume automated advanced tissue staining for automated advanced tissue staining in the research setting

EU

Q2–4

One antibody for IHC testing in infectious diseases Six DNA probes for ISH testing in cancer BenchMark GX Discovery ULTRA

EU, APAC US, EU

Q2 Q1–2

black type = new product/first market launch, grey type = new product/launch in additional markets. APAC = Asia—Pacific; EU = European Union; LATAM = Latin America; US = United States; WW = worldwide. DDISH = dual colour dual hapten ISH; HAV = hepatitis A; HbA1c = hemoglobin 1Ac; HBV = hepatitis B; HCG = human chorionic gonadotropin; HCV = hepatitis C; HIV = human immunodeficiency virus; HPV = human papillomavirus; HSV = herpes simplex virus; IHC = immunohistochemistry; ISH = in situ hybridisation; MRSA = methicillin-resistant Staphylococcus aureus; NT-proBNP = N-terminal fragment of B-type natriuretic peptide; PAPP-A = pregnancy-associated plasma protein; RTCA = real-time cell analyser; SISH = silver ISH; STAT = short turn-around time (tests used in emergency).

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Diagnostics

Key product launches planned for 2011 Business area

Product name

Product description

Market

Professional Diagnostics

Two immunoassays

— Total Vitamin D: to measure vitamin D2 and D3 with greater precision — H E4: aid in detecting ovarian cancer clinical chemistry module with throughput of 2,000 tests/hour for high-volume laboratories

EU

H1

EU US, EU

H1 H1

multi-parameter blood gas analyzer for use at the point of care and in laboratories next-generation strip-free blood glucose monitoring system with an integrated lancing device; significantly smaller than current version, with enhanced functionality sleek version for high-frequency users interactive insulin delivery system combining insulin pump and blood glucose monitoring system with broad data management capabilities — cobas 4800 BRAF V600 Mutation Test: for identification of the V600 mutation in the BRAF gene — cobas 4800 KRAS Mutation Test: for identification of mutations in the KRAS gene — cobas 4800 EGFR Mutation Test: for identification of mutations in the EGFR gene — cobas 4800 HPV Test: detects HPV 16 and HPV 18 individually and 12 other high-risk genotypes in a pooled result for HLA genotyping on the GS Junior System or GS FLX ­System new sequencing chemistry; enables extended read lengths on the GS FLX system (sequencing kit) ultra-high resolution arrays for CGH validation and combined CGH/SNP validation with 4.2 million and 2.1 million features for discovery of variations in gene copy numbers and single nucleotides to support the diagnosis of breast cancer on BenchMark ULTRA to support the diagnosis of breast cancer

US

H2

EU

H2

US US

H2 H2

EU, US

H2

EU

H2

EU

H2

US

H2

WW

H1

WW

H1

WW

H2

US

H1

US

H2

US, EU

H1

cobas c 702 module for cobas 8000 modular analyser series cobas b 123 POC system Diabetes Care

Accu-Chek Mobile LCM

Accu-Chek Nano Accu-Chek Combo

Molecular Diagnostics

Applied Science

Four molecular tests in oncology and infectious diseases

GS G Type HLA Primer Sets GS FLX Titanum-XL 4.2M CGH and 2.1M CGH/SNP arrays

Tissue Diagnostics

ER/PR antibody for IHC testing HER2 Dual Colour ISH Probe for ISH testing FutureView

next-generation detection system for BenchMark platforms; delivers greater specificity, flexible detection options and improved turnaround time

Timelines

black type = new product/first market launch; grey type = new product/launch in additional markets. EU = European Union; US = United States; WW = worldwide. BRAF = B-isoform of the rapidly growing fibrosarcoma oncogene; CGH = comparative genomic hybridisation; EGFR = epithelial growth factor receptor; ER/PR = estrogene receptor/progesterone receptor; HE4 = human epididymis protein 4; HER2 = human epidermal growth factor receptor 2; HLA = human leukocyte antigen; HPV = human papillomavirus; IHC = immunohistochemistry; ISH = in situ hybridisation; KRAS = member of the Ras family of oncogenes; SNP = single nucleotide polymorphism.

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Diagnostics

Glossary Biomarker | A characteristic that can be measured and evaluated as an indicator of a normal biological process, a disease process or a response to a therapeutic intervention. Elevated levels of the protein HER2 in cancer, for example, are a biomarker for ­a high probability of response to Herceptin. Cell analysis | Methods of measuring the properties of cells, including their size and shape, cellular parameters such as the presence of specific proteins, and cellular processes such as proliferation and growth. Cell analysis technologies play an important role in drug development and production. CE Mark certification | Certification that an in vitro diagnostic (IVD) product complies with all safety, health and environmental requirements for use in the European Union. Certified diagnostics are referred ­ to as CE IVDs. Clinical chemistry | A branch of diagnostics comprising tests that detect and measure changes in ­ the chemical composition of body fluids and tissues ­ to diagnose or predict the course of a disease. DNA sequencing | Methods of determining the order of nucleotides (molecular building blocks) in genetic material. Knowing an individual’s DNA sequence can provide insights into genetic changes which contribute to human disease or influence ­t reatment response. High-throughput technologies read thousands of sequences at once.

Roche Business Report 2010

79­

In situ hybridisation (ISH) | A method of staining biological tissue samples to identify the presence and copy number of specific genes or genetic mutations in cells; used in the diagnosis of cancer and other diseases. Micropump for insulin delivery | A next-generation insulin pump, small, light-weight, discrete-to-wear that delivers insulin without tubing. It combines ­k ey­ features of durable insulin pumps with the best attributes of tube-free patch pumps providing flexibility and freedom for a broader range of insulindependent people with diabetes. Microarray | A device for determining genetic changes that may contribute to human disease or influence treatment response. High-density micro­ arrays evaluate thousands of DNA and RNA sequences at once. Point-of-care (POC) testing | Diagnostic testing performed at or near the site of patient care using transportable (often handheld) instruments and test kits. Results are available immediately helping to speed clinical decision-making. Polymerase chain reaction (PCR) | A laboratory method widely used in research and industry to make millions of copies of a DNA sequence of interest ­ very quickly. Real-time PCR simultaneously amplifies (copies) and quantifies the targeted DNA molecule. Virology | In molecular diagnostics, testing to detect certain serious and prevalent viral infections (e.g. HIV and hepatitis C) or to monitor their treatment.

Immunoassay | A laboratory test that detects or measures a target substance in a sample using ­a n immunochemical reaction, in which an antibody binds to a specific antigen. The target can be a drug, a protein or a virus, for example. Immunohistochemistry (IHC) | A method of staining biological tissue samples to determine the ­p res-­ ence, level and location of specific proteins in cells; used in the diagnosis of cancer and other ­d iseases.

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Corporate Governance | Roche’s

commitment to all stakeholders is reflected in its operating businesses’ focus on value creation, in a management culture that conforms to modern standards of corporate governance and in the Group’s policy of communicating transparently.

Remuneration Report | Roche’s

success depends on the abilities and dedication of its people. Recognition of this forms the basis of our remuneration policy and system.

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Corporate Governance

Roche Business Report 2010

81­

Corporate Governance

Roche complies with all relevant corporate gover­ nance requirements, in particular with all applicable laws, the Swiss Stock Exchange (SIX Swiss Exchange) directives (including the commentaries thereto) and the Swiss Code of Best Practice for ­C orporate Governance promulgated by the Swiss business federation ‘economiesuisse’. The company’s internal governance framework, particularly its Arti­ cles of Incorporation and Bylaws, embodies all the principles needed to ensure that the company’s busi­ nesses are managed and supervised in a manner consistent with good corporate governance, includ­ ing the necessary checks and balances. 1 Our printed Annual Report contains selected links to the Roche website (www.roche.com). Readers are thus provided not only with a ‘snapshot’ of our com­ pany at the reporting date but are also directed to sources which they can consult at any time for upto-date information about corporate governance ­ at Roche. Whereas each annual report covers a sin­ gle financial year ending 31 December, our website contains information of a more permanent nature as well as the latest Roche news. The company’s Arti­ cles of Incorporation, Bylaws and the curricula vitae of the members of the Board of Directors and the Corporate Executive Committee are published on our website.

Board of Directors At the 92 nd Annual General Meeting (AGM) of Roche Holding Ltd, on 2 March 2010, shareholders re-elected DeAnne Julius and Beatrice Weder di Mauro as members of the Board of Directors for a term of three years as provided by the Articles ­ of Incorporation. Peter Brabeck-Letmathe and Horst Teltschik have decided to retire as members of the Board of Directors after many years of distinguished service. Arthur D. Levinson and William M. Burns were elected as new Members of the Board for a term of three years as provided by the Articles of Incorporation. At its organising meeting immediately following the 2010 AGM, the Board of Directors ­ has approved its committees’ structure and its com­ mittees’ memberships as shown on page 83.

At the AGM on 1 March 2011, the Board of Directors will propose shortening the term of office of new or directors for re-election from three to two years and the Board will nominate Pius Baschera, Bruno Gehrig, Lodewijk J. R . de Vink and Andreas Oeri for re-elec­ tion to the Board and Paul Bulcke, Peter R. Voser and Christoph Franz for election as new Members of the Board. Walter Frey has decided to retire as member of the Board of Directors after ten years of distinguished service. The Board of Directors thanks Walter Frey for his long-standing engagement and his many con­ tributions to Roche which started already with his activities as a member of the Board of Roche Pharma AG in Germany from 1996 to 1998 before becoming a Board member of Roche Holding Ltd in 2001. Wolfgang Ruttenstorfer decided to resign as a mem­ ber of the Board of Directors of Roche Holding Ltd after four years of service. The Board of Directors thanks Wolfgang Ruttenstorfer for his valuable work and contribution to Roche.

Corporate Executive Committee Starting on 1 January 2010 Pascal Soriot, Member of the Corporate Executive Committee since April 2009, and Daniel O’Day were appointed as COO Division Roche Pharmaceuticals and COO Division Roche Diagnostics and as a new member of the Corporate Executive Committee, respectively. Erich Hunziker, Chief Financial Officer, Chief Infor­ mation Officer and Deputy Head of the Corporate Executive Committee, has decided to retire from Roche at the end of March 2011 and plans to focus on a number of board memberships. The Board of Directors of Roche Holding Ltd thanks Erich Hunziker for his many years of exceptional service and out­ standing contributions to the Group’s success. The Board of Directors has appointed Alan Hippe to succeed Erich Hunziker as Chief Financial Officer.

1 http://www.roche.com/about_roche/corporate_governance.htm

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Roche Business Report 2010

Corporate Governance

Board of Directors per 31 December 2010 (from left): Dr Franz B. Humer, Prof. Bruno Gehrig, André Hoffmann, Dr Andreas Oeri, Prof. Pius Baschera, Prof. Sir John Irving Bell, William M. Burns, Lodewijk J. R. de Vink, Dr DeAnne Julius, Walter Frey, Dr Arthur D. Levinson, Dr Wolfgang Ruttenstorfer, Prof. Beatrice Weder di Mauro.

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Corporate Governance

Roche Business Report 2010

83­

Board of Directors Name (year of birth)

Board of Directors

Term ends

First elected

1995

Dr Franz B. Humer (1946)

D * , E

Chairman

2012

Prof. Bruno Gehrig (1946)

C * , D, E

Vice-Chairman

2011

2004

André Hoffmann (1958)

C, D, E

Vice-Chairman

2012

1996

Prof. Pius Baschera (1950)

A, E

2011

2007

Prof. Sir John Irving Bell (1952)

C, E

2012

2001

William M. Burns (1947)

B, E

2013

2010

Lodewijk J. R . de Vink (1945)

C, E

2011

2004

Walter Frey (1943)

A, B, E

2011

2001

Dr DeAnne Julius (1949)

B * , E

2013

2002

Dr Arthur D. Levinson (1950)

C, E

2013

2010

Dr Andreas Oeri (1949)

A * , E

2011

1996

Dr Wolfgang Ruttenstorfer (1950)

B, E

2011

2007

Prof. Beatrice Weder di Mauro (1965)

A, B, E

2013

2006

New proposed members of the Board of Directors, nominated for Paul Bulcke (1954) election at the Annual General Meeting Peter R. Voser (1958) Dr Christoph Franz (1960) on 1 March 2011

Secretary to the Board of Directors

Dr Gottlieb A. Keller (1954)

Honorary Chairman of the Board of Directors

Dr Fritz Gerber (1929)

A Corporate Governance and Sustainability Committee. B Audit Committee. C Remuneration Committee. D Presidium/Nomination Committee. E Non-executive director. * Committee chairperson.

08_Roche_AR10_ENG_Corporate Governance.indd 83

1 January 2011

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Roche Business Report 2010

Corporate Governance

Corporate Executive Committee per 31 December 2010 (from left): Dr Severin Schwan, Dr Pascal Soriot, Daniel O’Day, Dr Erich Hunziker, Silvia Ayyoubi, Dr Gottlieb A. Keller, Dr Richard Scheller, Dr Jean-Jacques Garaud, Dr Dan Zabrowski, Osamu Nagayama, Dr Stephan Feldhaus, Per-Olof Attinger.

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Corporate Governance

Roche Business Report 2010

85­

Corporate Executive Committee Name (year of birth)

Corporate Executive Committee

Position

Dr Severin Schwan (1967)

CEO of the Roche Group

Dr Erich Hunziker (1953)

Chief Financial and IT Officer/ Deputy Head of the Corporate Executive Committee

Dr Pascal Soriot (1959)

COO Division Roche Pharmaceuticals

Daniel O’Day (1964)

COO Division Roche Diagnostics

Dr Gottlieb A. Keller (1954)

General Counsel

Silvia Ayyoubi (1953)

Head Human Resources

As of 1 April 2011

Dr Alan Hippe (1967)

Chief Financial and IT Officer

Enlarged Corporate Executive Committee

Dr Richard Scheller (1953)

Osamu Nagayama (1947)

President and CEO Chugai Head Genentech Research and Early Development (gRED)

Dr Jean-Jacques Garaud (1955)

Head Roche Pharma Research and Early Development (pRED)

Dr Dan Zabrowski (1959)

Head of Roche Partnering

Dr Stephan Feldhaus (1962)

Secretary to the Corporate Executive Committee

Head Group Communications

Per-Olof Attinger (1960) KPMG Klynveld Peat Marwick Goerdeler SA (reporting years 2004–2008)

Statutory Auditors of Roche Holding Ltd

KPMG AG (since 2009)

Chief Compliance Officer

Dr Urs Jaisli (1956)

Auditor in charge: John A. Morris (since 2004)

Alan Hippe will join Roche as a member of the ­C orporate Executive Committee as of April 2011. As of 1 January 2010 Jean-Jacques Garaud was appointed as Head of Roche Pharma Research and Early Development (pRED) and together with Dan Zabrowski as Head of Roche Partnering. Both were appointed as new members of the Enlarged Corpo­ rate Executive Committee.

08_Roche_AR10_ENG_Corporate Governance.indd 85

Effective 1 August 2010 Stephan Feldhaus was appointed Head Group Communications and Member of the Enlarged Corporate Executive Committee reporting to Severin Schwan and replacing Per-Olof Attinger, who took over a newly created position ­ as Head CEO Office and Secretary to the Corporate Executive Committee reporting to Severin Schwan.

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Roche Business Report 2010

Corporate Governance

Information relating to Corporate Governance 1 Group structure and shareholders • Roche’s operating businesses are organised into two divisions: Pharmaceuticals and Diagnostics. The Pharmaceuticals Division comprises the two business segments Roche Pharmaceuticals and Chugai, whereas Genentech as the former third segment has been integrated into Roche Pharma­ ceuticals. The Diagnostics Division consists of ­ the following five business areas: Applied Science, Diabetes Care, Molecular Diagnostics, Profes­ sional Diagnostics and Tissue Diagnostics. Busi-­ ness activities are carried out through Group subsidiaries and associated companies. Significant subsidiaries and associated companies are listed in the Finance Report, Note 34 to the Roche Group Consolidated Financial Statements (‘Subsidiaries and associates’, page 131). • Major shareholders are listed in the Finance Report, Notes 28 and 33 to the Roche Group Consolidated Financial Statements (‘Equity attributable to Roche shareholders’ and ‘Related parties’, pages 114 and 129) and in Note 4 to ­ the Financial Statements of Roche Holding Ltd (‘Significant shareholders’, page 154). • André Hoffmann, Vice-Chairman of the Board of Directors, and Andreas Oeri, Member of the Board of Directors and Chairman of the Board’s Corporate Governance and Sustainability Committee, serve ­ in their respective capacities on the Board and its Committees as representatives of the shareholders group with pooled voting rights and receive the remuneration set forth in the Remuneration Report on page 93 and in the Finance Report, Note 33 ­ to the Roche Group Consolidated Financial State-­ ments (‘Related parties’, page 129) and Note 6 ­ to the Financial Statements of Roche Holding Ltd (‘Board and Executive remuneration’, page 155). No other relationships exist with the shareholders with pooled voting rights. • There are no cross-shareholdings.

2 Capital structure

• Information on Roche’s capital structure is pro-





• •









vided in the Finance Report, Notes to the Financial Statements of Roche Holding Ltd (pages 153 ­ and 154). Additional details are contained in the Articles of Incorporation of Roche Holding Ltd. 2 Changes in equity are detailed in the Finance Report, Notes to the Financial Statements of Roche Holding Ltd (page 154). The company has a share capital of 160,000,000 Swiss francs, divided into 160,000,000 fully paid bearer shares with a nominal value of 1 Swiss franc each. There are no restrictions on the exer-­ cise of the voting rights of these shares. Upon deposit, shares can be voted without any restric­ tions. There is no authorised or conditional capital. In addition, 702,562,700 non-voting equity securities (NES) have been issued in bearer form. They do not form part of the share capital and confer no voting rights. Each NES confers the same rights as one share to participate in avail- able earnings and in any liquidation proceeds following repayment of the share capital. Roche’s NES and the rights pertaining thereto (including the provisions protecting the interests of NES holders) are described in §4 of the Articles of Incorporation of Roche Holding Ltd. Information on debt instruments which have been issued and on outstanding bonds is provided in the Finance Report, Note 27 to the Roche Group Consolidated Financial Statements (‘Debt’, page 108). Additional information on employee stock options is provided in the Finance Report, Note 11 to the Roche Group Consolidated Financial Statements (‘Employee stock options and other equity com-­ pensation plans’, page 79). Roche has issued no options apart from employee stock options, Stock-settled Stock Appreciation Rights (S-SARs) and options issued in connection with debt instruments. Neither the options awarded to employees nor the debt instruments which have been issued have any effect on Roche’s share capital.

2 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm

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Corporate Governance

3 Board of Directors and Corporate Executive Committee • Information on each member of the Board of Directors (including the years in which they were elected and the years in which their terms end) and on each member of the Corporate Executive Committee is listed on pages 81 to 85. Curricula vitae and other information (including information on board memberships) are available on the Internet. 3 • The Annual General Meeting elects the members of the Board of Directors in staggered elections ­ in which each nominee is voted on separately (see §18 of the Articles of Incorporation of Roche Holding Ltd 4 and the Minutes of the 92 nd Annual General Meeting of Roche Holding Ltd, held 2 March 2010 5). • With the exception of Franz B. Humer, William M. Burns and Arthur D. Levinson none of the mem- bers of the Board of Directors has been a member of Roche’s Corporate Executive Committee or served in an executive capacity at any Group sub-­ sidiary during the three financial years preceding the current reporting period. • The internal organisation of the Board of Directors and the division of authority and responsibilities between the Board and management, the remits of the Board committees and the information ­ and control mechanisms available to the Board ­ in its dealings with corporate management are governed by the Bylaws. 6 • The Board of Directors of Roche Holding Ltd is organised so as to ensure that the Group’s busi- nesses are conducted responsibly and with a focus on long-term value creation. To this end, the Roche Board has delegated certain responsibili­ ties to several committees 7. Their composition and chairpersons as of 1 January 2011 are described on page 83. Each committees’ authorities and re-­ sponsibilities are defined in detail in the Bylaws ­ of the Board of Directors. 8 • All the committees except the Presidium are chaired by independent directors. • According to the Bylaws of the Board of Directors at the request of any of its members a Board meeting without the Chairman present may be convened. The Roche Board meets once a year ­ to assess the Chairman’s performance. This meeting, which is not attended by the Chairman, is chaired by one of the Vice-Chairmen.

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Roche Business Report 2010

87­

• The Board of Directors has established a system of controls which is continuously monitored by the Audit Committee and by the Corporate Gover­ nance and Sustainability Committee and consists of the following elements: — Report on financial and operating risks (risk management system) — System of internal controls over financial reporting (see pages 135 and 138 in the Finance Report) — Internal audits — Group Compliance Officer and Compliance officers in subsidiaries — Safety, Health and Environmental Protection Department — Corporate Sustainability Committee — Science and Ethics Advisory Group (SEAG), for issues relating to genetics and genetic engineering (established in 1999). • Each year several black-out periods are imposed during which senior employees are prohibited from trading in company stock. The following black-out periods are in effect for 2011: 26 December 2010 to 2 February 1 April to 14 April 26 June to 21 July 1 October to 13 October Black-out periods can be changed by the Chair­ man of the Board of Directors if circumstances warrant. • In 2010 the Board of Directors met for five meetings, each from 3 to 6 hours in length * ; once for a full-day meeting * ; and once for a three-day

* These figures indicate the actual length of meetings and do not include the directors’ extensive pre-meeting preparations and post-meeting follow-up activities. 3 http://www.roche.com/about_roche/management/ board_of_directors.htm and http://www.roche.com/about_roche/management/ executive_committee.htm 4 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm 5 http://www.roche.com/about_roche/corporate_governance/ annual_general_meetings.htm 6 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm 7 http://www.roche.com/about_roche/corporate_governance/ committees.htm 8 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm

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Roche Business Report 2010

Corporate Governance

Board and Board Committees attendance 2010

Board

Presidium/ Nomination Committee

Remuneration Committee

Audit Committee

Corporate Governance and Sustainability Committee

Number of meetings

5

5

4

5

3

F. B . Humer

5

5







B. Gehrig

5

5

4





A. Hoffmann

5

5

4





P. Baschera

5







2

J. I . Bell

5



4





W. M . Burns * *

5





5



L. J . R . de Vink

5



4





W. Frey

5





5

3

D. A . Julius

5





5



A. D . Levinson * *

4



3





A. Oeri

5







3

W. Ruttenstorfer

5





5



B. Weder di Mauro

5





4

2

– Not a member of that committee. ** Board and Committee member since 2 March 2010.

visit to a major subsidiary * which included a Board of Directors meeting * . The Board committees met as follows in 2010: — Presidium of the Board of Directors/Nomination Committee: five meetings (approx. 2 hours each * ) — Remuneration Committee: four meetings 9 (approx. 2 to 3 hours each * ) — Audit Committee: five meetings (approx. 3 to 4 hours each * ) — Corporate Governance and Sustainability Com­ mittee: three meetings (approx. 3 hours each * ). • The Board of Directors regularly conducts a selfassessment of its performance. • The members of the Corporate Executive Commit­ tee are invited to attend for, and report in person on, those agenda items concerning them. When the situation warrants, members of the Enlarged Corporate Executive Committee may also be invited to attend. The Board committees invite the Chairman of the Board and other Corporate Executive Committee members to deliver reports at committee meetings and may elect to commis­ sion independent expert reports and call on ­ the services of consultants. The risk management system is subject to continuous review, with findings being presented to the Audit Committee

08_Roche_AR10_ENG_Corporate Governance.indd 88

or the full Board. 10 Internal Audit regularly briefs the Audit Committee with reference to ongoing audit reports. Members of Internal Audit attend Audit Committee meetings, as do external audi-­ tors. For information on the external auditors, see page 89. • Members of the Corporate Executive Committee have a maximum ordinary notice period of twelve months. • There are no management contracts which fall within the scope of Subsection 4.3 (annex) of the SIX Directive on Information relating to Corporate Governance. 4 Remuneration, shareholdings and loans All details regarding remuneration, shareholdings and loans are set forth in the separate Remunera­ tion Report on pages 91 to 101 and in the Finance Report, Notes 28 and 33 to the Roche Group * These figures indicate the actual length of meetings and do not include the directors’ extensive pre-meeting preparations and post-meeting follow-up activities.   9 Remuneration Committee members are not permitted to ­contribute to or attend Remuneration Committee meetings at which matters concerning them are deliberated or decided. 10 Additional information is provided in the Finance Report, Note 32 to the Roche Group Consolidated Financial Statements, ‘Risk management’, page 121.

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Corporate Governance

Consolidated Financial Statements (‘Equity attri­ butable to Roche shareholders’ and ‘Related ­p arties’, pages 114 and 129) and are listed in the Notes 6 and 7 to the Financial Statements of Roche Holding Ltd (‘Board and Executive remune­r ­ ation’ and ‘Board and Executive shareholdings’, pages 155 and 157). 5 Participatory rights of shareholders

The reports of statutory auditors on the Consoli­ dated Financial Statements and on the Financial Statements can be found on pages 136 and 162, respectively, of this year’s Finance Report.

defined in Roche’s Articles of Incorporation. 11 As Roche shares are issued to bearer, there are ­ no restrictions on admission to Annual General Meetings, with the exception that shares must ­ be deposited within a specified period before the date of a meeting and an admittance card must ­ be issued in the shareholder’s name, as provided in §12 of the Articles of Incorporation. Any share- holder can elect to be represented by another shareholder at an Annual General Meeting. The Articles of Incorporation contain no restrictions ­ on the exercise of voting rights, and the only quo-­ rum requirements are those stipulated in §16, ­ in conformity with the Swiss Code of Obligations. • Under §10.2 of the Articles of Incorporation, share- holders representing shares with a nominal value of at least 1 million Swiss francs can request the placement of items on the agenda of an Annual General Meeting. This must be done no later than 60 days before the date of the meeting.

7 Relationship to statutory auditors At the Annual General Meeting of Roche Holding Ltd on 2 March 2010, the shareholders voted to appoint KPMG AG (KPMG) as statutory auditors (information on how long the auditors and auditor in charge have been serving in these capacities ­ is provided on page 85). The statutory auditors parti­c ipate in Audit Committee meetings. They prepare written and oral reports on the results of

08_Roche_AR10_ENG_Corporate Governance.indd 89

89­

their audits. The Audit Committee oversees ­ and assesses the auditors and makes recommen­ dations to the Board (for information on the responsibilities of the Audit Committee, see Arti­ cle 8.1 of the Bylaws 12). The statutory auditors par­t icipated in four meetings of the Audit Commit­ tee in 2010.

• The participatory rights of shareholders are

6 Change of control and defensive measures • The Articles of Incorporation contain no provisions on the mandatory bid rule. Swiss law applies. • There are no change-of-control clauses. Those components of remuneration based on Roche NES would be terminated in the event of an acquisi-­ tion, and vesting period restrictions on pre-exist­ ing awards would be removed, so that all such options could be exercised immediately.

Roche Business Report 2010

KPMG received the following remuneration for their services as statutory auditors of Roche Hold­ ing Ltd and other Roche companies:



Auditing services

2010 2009 (millions of CHF)

20.8

21.9

Audit-related services

2.6

3.7

Tax consultancy services

1.5

1.3

24.9

26.9

Total

The statutory auditors are elected each year by the Annual General Meeting. Ernst & Young Ltd received the following remuner­ ation for their services as the auditors of Chugai:



Chugai audits

2010 2009 (millions of CHF)

2.2

2.2

Other consulting services



provided to Chugai

0.1

2.2 *

Total

2.3

4.4

* In 2009: Genentech and Chugai.

8 Information policy • As provided by §33 of the Articles of Incorpora­ tion 13 , corporate notices are published in the Swiss Official Gazette of Commerce and in other daily newspapers designated by the Board of 11 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm 12 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm 13 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm

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Corporate Governance

Directors (Basler Zeitung, Finanz und Wirtschaft, L’Agefi, Le Temps, Neue Zürcher Zeitung). • Roche reports its half-year and full-year results in business reports published in print and online formats and at media events. In addition, detailed first- and third-quarter sales figures are published each year in April and October. The most current list of publication dates is available in English and German on the Internet. 14 • All relevant information and documents, including all media releases, investor updates 15 and presentations to analyst and investor conferences are available on the Internet. Further publications can be ordered by e-mail, fax or telephone: ­ basel.webmaster @  roche.com, ­ tel. +41 (0)61 688 83 39, ­ fax +41 (0)61 688 43 43. • The contact address for Investor Relations is: F. Hoffmann-La Roche Ltd, Investor Relations, Group Finance, 4070 Basel, Switzerland; ­ tel. +41 (0)61 688 88 80, ­ fax +41 (0)61 691 00 14. ­ Additional information, including details on specific contact persons, is available on the Internet. 16 9 Chief Compliance Officer The Chief Compliance Officer with his compliance officers network is committed to ensuring that the Roche Group Code of Conduct 17 is consistently complied with throughout the Roche Group. He also serves as a contact person for shareholders, employees, customers, suppliers and the general public on issues relating to the implementation ­ of and compliance with this Code. Employees and other parties who become aware of violations of the Roche Group Code of Conduct can bring them to the attention of their managers or supervisors or report them to the Chief Compliance Officer (Urs Jaisli, direct phone number: ­ +41 (0)61 688 40 18, e-mail: urs.jaisli @  roche.com). ­ Such disclosures will be treated confidentially. In addition, as of the end of 2009, employees may anonymously report irregularities or complaints ­ in their corresponding mother language via a ‘speak-up hotline’. The Chief Compliance Officer reports regularly to the Corporate Governance and Sustainability Committee.

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10 Non-applicability/negative disclosure It is expressly noted that any information not ­c ontained or mentioned herein is non-applicable or its omission is to be construed as a negative declaration (as provided in the SIX Swiss Exchange Corpo­rate Governance Directive and the Com­ mentary thereto).

14 15 16 17

http://www.roche.com/media.htm http://www.roche.com/investors.htm http://www.roche.com/investors/contacts.htm http://www.roche.com/about_roche/corporate_governance/ code_of_conduct.htm

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Remuneration Report

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Remuneration Report

Summary Roche’s success depends on the abilities and dedication of its people. Recognition of this forms the basis of our remuneration policy and system. One of the primary aims of our remuneration policy is to encourage a long-term focus and align management’s interests with the interests of Roche’s shareholders and holders of Roche’s non-voting equity securities (NES).

• This remuneration report will be submitted sepa-





• •



rately for approval at the 2011 Annual General Meeting. The remuneration of Corporate Executive Committee members and other senior Roche executives is comprised of: — Base salary (fixed) — Bonus (variable) — Stock-settled Stock Appreciation Rights (S-SARs) 1 (variable) — Performance Share Plan (PSP) awards (variable) Under the PSP 2008–2010 no NES will be awarded. The S-SARs granted in 2006, 2007, 2008, 2009 and 2010 have strike prices above the NES price ­ as of 31 December 2010 and have no value for ­ the recipients. This can change if Roche’s future ­ NES price improves. There has been no change in the base remuneration of the Board of Directors since 2001.

Please see the rest of this report for full details 2. Remuneration policy Roche fundamentally renewed its remuneration policy in 2004 and reviewed it in 2010, reconfirming the ­ key principles. It is part of a framework of employee policies aimed at motivating and retaining current employees, attracting talented new ones and helping all Roche employees to perform at consistently ­ high levels. Our remuneration policy is designed to foster value creation and reinforce a culture of ­ performance and innovation, and it applies to nonmanagerial employees as well as to managers. ­ The key principles underpinning this policy are: • Focus on value creation • Pay for performance • Enabling employees to share in the company’s success • Fairness and transparency in remuneration decisions

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• A balanced mix of long- and short-term remuneration components

• Market competitiveness. Base pay, bonuses, blocked non-voting equity securities (NES), awards of Stock-settled Stock Appreciation Rights (S-SARs) and a Performance Share Plan (PSP) support these principles. These remuneration com-­ ponents are linked to our company’s financial perfor-­ mance and commercial success and thus align the ­ interests of Roche employees with those of the shareholders. The amount of the separate components of remuneration for each individual member of the Corporate ­ Executive Committee is shown in the individual descrip-­ tion of the remuneration of the Corporate Executive Committee in this report. Base pay Base pay (cash payment) levels are determined according to market data of the world’s biggest pharmaceuticals companies 3 for specific positions and individual employees’ abilities, experience and perfor-­ mance over time. Pay increases are linked to individual performance and also take into account prevailing market conditions 3 and the company’s overall economic situation. Base pay and pay increases are conclusively monitored and determined by the Remuneration ­ Committee. Bonuses Bonuses (cash payment) are awarded in recognition ­ of individual contributions to value creation which ­ go beyond normal job expectations, and they are meant to be an incentive to create or strengthen new business opportunities and strive for outstanding results. Bonus amounts are linked to Group or divisional business performance considering profit, ­ 1 See ‘Stock options/Stock-settled Stock Appreciation Rights (S-SARs)’, page 95, 98 and 99. 2 See also in the Finance Report, Note 33 to the Roche Group Consolidated Financial Statements (‘Related parties’, page 129) and Notes 6 and 7 to the Financial Statements of Roche Holding Ltd (‘Board and Executive remuneration’ and ‘Board and Executive shareholdings’, page 155 and 157). 3 Peer set for 2010: Abbott Laboratories, Amgen, Astellas, ­AstraZeneca, Bayer, Becton Dickinson, Biogen Idec, Bristol-Myers Squibb, Eli Lilly, Gilead, GlaxoSmithKline, Johnson & Johnson, Merck & Co., Novartis, Pfizer, Sanofi-Aventis, Takeda.

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Variable remuneration elements (bonuses, S-SARs and PSP) in relation to fixed base pay of the Members of the Corporate Executive Committee

Individual target value

Bonus

S-SARs

max. 100%

100%

PSP

33.33% (based on annual base pay

(in % relation to value of base pay)

­m easured at 1 January of first year of cycle)

Minimum Maximum (in % relation to value

0%

0%

200%

150%

66.66%

(Cash payment)

(Value development

(Value development

of base pay)

Performance criteria

0%

Group objectives (Group

determined by

­d etermined by

performance of NES

performance of NES

after grant)

after grant)

Individual contributions

Group performance of

and divisional business

upon the Remuneration

TSR in relation to

performance) and

Committee’s decision at

TSR ­p erformance

individual objectives

its own discretion

of peer set (see page 95 to 96)

considering profit, sales growth, OPAC (Operating Profit After Capital Charge) Split in %    a)  Group objectives

70%

n.a.



   b)  Individual objectives

30%

n.a.

100%

sales growth, OPAC (Operating Profit After Capital Charge) performance and to the achievement of ­ individual and functional, measurable and qualitative performance objectives. For reasons of competi-­ tiveness Roche does not disclose details of individual objectives of the members of the Corporate Exec-­ utive Committee. The Remuneration Committee of the Board of Directors has defined the Corporate Ex-­ ecutive Committee members bonuses in December 2010 based on results achieved for 2010. Stock-settled Stock Appreciation Rights (S-SARs) Stock-settled Stock Appreciation Rights were ­ introduced on 1 January 2005, thus establishing a uniform system of remuneration throughout Roche. S-SARs entitle holders to benefit financially from ­ any increase in the value of Roche’s non-voting equity securities between the grant date and the exer-­ cise date. Awards are allocated individually upon the Remuneration Committee’s decision at its own discretion. Detailed information is available on page 95 and page 98 to 99.

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Performance Share Plan The members of the Corporate Executive Committee and other members of senior management (cur-­ rently some 120 individuals worldwide) participate ­ in the Performance Share Plan (PSP). The PSP ­ was established in 2002 for periods of three years ­ each and is based on a three-year comparison ­ of the total shareholder return (TSR) with 17 competing companies 3 . In 2010 there were three overlapping performance cycles, (PSP 2008–2010, ­ PSP 2009–2011 and PSP 2010–2012) of which PSP 2008–2010 closed on 31 December 2010. Details for the PSP 2008–2010 calculation and addi-­ tional information are set forth in ‘Remuneration ­ of members of the Corporate Executive Committee, D. Performance Share Plan (PSP)’, page 95. Remuneration of the Board of Directors and the Corporate Executive Committee Each year the Remuneration Committee, which is entirely comprised of independent external members of the Board of Directors, sets remuneration for the

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Remuneration Report

members of the Board of Directors and the Corporate Executive Committee (cash payments, bonuses, options, Stock-settled Stock Appreciation Rights and policy decisions about pension benefits). The terms ­ of the Performance Share Plan are determined annually by the Board of Directors, acting upon recommen-­ dations from the Remuneration Committee. The Remuneration Committee continuously tracks salary trends in the market of the world’s biggest pharmaceuticals companies 3 and reports to the Board of Directors. Information on this committee’s remit, powers and its procedures for making remuneration decisions can be found in the Bylaws of the Roche Board of Directors 4. Following the revision of the remuneration policy including market comparisons with the world’s major pharmaceutical companies 3 , the Remuneration Committee has determined the bonuses and remu­

Roche Business Report 2010

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neration of the Chairman of the Board of Directors, ­ the members of the Corporate Executive Committee ­ taking into consideration personnel changes. The following pages provide detailed information on the remuneration earned by each member of the Board of Directors and by each member of the Corporate Executive Committee for 2010. 1 Remuneration 1.1 Remuneration of members of the Board of Directors | In 2010 the members of the Board of Directors 5 received the remuneration in cash shown

4 http://www.roche.com/about_roche/corporate_governance/ article_of_incorporation.htm 5 For a list of members, their positions and their committee memberships and chairmanship, see page 83.

Remuneration of members of the Board of Directors

F. B . Humer

Remuneration 2010 (in CHF)

Additional compensation 2010 for committee members/chairs 6 (in CHF)

Additional special compensation 2010

(see page 97 7)

50,000

(Remuneration as Chairman of the Board of Directors see page 97 7)

B. Gehrig

400,000 8

A. Hoffmann

400,000 8

P. Baschera

300,000

30,000

J. I . Bell

300,000

30,000

W. M . Burns

250,000 9

30,000

L. J . R . de Vink

300,000

30,000

W. Frey

300,000

60,000

D. A . Julius

300,000

60,000

– –

A. D . Levinson

250,000 9

30,000

A. Oeri

300,000

60,000

W. Ruttenstorfer

300,000

30,000

B. Weder di Mauro

300,000

60,000

Remuneration of former members of the Board of Directors Remuneration 2010 (in CHF)

Additional compensation 2010 for committee members/chairs 6 (in CHF)

P. Brabeck-Letmathe

50,000 10



H. Teltschik

50,000 10



Additional special compensation 2010

See page 94

  6 With the exception of members of the Presidium and the Vice-Chairmen, Board members receive CHF 30,000/year for each committee they serve on and CHF 60,000/year for each committee they chair.   7 See ‘G. Highest total remuneration to a member of the Board of Directors’, pages 97 and 98.   8 Remuneration for serving as Vice-Chairman of the Board.   9 Prorated remuneration for the period from March to December 2010. 10 Prorated remuneration for the period from January to March 2010.

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in the table ‘Remuneration of members of the Board of Directors’ on page 93 for their Board activities. Remuneration of all members of the Board of Directors will again remain unchanged for 2011. Beside the cash payments, the non-executive members of the Board of Directors were not awarded any shares, non-voting equity securities, Stock-settled Stock Appreciation Rights (S-SARs) 11, stock options or Restricted Stock Units (RSUs) in 2010. Horst Teltschik received honoraria amounting to 19,635 euros (27,096 Swiss francs) for serving on the boards of several Roche subsidiaries in Germany. William M. Burns received honoraria amounting to a total of 25,000 US dollars (26,000 Swiss francs) ­ for serving as a member of the Board of Directors of Chugai Pharamaceutical Co., Ltd. Since his election to the Board of Directors of Roche Holding Ltd Arthur D. Levinson received payments

for his consulting work and for his Board membership of Genentech amounting to 342,367 US dollars (356,062 Swiss francs). For 2010 the members of the Board of Directors received remuneration totalling 14,662,589 Swiss francs 12 (2009: 18,608,650 Swiss francs). No additional remuneration was paid to members of the Board of Directors. 1.2 Remuneration of members of the Corporate Executive Committee | The general provisions assigning authority for decisions on Corporate Executive Committee remuneration to the Remuneration Committee and to the Board of Directors are outlined on pages 91 to 93 of this remuneration report.

11 See ‘Stock options/Stock-settled Stock Appreciation Rights (S-SARs)’, page 98. 12 See ‘Remuneration of members of the Board of Directors’, page 93.

Remuneration of members of the Corporate Executive­ Committee A. Base pay | in CHF Annual salary 2010

Annual salary 2009

Annual salary 2008

S. Schwan

3,750,000

2,875,002

2,283,340

S. Ayyoubi

1,100,000

725,004

481,670

E. Hunziker

2,000,000

2,000,000

2,000,000

G. A . Keller

1,500,000

1,500,000

1,350,000

D. O’Day

1,000,000

*

*

P. Soriot

2,000,000

1,246,878

*

Total

11,350,000

* Not a member of the Corporate Executive Committee.

Due to obligations from his former Roche assignment in the US, Daniel O’Day received the following payments in 2010: Mortgage subsidy 15,000 US dollars (15,600 Swiss francs), for financial/tax service ­ 9,796 US dollars (10,188 Swiss francs). Daniel O’Day received in addition 82,415 Swiss francs for the schooling of his children. For 2010 the members of the Corporate Executive Committee received remuneration totalling 38,759,516 Swiss francs 13 (2009: 54,858,227 Swiss francs).

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B. Bonus All members of the Corporate Executive Committee will receive the bonus 2010 as a cash payment due for payment at the end of April 2011. On 31 December 2010 the Stock-settled Stock Appreciation Rights granted in 2006, 2007, 2008 ­

13 See ‘Remuneration of members of the Corporate Executive Committee’, (A.–F. and H.) excluding AHV/IV/ALV, page 94 to 98.

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Roche Business Report 2010

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Bonus Bonus for 2010

Bonus for 2009

Bonus for 2008

Total (in CHF)

Total (in CHF)

Total (in CHF)

S. Schwan

3,000,000

4,675,178

3,000,000

S. Ayyoubi

1,000,000

1,637,909

500,000

E. Hunziker

2,000,000

3,606,905

2,200,000

G.A. Keller

1,000,000

1,813,506

1,000,000

D. O’Day

1,300,000

*

*

P. Soriot

3,312,500 * *

2,000,000

*

Total

11,612,500

* Not a member of the Corporate Executive Committee. ** Including an additional compensation for the successful integration of Genentech amounting to 1,312,500 Swiss francs, paid in 2010.

C. Stock-settled Stock Appreciation Rights (S-SARs) S-SARs 14 2010 (value in CHF 15)

S-SARs 14 2009 (value in CHF 15)

S-SARs 14 2008 (value in CHF 15)

S. Schwan

3,559,911

3,559,849

2,225,542

S. Ayyoubi

1,068,022

889,993

445,146

E. Hunziker

1,779,990

1,957,935

1,958,480

G. A . Keller

1,335,010

1,334,989

1,335,313

D. O’Day

890,030

*

*

P. Soriot

1,779,990

1,401,735

*

Total

10,412,953

* Not a member of the Corporate Executive Committee. 14 See ‘Stock options/Stock-settled Stock Appreciation Rights (S-SARs)’, page 98. 15 Black-Scholes value as described in ‘Stock options/Stock-settled Stock Appreciation Rights (S-SARs)’, page 98 and 99. Values for 2008 and 2009 according to Annual Report 2009, page 79.

and 2009 most of which can be exercised, follow-­ ing the end of the vesting period in February 2010, ­ had no value for the recipients. 16 Members of the Corporate Executive Committee additionally receive annual expense allowances of 30,000 Swiss francs, totalling 180,000 Swiss francs. D. Performance Share Plan (PSP) The members of the Corporate Executive Committee and other members of senior management (currently some 120 individuals worldwide) participate in the Performance Share Plan (PSP). In 2006 the PSP moved to overlapping three-year performance cycles, with a new cycle beginning

09_Roche_AR10_ENG_Remuneration Report.indd 95

each year. In 2010 there were thus three cycles in progress (PSP 2008–2010, PSP 2009–2011 and PSP 2010–2012); As in the previous year for the PSP 2007–2009, the PSP 2008–2010 ended on 31 December 2010 without any awards of targeted NES. Under the provisions of this plan, a number of nonvoting equity securities have been reserved for ­ the participants in each cycle. The number of se-­ curities actually awarded will depend on whether ­ and to what extent an investment in Roche securities (shares and NES) outperforms the average return ­

16 S ee strike prices in table ‘Stock options and S-SARs’, page 101.

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on an investment in securities issued by a peer set ­ of comparator companies 17. Comparisons are based on the securities’ market prices and dividend yields, i.e. on Total Shareholder Return (TSR). To reduce the effect of short-term market fluctuations, security prices are averaged over the three months (October to December) prior to the start of a performance cycle and over the three months (October to December) at the end of the cycle. If Roche securities ­ perform as well as or better than those of 75% of the peer set and, in addition, Roche’s TSR increases ­ at least 10% during a cycle, the Board of Directors can elect to increase the maximum NES award ­ by as much as two-fold. In the event that an investment in Roche securities underperforms the ­ average return delivered by the peer companies, fewer or no NES will be awarded. In 2010 NES were reserved under the plan for members of the Corporate Executive Committee as ­ shown in the table below. The Board of Directors will decide on the actual level of NES or cash equivalent awards for the cycles 2009–2011 and 2010–2012 after the close of the 2011 and 2012 financial years, respectively. The aim of the PSP is to provide ­ an incentive to participants to achieve steady value growth.

At the end of the PSP 2008–2010 cycle (based on a three-month moving average at constant exchange rates) with distributed dividends totalling 13.454 billion Swiss francs (2008: 3.967 billion Swiss francs; 2009: 4.312 billion Swiss francs; 2010: 5.175 billion Swiss francs), the TSR of the Roche securities ­ (NES and shares) ranked #15, compared with its peer set of companies operating in the same in-­ dustry. Therefore, according to the terms of the plan, the participants received none of the originally ­ targeted NES (see table below for details). E. Indirect benefits Employer contributions made in 2010 to social security schemes, pension plans and a Group-wide employee stock purchase plan (Roche Connect) in respect of members of the Corporate Executive ­ Committee are shown in the table ‘Indirect benefits in 2010’ on page 97. Roche Connect is a voluntary stock purchase plan offering employees the opportunity to buy Roche non-voting equity securities (NES) up to an amount equal to 10% of their annual salary at a 20% dis-

17 See footnote 3, page 91.

Performance Share Plan (PSP) 2009

2010 18 Total estimated value of PSP awards (2008–2010, 2009–2011 and 2010–2012) (value in CHF)

No NES awarded in 2010 for PSP 2008–2010 (value in CHF)

No NES awarded in 2009 for PSP 2007–2009 (value in CHF)

Target number of NES for PSP 2010–2012

Target number of NES for PSP 2009–2011

No awards of targeted number of NES for PSP 2008–2010

S. Schwan

5,991

5,011



502,425





S. Ayyoubi

1,597

1,002



118,688





E. Hunziker

3,994

4,009



365,470





G. A . Keller

2,995

3,006



274,046





D. O’Day

1,997

904



132,479



*

P. Soriot Total

3,994

2,104



278,475





20,568

16,036



1,671,583





* Not a member of the Corporate Executive Committee. 18 Total estimated value for 2010: PSP 2008–2010: none of the originally targeted NES awarded. PSP 2009–2011 and 2010–2012: Estimated value calculated using the year-end price as of 31 December 2010, CHF 137.00 per non-voting equity security (NES), based on the number of NES originally ­t argeted subject to changes in the number and value of NES awardable under the plan on 31 December 2011 and 31 December 2012, respectively, and spread over the relevant period of time, i.e. ¹⁄³ for the year 2010. The Board of Directors will vote on the actual ­allocation of NES originally targeted on 31 December 2011 and 31 December 2012, respectively, according to the TSR achieved.

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Indirect benefits in 2010 Pension funds/MGB 19 (in CHF)

AHV/IV/ALV 20 (in CHF)

Roche Connect (in CHF)

Payments for tax consulting services (in CHF)

S. Schwan

456,122

351,284

89,588

8,827

S. Ayyoubi

986,100

137,919

3,000

6,118

E. Hunziker

622,401

203,889

50,004

6,225

G. A . Keller

529,325

177,250

37,500



D. O’Day

304,350

56,524

7,294

5,918

P. Soriot Total

311,505

273,067





3,209,803

1,199,933

187,386

27,088

19 MGB: Stiftung der F. Hoffmann-La Roche AG für Mitarbeiter-Gewinnbeteiligung (employee profit-sharing foundation supplementing occupational pension benefits). 20 AHV/IV/ALV: Swiss social security programmes providing retirement, disability and unemployment benefits.

count. NES purchased under this plan are subject to a holding period, which is four years in Switzerland. F. Other remuneration, emoluments and loans In 2010 pensions and two payments for tax consulting services totalling 2,118,892 Swiss francs were paid to four former Corporate Executive Committee members. Members of the Corporate Executive Committee have a maximum notice period of twelve months. In connection with the new company and personnel structure, members of the Corporate Executive Committee can receive compensation amounting to one annual base pay in case of termination of the contract by the company (termination through no fault and not based on lack of performance) until the age of sixty.

G. Highest total remuneration to a member of the Board of Directors Franz B. Humer as the chairman was the member of the Board with the highest total remuneration for 2010 (see ‘Remuneration of members of the Board of Directors’, page 93). The Chairman’s remuneration consists of base salary and bonus awards. As Chairman of the Board after the handover of his execu-­ tive function as CEO at the Annual General Meeting on 4 March 2008, he did not receive any additional S-SARs or NES from new PSP cycles and was ­ no longer enrolled in any Roche stock option plan ­ or S-SARs. According to the announcement in the Annual Report 2009, the Board of Directors reduced the Chairman’s base salary in 2010 to 4 million Swiss

Highest total remuneration to a member of the Board of Directors 2010 (in CHF)

2009 21 (in CHF)

Salary

4,507,500

6,030,000

Bonus

2,200,000

4,992,018

Total

6,707,500

11,022,018

Pension funds/MGB 22

2,995,801

2,995,109

Roche Connect Total (value)

75,000 10,033,431 23

75,000 14,353,552

21 For detailed calculation of the remuneration as Chairman and CEO for 2009 see Annual Report 2009, page 82. 22 M GB: Stiftung der F. Hoffmann-La Roche AG für Mitarbeiter-Gewinnbeteiligung (employee profit-sharing foundation supplementing occupational pension benefits). 23 Includes additional compensation for Committee members (CHF 50,000), payments for tax consulting services (CHF 49,130) and Chugai advisory mandate USD 150,000 (CHF 156,000), not including employer contribution to AHV/IV/ALV (CHF 565,871).

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Highest total remuneration to a member of the Corporate Executive Committee 2010 (in CHF)

2009 24 (in CHF)

Salary

3,750,000

2,875,002

Bonus

3,000,000



4,675,178

Total

6,750,000



7,550,180

S-SARs (Black-Scholes value 25 at grant minus 11%) Pension funds/MGB 26 Roche Connect

3,559,911

3,559,849

456,122

456,941

89,588

69,790

502,425 *

408,793 24

Estimated value of targeted (not awarded) NES according to Performance Share Plan 27 (* 2009–2011, 2010–2012, no awards/value of NES of 2008–2010) Total Total (value)

11,396,873 28

12,101,478

24 For detailed information see Annual Report 2009, page 83. 25 Black-Scholes value as described in ‘Stock options/Stock-settled Stock Appreciation Rights (S-SARs)’, page 98 to 99. 26 M GB: Stiftung der F. Hoffmann-La Roche AG für Mitarbeiter-Gewinnbeteiligung (employee profit-sharing foundation supplementing occupational pension benefits). 27 Basic rules and detailed calculation see ‘Remuneration of members of the Corporate Executive Committee, D. Performance Share Plan’, page 96, footnote 18, respectively. 28 Includes an annual expense allowance (CHF 30,000), payments for tax consulting services (CHF 8,827), excluding employer ­contribution to AHV/IV/ALV payments.

francs (as of 1 April 2010) and determined at the ­ end of 2009 that his total remuneration, including bonuses, contributions to pension funds and ad-­ ditional compensation (expense allowance) will, depending on the achievement of objectives, not exceed the maximum amount of 11 million Swiss francs. The shareholders agreed to this maximum amount with the approval of the Remuneration Report 2009 at the Annual General Meeting on 2 March 2010. The effective total remuneration ­ was 8.8% below of the determined maximum and 30.1% lower than 2009. H. Highest total remuneration to a member of the Corporate Executive Committee Severin Schwan as CEO was the member of the Corporate Executive Committee with the highest total remuneration for 2010 (see ‘Remuneration of members of the Corporate Executive Committee’, A.–F., page 94 to page 97). No additional remuneration was paid to current or former members of the Corporate Executive Committee.

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1.3 Security holdings | Directors André Hoffmann and Andreas Oeri and members of the founders’ families who are closely associated with them belong to a shareholder group with pooled voting rights. ­ At the end of 2010 this group held 80,020,000 shares (50.01% of issued shares). Detailed information about this group can be found in the Finance Report, Note 33 to the Roche Group Consolidated Financial Statements (‘Related parties’, page 129) and in ­ the Note 4 to the Financial Statements of Roche Holding Ltd (‘Significant shareholders’, page 154). In addition, as of 31 December 2010 the members ­ of the Board of Directors and persons closely associated with them and the members of the Executive Committee and persons closely associated with ­ them held shares and NES as shown in the table on page 100. 1.4 Stock options/Stock-settled Stock Appreciation Rights (S-SARs) | At 31 December 2010 Franz B. Humer and William M. Burns (being the only ­ members of the Board of Directors holding options and as of 1 January 2005 S-SARs due to their ­ former positions) and the members of the Corporate Executive Committee held options and Stock-­ settled Stock Appreciation Rights (S-SARs; first

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introduced on 1 January 2005) as shown in the table ‘Stock options and S-SARs’ on page 101. All of the options shown in the table were issued by Roche as employee stock options. Each option ­ entitles the holder to purchase one Roche non-voting equity security (NES) at a specified strike price ­ at grant.

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99­

The strike prices, expiry dates and grant values ­ for options and S-SARs are shown in the table on page 101. The numbers of options and S-SARs ­ as calculated at the time of issue have been entered as values in the table ‘Remuneration of members ­ of the Corporate Executive Committee, C. Stock-settled Stock Appreciation Rights (S-SARs)’ on page 95.

Under the terms of this multi-year option plan, ­ the strike price for options shown was the closing price for Roche NES on the last day of trading ­ prior to the Roche Annual Media Conference. All of the options shown are non-tradable. One-third ­ of the options are subject to a vesting period of one year, one-third have a vesting period of two years, ­ and one-third a vesting period of three years. Unvested options lapse without compensation ­ if employment is terminated voluntarily (for reasons other than retirement), while vested options must ­ be exercised within a limited period of time. If employ-­ ment is involuntarily (layoff or redundancy, job ­ elimination or reduction in force) terminated, granted but unvested options vest immediately and must ­ be exercised within six months or they are forfeited. The fair value of the options is calculated at the ­ date of issue using the Black-Scholes formula and as if the options were tradable, with an 11% deduction for the average two-year vesting period. The S-SARs shown in the table on page 101 were introduced by Roche on 1 January 2005 in place of stock options. S-SARs entitle holders to benefit financially from any increase in the value of Roche’s NES between the grant date and the exercise date. The strike price for S-SARs under the terms of this multi-year plan was the closing price for Roche NES on the first day of trading after the Roche Annual Media Conference. All S-SARs vest within three years of the grant date: i.e. one-third vest at the end of ­ one year, one-third at the end of two years, and onethird at the end of three years. Vested S-SARs ­ must be exercised (converted into NES) within seven years of the grant date, and unexercised S-SARs lapse without compensation. The fair value of the options is calculated at the date of issue using the Black-Scholes formula and as if the options were tradable, with an 11% deduction for the average twoyear vesting period.

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100­

Roche Business Report 2010

Remuneration Report

Security holdings (at 31 December 2010)

Shares (number)

NES (number)

Close relatives’ security holdings (number/type)

3

197,215



Others (number)

Board of Directors F. B . Humer

S-SARs see 1.4 2500 ROGTPK Tracker-plus Cert. Zürcher Kantonalbank on Roche Genussschein (ROG) as underlying, Valor 10 716 273, ISIN: CH0107162734

B. Gehrig A. Hoffmann

50 –*

150





200



250,000 UBS Long/Short Certificates linked to Roche Bearer Shares/ Roche Non-Voting Equity securities (Valor: 10 690 162, ISIN: CH0106901629)

P. Baschera

1





300

1,647





W. M . Burns

3

79,254



Stock options, S-SARs see 1.4

L. J . R . de Vink







31,600 American Depository Receipts (ADR),

72,500







350



1,550 NES







J. I . Bell



RHHBY, US ISIN: US7711951043 W. Frey D. A . Julius A. D . Levinson



A. Oeri

–*

307,793

– 250,000 UBS Long/Short Certificate linked to Roche Bearer Shares/ Roche Non-Voting Equity securities (Valor: 10 690 162, ISIN: CH0106901629)

W. Ruttenstorfer B. Weder di Mauro Total

1,000







200







74,407

586,259

1,550 NES

Corporate Executive Committee S. Schwan

3

35,978

570 NES

Stock options, S-SARs see 1.4

S. Ayyoubi

3

12,213



Stock options, S-SARs see 1.4

E. Hunziker

3

62,458



Stock options, S-SARs see 1.4

G. A . Keller

1,253

31,278

70 NES

S-SARs see 1.4

3

220



S-SARs see 1.4 S-SARs see 1.4

D. O’Day P. Soriot Total

2

6,314



1,267

148,461

640 NES

* Shares held by the shareholders group with pooled voting rights not listed.

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Remuneration Report

Roche Business Report 2010

101­

Stock options and S-SARs Number of stock options and S-SARs held by current and former members of the Corporate Executive Committee on 31 December 2010 (S-SARs first issued in 2005) 2010 29

2009 29

2008 29

2007 29

2006 29

S. Schwan

154,443

175,362

105,576

29,190

15,696

4,983 30

1,864

487,114

S. Ayyoubi

46,335

43,842

21,117

3,243

2,517

3,957

2,360

123,371

E. Hunziker

77,223

96,450

92,907

48,651

26,160

34,074

20,915

396,380

G. A . Keller

57,918

43,842

63,345

24,327

15,696





205,128

D. O’Day

38,613

21,762

20,133

10,269

5,856





96,633

P. Soriot

77,223

69,051

63,345

29,190

23,544





283,989

43,014

25,139

1,592,615

2005 29

2004 30

Total

Corporate Executive Committee

+ 21,636 Total

451,755

450,309

366,423

144,870

111,105

Former Corporate Executive Committee members F. B . Humer

None 31

W. M . Burns

None 32

Strike price (CHF)

175.50

48,651

52,317

42,589



143,557

109,602

None 31

105,576

None 31

48,651

26,160

34,074



324,063

145.40

195.80

229.60

195.00

123.00

129.50

3.2.2012

3.2.2011

20.89

31.92

196.50 Market price per NES

137.00

on 31 December 2010 (CHF) Expiry date

4.2.2017

5.2.2016

31.1.2015

8.2.2014

2.2.2013 2.1.2013

Grant value per option and

23.05

20.30

21.08

36.59

34.02 37.02

(starting in 2005) per S-SAR in CHF (Black-Scholes value minus 11%) 29 S-SARs. 30 Stock options. 31 As of 2008 Franz B. Humer does not receive any additional S-SARs. Franz B. Humer received stock options and S-SARs as a Member of the Corporate Executive Committee until 2007. 32 As of 2010 Wiliam  M. Burns does not receive any additional S-SARs. William  M. Burns received stock options and S-SARs as a Member of the Corporate Executive Committee until 2009.

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Corporate Responsibility | In

2010 the Dow Jones Sustainability Indexes named Roche ‘Supersector Leader’ in healthcare for the second consecutive year. Sustainability is at the core of our business practices and this positioning reflects our commitment to running our business in a way that is ethical, responsible and creates long-term value for stakeholders. During the year we made progress on our long-term diversity and energy goals and introduced new programmes to increase access to our products.

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Corporate Responsibility

Roche Business Report 2010

103­

Corporate responsibility in brief

We focus on developing new medicines and diag­ nostics that address unmet medical need and help patients lead longer, better lives. Discovering ­ and developing these products remains our greatest responsibility. The nature of our business means we always think long term. It takes eight to twelve years to bring our medicines to market, so being sustainable is critical for our success, as well as for our customers, sup-­ pliers and partners. We aim to balance the needs of individuals, society and the environment in our work, and to be a rewarding employer that attracts talented people. Our values of integrity, courage and passion guide employees to do the right thing in their work. Our approach We focus on the corporate responsibility issues that are most relevant to our stakeholders and have the greatest potential to impact our business. We monitor our progress using key performance indicators (KPIs) for each issue. During 2010 we revised our KPIs to align them with our strategic framework, ensure they support our long-term business strategy and goals, and further integrate responsible behaviour through­ out the business. The updated KPIs measure the value we create for four main stakeholder groups: employees, patients, investors and society. We report against several of these KPIs, plus additional performance measures, throughout this Annual Report and on our website. In 2010 we were named ‘Supersector Leader’ in healthcare for the second year running in the Dow Jones Sustainability Indexes (DJSI), in recognition ­ of our commitment to sustainable practices. We use this index and other analyses to evaluate our perfor­ mance, and to identify areas where we can improve or learn from others. Managing corporate responsibility At Roche, corporate responsibility is an integral part of everyone’s work and is coordinated by our Cor-­ porate Sustainability Committee (CSC), as shown in the diagram. The CSC identifies and assesses sig-­ nificant social, ethical and environmental risks and opportunities, and develops and revises corporate positions and guidelines on related topics. It met for­ mally four times in 2010 and, in September, hosted

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 103

the sixth annual sustainability workshop, attended ­ by sustainability experts from around the Group. Access to medicines and diagnostics and the value ­ of our products and services remained high on ­ the agenda this year, while a working group dis­ cussed our new KPIs. More on the Web • Sustainability principles: www.roche.com/principles

• CSC Charter: www.roche.com/csr_committees • KPIs: www.roche.com/sus-kpi.pdf

Roche management of sustainability Board of Directors

Corporate Executive Committee

Board Committee for Corporate Governance and Sustainability

Corporate Sustainability Committee (CSC) Core Team and Working Team

Key material sustainability topics

A network of more than 150 colleagues from all relevant Corporate and Divisional Functions

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Corporate Responsibility

Stakeholder engagement

We aim to create value for our stakeholders through the medical benefits our products provide, our ­ daily business activities, and specific activities with each group. We regularly seek stakeholders’ views when formulating business strategy, setting priorities including those relating to Corporate Responsibil-­ ity (CR), and throughout product development. We

believe in two-way dialogue where both parties learn from each other. The table shows examples from 2010, and there is further information on our website. More on the Web • Stakeholder engagement: www.roche.com/stakeholder_engagement

Stakeholder engagement in 2010 Stakeholder group

Examples of engagement

Results of engagement

Patients and

— R an workshops for patient groups in several

— B etter understanding of patients’ needs so

patient groups

countries, including France and Germany — R eviewed informed consent forms with patient advocacy group, EGAN

Healthcare professionals

— M arket research and needs assessment among HCPs in US and top five EU countries

(HCPs)

— Virtual conference services for HCPs

Governments,

— Participated in industry initiatives on topics

regulators and industry

such as biosimilars — Developed guidelines for misuse of compounds with the World Anti-Doping Agency

Healthcare payers — Worked with payers to develop methods to evaluate and compare the effectiveness of medicines — D eveloped a pricing toolkit and computer

we can help them manage their disease — C onsent forms easier for patients to read and understand — Improved understanding of customer needs — O ver 3,000 HCPs participated in American Society of Clinical Oncology virtual conference — D evelopment of effective public health policies and regulations, and shared ­learnings — R oche and WADA signed a memorandum of understanding — D evelopment of tools to assess cost-­ effectiveness — Improved understanding among payers of the value of our products and ­s ervices

models in association with payers Employees

— G roup-wide programmes to promote our strategic framework — R an management town hall meetings at

— Increased awareness and understanding of the strategic framework among the global work force

major sites Investors

— A ttended over 70 investor meetings and ­c onferences

Suppliers and business partners

— Worked with key suppliers to ­c ommit to our new Supplier Code of Conduct — B egan aligning supplier audit protocols with

— Improved investor understanding of our business model, strategy and late-stage pipeline — M inimised supply chain risks — E xtended supplier audits to business critical service providers (indirect spend)

those of other PSCI members Non-governmental — Worked with the Access to Medicines Index organisations

on its 2010 ranking — E ngaged with Amnesty ­International, Declaration of Bern and others on organ donation in China

Communities

— D onated time, money and expertise to causes such as AIDS orphans in Malawi and clean water in Uganda — C ontributed to local communities through

— E nsure recognition for our access ­p rogrammes — Launched project with the Chinese Ministry of Health to establish an organ donation system — H elp to reduce health inequalities — M aintain positive relationships with communities — S upport the next generation of scientists

initiatives such as Roche Genetics Education Programme Media

— O ver 120 corporate press releases and trade news updates

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 104

— M aintain a positive media image and protect our reputation

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Corporate Responsibility

Roche Business Report 2010

105­

Patients

Excellence in science is furthering our understanding of the mechanisms of disease. We are using this knowledge to develop medically differentiated new therapies and help improve patients’ quality of life. Furthermore, by fitting treatments to patients and achieving better outcomes, personalised healthcare makes more efficient use of healthcare budgets. We can increase this contribution to society by:

• demonstrating the medical and economic value • • • • •

of our products helping to improve global access to healthcare running safe and ethical clinical trials ensuring patient safety building relationships with patients groups listening and responding to customers’ views.

The value of medicines and diagnostics Healthcare payers have to balance medical need and clinical impact with the cost of new medicines and ­ the allocation of scarce budgets. This has led to the development of a variety of methods for determin-­ ing appropriate coverage and reimbursement rates ­ by examining the clinical, economic, social and ­ ethical implications of a medical technology. These are broadly termed Health Technology Assess-­ ments (HTAs). Different providers use different HTAs, resulting in varying healthcare priorities, delivery ­ and access levels. It is essential that payers can assess our products using objective, consistent and open processes, which consider the full cycle of care as well as clini­ cal and economic value, for individual patients and ­ for society. For this reason, we have a global depart­ ment that sets and maintains prices for our portfolio, throughout the product lifecycle. It also ensures our clinical trials assess the cost effectiveness as well ­ as efficacy. When setting the price for a new test or drug, we look at the medical benefit it provides, and compare its lifecycle value with the available alternatives. Many of our products help reduce treatment times and the need for surgery or palliative care, minimise hospital stays, prevent disease from returning, and speed patients’ return to work. The associated savings are also taken into account. Additionally, we consider local reimbursement models, population size and prevalence of the disease, and level of unmet need.

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 105

Our health economists and reimbursement managers work with national and local health authorities to demonstrate the economic and health benefits of our products and services within each healthcare sys­ tem. We engage with payers and providers through­ out a product’s lifecycle, and provide guidance on how to assess the value of our products and services through evaluations such as HTAs. In markets such as the UK, we have developed models that assess the costs and clinical consequences of certain thera-­ pies compared with different treatment options, to help payers and healthcare providers make in-­ formed choices. We work with payers to agree pricing arrangements that suit their needs. Our approach considers a range of options for reaching a mutually agreeable price, such as volume-based and other discounts, price capping, cost sharing and payment by results. This work was particularly important for main-­ taining access to our products in 2010, when many governments focused on reducing healthcare ­ budgets or restricting their growth, to help manage public finances. Our positions on personalised healthcare, assessing the value of our products and services, and pricing describe our approach in more detail and are available on our website. Global access to healthcare The provision of healthcare is a shared responsibility, and lack of access to medicines and diagnostics is one of many systemic causes of healthcare inequality. Other barriers include lack of disease awareness, ­ low levels of diagnosis, and limited healthcare infra­ structure and budgets. We have an important role to play in tackling the ­ global healthcare challenge. We work with govern­ ments, healthcare providers, the media, patient groups and non-governmental organisations (NGOs) to increase access and tackle these wider problems. Health needs in developing countries and emerging markets differ from those in the developed world. ­ We create tailored programmes to boost access to our products, plus research and development (R &  D ) models for the discovery of new products for these regions. We are committed to finding sustainable ­

28.01.2011 11:54:15

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Roche Business Report 2010

Corporate Responsibility

and impactful ways to make a long-term difference to healthcare. The illustration shows some of our pro­ grammes to increase access to healthcare, and there are further details on our website. Access for those most in need | The World Health Organization (WHO) lists many of our drugs as essential medicines. These and our other products are available through doctors, hospitals, laborato-­ ries and pharmacies in over 160 countries — mainly in those with established healthcare systems. ­ However, around a third of the world’s population does not have adequate access to healthcare. Poorer countries suffer the highest levels of disease and have the weakest healthcare systems. Many face a critical shortage of healthcare professionals and facilities, as well as low levels of understanding of the causes, prevention and treatment of disease. We ­ aim to provide sustainable access to healthcare in these countries based on: • Sustainable patent and pricing policies • Partnerships with governments, NGOs and others • Education, training and knowledge-transfer • R &  D into diseases with unmet medical needs. We have not filed or enforced patents for any of our medicines in the Least Developed Countries (LDCs) defined by the United Nations since 2001. In 2010 ­ we expanded this policy to include the Low Income Countries (LICs) defined by the World Bank, cover-­ ing another six countries. In addition, we do not file or enforce patents for any antiretroviral HIV medi­ cines in sub-Saharan African (sSA) countries. We supply two HIV medicines at no-profit prices in the LDCs and sSA, and we provide these medicines at reduced prices in lower-middle-income countries. Valcyte, our medicine for AIDS-related cytomegalo-­ virus retinitis, is available at reduced prices for NGOled AIDS treatment programmes in the LDCs, LICs, sSA, and lower-middle-income countries. We focus on developing partnerships with govern­ ments and NGOs in these countries. Our aim is to estab­lish programmes that raise awareness, train healthcare providers, and improve infrastructure. This approach increases the capabilities of healthcare systems so they can start to sustainably meet patient needs. This increases access to healthcare, and

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 106

40

new drug leads selected by OneWorld Health to investigate as potential new treatments for childhood diarrhoea

47,000

patients received free medicines through the Genentech Access to Care Foundation

1,100,000 infants tested for HIV through the AmpliCare Initiative

19,500

employees participated in the annual Children’s Walk to support care centres and provide educational opportunities for AIDS orphans in Malawi, as well as local community activities

develops new markets for our products and services in the longer term. In 2010 we joined forces with the International Atomic Energy Agency (IAEA) to launch EDUCARE, a major new programme to improve cancer care ­ in Africa. Cancer kills more people each year in devel-­ oping countries than AIDS, malaria and tuberculo-­ sis combined, yet there is very little oncology invest­ ment. The programme is establishing an online ­ university offering comprehensive training in several areas of cancer management, and a network for ­ doctors to share knowledge and experience with their peers. Roche is providing financial support, con-­

28.01.2011 11:54:15

Corporate Responsibility

11,000,000

107­

treatment courses of anti-influenza medicine Tamiflu donated to WHO for countries most in need, two sublicensing agreements reached and the Tamiflu Reserves Programme established for developing countries

3–12

55

months employees can go on secondment to contribute their skills and expertise to help make a difference in health services in LDCs

countries where Roche does not file or enforce patents for any of its medicines

45,000

people reached each year in rural South Africa by the Phelophepa Healthcare train

450

children supported in sSA in monitoring their diabetes through a partnership with Novo Nordisk’s ‘Changing Diabetes in Children’ programme

sultation and expertise. In 2010 we identified suitable sites for pilot programmes in Ghana, Zambia, Tan-­ zania, and Uganda, where we will begin training pro­ grammes in 2011. We also have a number of programmes for increasing access to diagnostic tests. We are a partner in Novo Nordisk’s Changing Diabetes in Children programme, along with the World Diabetes Foundation and sev­ eral African governments. More than 450 children in Africa were enrolled in the programme by the end ­ of 2010. They received education in diabetes care and access to insulin and diabetes supplies provided ­ by Roche. We also help to train healthcare workers,

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 107

Roche Business Report 2010

83% 13

4

of HIV-infected patients eligible for no-profit or reduced-price Roche medicines

pilot countries selected for online university courses in oncology under the EDUCARE initiative in sSA, in partnership with IAEA

AIDS technology agreements reached with companies in LDCs and sSA for on-site technical help to manufacture generic versions of Roche’s HIV medicine saquinavir

2,000

orphaned children given primary healthcare plus other services and assistance through Re &  A ct and support to the UNICEF & ECPP AIDS Orphan programmes

patients and their families. In 2010 we took part in workshops for healthcare workers in Cameroon ­ and Uganda, and participated in the Diabetes Leader­ ship Forum Africa 2010. More than 260 participants from 32 sub-Saharan African countries attended this event, to discuss the appropriate response to the increasing burden of diabetes and other non-commu­ nicable diseases in Africa. A number of our partnerships improve research into neglected diseases of the developing world. For example, in 2010 we launched a research fellowship together with the WHO’s programme for research and training into tropical diseases (TDR), the Gates

28.01.2011 11:54:15

108­

Roche Business Report 2010

Corporate Responsibility

Foundation and the International Federation of Phar­ maceutical Manufacturers and Associations (IFPMA). This fellowship gives researchers from developing countries first-hand experience of state-of-the-art processes and techniques, to help improve their research and clinical development expertise.

Boosting cancer care in Morocco In Morocco, our partnership with the Lalla Salma Association Against Cancer (ALSC) has helped increase cancer awareness and access to treatment, and led to the launch of the first national

Roche ranked sixth in the 2010 Access to Medicines Index, an independent ranking of 20 research-­ focused pharmaceutical companies based on 106 indicators. We are pleased with this score, partic-­ ularly as the index focused on diseases outside our areas of specialty, and so did not take into account our EDUCARE cancer initiative or diagnostics access programmes.

cancer plan. This plan includes the construction of new cancer centres, expanded screening programmes, and education and awareness initiatives. We also partner with ALSC to provide access to our cancer treatments for the eight million Moroccans living below the poverty line, who otherwise fall outside the healthcare system. ALSC buys the drugs at a much reduced price, and Roche donates

Access in emerging markets | Improving health­ care standards in middle-income countries present ­ a substantial market opportunity for Roche. The ­ market research agency IMS estimates that by 2012, the value of emerging markets will equal roughly 80% of US market value and exceed that of Western Europe. Our emerging markets strategy focuses ­ on speeding up regulatory approvals and supporting market development, primarily in major emerging economies such as Brazil, China, India and Russia. Every country’s healthcare system is at a different stage of development and has different needs. We work with governments in each country to help establish appropriate policies, processes and pro­ grammes, such as disease awareness, local clin-­ ical trials and training for healthcare professionals. We also develop specific pricing programmes for individual emerging markets, where many patients cannot afford long-term treatment for diseases ­

the money received to help strengthen healthcare infrastructure in the country. In 2010 1,300 cancer patients received free treatment as a result of this partnership. Our efforts are paying dividends, as the market for cancer treatments has more than quadrupled in the last five years. At a special ceremony in November 2010, Roche accepted the International Award from Princess Lalla Salma for our efforts.

such as cancer, hepatitis C and rheumatoid arthritis. In 2010 we negotiated commercial access pro­ grammes in middle-income countries for our hepatitis drug Pegasys, as well as for our cancer drugs ­Avastin, Herceptin, MabThera and Tarceva. For example, India has a high hepatitis C infection rate, coupled with low levels of diagnosis and limited

Impact of our HIV access programmes HIV-infected patients

HIV-infected patients living

living in countries eligible

in countries eligible for

for no-profit medicines

reduced-price medicines

68 %

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 108

83 %

28.01.2011 11:54:16

Corporate Responsibility

access to treatment. Counterfeit medicines present further challenges. Our Pharmaceuticals and Diag­ nostics Divisions have set up screening camps, blood banks and dialysis clinics to help overcome these problems. We have also engaged supply chain secu­ rity experts Kezzler to provide encryption software that enables consumers to verify that their medicine is genuine when they buy it, using their mobile phone. Cost-assistance programmes are available in India based on the recommendation of the treat­ing doctor. As a result of these combined efforts, the number ­ of patients receiving Pegasys and our cancer drugs has dramatically increased. Access in the developed world | Even in countries with advanced healthcare systems, many people ­ cannot afford treatment or the insurance to pay for ­ it. In the United States, Genentech helps patients ­ to access our medicines, regardless of their ability to pay. Genentech Access Solutions helps insured patients navigate the complexities of health insurance ­ coverage by explaining what their policy covers and what they need to pay for, and by helping them ­ find payment support programmes where possible. ­ In 2010 we assisted more than 107,000 people. The Genentech Access to Care Foundation (GATCF) provides free medicines to uninsured and underin­ sured patients who meet certain financial and medi­ cal criteria. In 2010 GATCF provided free medicines ­ to more than 47,000 patients. Safe and ethical clinical trials Clinical trials are essential to demonstrate that new medicines are safe and effective and that diagnostic tests provide useful data. They also provide impor­ tant information about the cost-effectiveness of ­ a treatment and how this improves quality of life. In addition, trials provide participating hospitals with educational, financial and medical support, and give patients access to the latest therapies. Patients receive free treatment during the trial, and until the drug is available through the healthcare system if ­ no approved alternative exists. We have strict policies and processes to ensure the safety, well-being and legal rights of people taking part in clinical trials. In addition, we do not perform

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 109

Roche Business Report 2010

109­

trials in countries where we do not plan to market the medicine being tested. We incorporate the Inter-­ national Conference on Harmonisation (ICH) — Good Clinical Practice (GCP) guidelines into our clinical ­ trial programmes, and train, monitor and audit all those involved to ensure compliance. In 2010 we revised the information we provide to patients taking part in Roche trials with help from the European Genetic Alliances Network (EGAN), to make it clearer and easier to understand. Clinical trials

Number of clinical trials

2010

2009

2008

1,429

1,552

1,596

30,006

31,447

29,886

327,804

302,063

277,674

Number of healthcare centres involved Number of patients in phase I–IV clinical trials Roche and Genentech.

People can search for clinical trials to take part in ­ or learn from the results of completed trials at ­ www.roche-trials.com. As of 31 December 2010 ­ the website contained details of 842 protocols ­ and 385 trial results. These studies cover more than 100 conditions including Alzheimer’s disease, asthma, around 30 cancers, cardiovascular disease, depression, diabetes, hepatitis, HIV/AIDS, influenza and obesity. The website had 194,241 visitors in 2010. Details of our clinical trials are also available through the International Federation of Pharma-­ ceutical Manufacturers and Associations (IFPMA) clinical trials portal, and the US National Institutes ­ of Health’s global registry. We store biological material used in clinical trials, such as tissue, organs, blood and other bodily fluids, in human specimen repositories, or ‘biobanks’. ­ This material is invaluable for learning more about diseases and exploring possible treatments. ­ They also contain sensitive information about the person providing the sample. We are dedicated ­ to protecting donors’ privacy and ensuring they are fully informed about how their sample and data ­ will be used before they agree to take part in a trial. We apply equally strict measures to all personal data about customers, suppliers and employees, in line with our directive on the protection of personal data.

28.01.2011 11:54:16

Can I handle

Disease area

Oncology

Indication

First-line metastatic colorectal cancer

Trial

AVEX (Avastin in the Elderly with Xeloda), MO19286

No. of patients

280 — fully recruited

No. of study sites

54

No. of countries

10

Daisy D., St. Michael’s Hospital, Oncology Clinical Research Group, Toronto

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 110

28.01.2011 11:54:43

this   ?

Jane A., Senior International Clinical Trial Manager, Roche Basel

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 111

28.01.2011 11:55:07

Phase IV clinical trials with Avastin in advanced colorectal cancer

Creating value for patients means doing post-approval trials so an effective medicine can benefit an even wider population Increasing the number of patients who can benefit from Avastin

ML18147 (TML)

820

2012 *

ML20907 (CAIRO3)

2013 *

780

ML21768 (AIO0207)

2013 *

760

Duration of treatment

ML19033 (NordicACT)

New chemotherapy combinations

249

2012 *

MO18420 (DREAM)

640

2013 *

ML21662 (TRIBE)

2014 *

450

Avastin

MO19286 (AVEX) MO18725 (OLIVIA)

Special populations

280

2012 * 2014 *

* First results expected

80

Number of patients in trial

Nearly a million patients have been treated with Avastin since it was first launched in 2004, and this breakthrough cancer medicine is being developed further in an extensive clinical trial programme. Cancer treatment is constantly evolving as oncologists try new drug combinations. Phase IV clinical trials, conducted after a medicine has entered the market, can generate valuable new insights, even for a drug as thoroughly studied as Avastin. Phase IV trials provide important additional information on safety and efficacy in the ‘real-life’ setting of routine oncology practice, and on the use of Avastin in special populations, such as the elderly. Many phase IV trials are further evalu­ ating Avastin in patients with metastatic colorectal cancer. Some are designed to determine the optimal duration of treatment, while others are investigating new combinations of Avastin with other medicines.

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 112

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Corporate Responsibility

Organ transplantation | In 2010 an NGO raised concerns that organs used in two Roche clinical trials in China may have been harvested without consent, and possibly from executed prisoners. The trials into the use of the immunosuppressant CellCept in ­ organ transplants involve 298 patients at 16 accred­ ited transplant centres, and are being carried out ­ to establish whether the standard CellCept dose will safely and effectively prevent organ rejection in ­ people of Chinese origin. For clinical trials in China we follow the same scien­ tific, medical and ethical standards as in all other countries. We support a worldwide ban on any use of organs from executed prisoners, as well as on the death penalty. However, as in many countries, Chi­ nese legislation prevents pharmaceutical companies from determining the origin of transplant organs. We will complete the two trials but have no plans to carry out further transplantation trials in China at ­ this stage. Any future trials will continue to adhere to ­ the Declaration of Istanbul on Organ Trafficking and Transplant Tourism and the WHO Guiding Principles on Human Cell, Tissue and Organ Transplantation. We contributed to changes in Chinese legislation in 2007. As a result of these changes, the number of transplants from living donors has increased. Efforts to introduce a system for people in China to sign their consent to donate an organ are also having a positive effect. We strongly believe that organ do-­ nation by freely consenting donors is the most effec­ tive way to contribute to an ethical and sustainable solution in this area of medical practice. We welcome ­ all support in this area, to improve the situation for patients in need of organs. Patient safety Any medicine may cause side effects in some patients. Our priority is to make sure the benefits ­o utweigh the risks. We have robust processes in ­ all countries to monitor how patients react to our ­m edicines. We regularly analyse medicines against various reference databases to help us spot poten-­ tial safety risks. All products in clinical development have a safety management plan, and all marketed medicines have a risk management plan reviewed and approved by major health authorities.

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We investigate all reported side effects to find out whether our product caused them. If there is a link, we re-evaluate whether the benefits of the medicine or test still outweigh the risks. We also have proce­ dures in place to promptly inform patients, physicians, healthcare providers and regulators of any new prod­ uct safety information. We update product labelling and information with new safety information as required and, when necessary, write to healthcare providers with updated advice on the use of our products. We have a strict product recall process to ensure we can withdraw products rapidly on the rare occasions that quality problems do arise. In 2010 there were no recalls involving the public. Patient advocacy Transparency is essential when pharmaceutical com­ panies partner with patient advocates. We declare our patient group partnerships on our website, along with a short description of the partnership’s activi­ ties. We also declare significant or meaningful non-­ financial support, as guided by the European Fed-­ eration of Pharmaceutical Industries and Associations (EFPIA). Our position statement and guidelines for working with patient groups describe our approach and are available on our website.

Patient groups are important partners for Roche. They give us insight into the challenges facing patients and their families, and share our interest in helping patients to understand and manage their condition. Examples of our patient advocacy in 2010 include running workshops in Frankfurt, Germany, and Brus­ sels, Belgium, to help patient groups improve the support they provide people living with disease. In

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France, the Roche Foundation organised a Chronic Disease Meeting in May 2010. This event, which will now be held annually, brought together almost ­ 300 patients, patient representatives and healthcare professionals to discuss ways to improve quality of ­ life for patients with chronic disease. The Foundation ­ also launched a new patient testimony website, ­ www.lavoixdespatients.fr, which publishes patient experiences and shares them through links to ­ social networks such as Facebook and Twitter. Patient education and awareness Our responsibilities do not stop once we have sup­ plied a product. We also help healthcare professionals and patients to fully understand their disease and treatment options, how to use our products correctly, and any other services available for improving out­ comes. Examples include the Accu-Chek Connect website and coaching programmes, which help diabetic patients to link their behaviour to their condition. We also provide support services for our cancer medi­ cines, including calls from trained oncology nurses to help patients manage their therapy, treatment diaries to record and learn from their experiences, patient treatment calendars and appointment reminders.

Chugai also supports efforts to raise disease aware­ ness. In June 2010 the company held an event to promote the importance of early detection and treat­ ment of rheumatoid arthritis, which affects around 700,000 people in Japan. Awareness days in eight Japanese cities brought attention to the impor-­ tance of detecting colon cancer early. For the second year running, the campaign used a giant inflatable colon with information posted on the walls, for visitors to walk through and learn how to help prevent ­ colon cancer during daily life. In December Chugai sponsored an event run by the cancer charity ­ Medicine and Humour, which helps patients and their families to manage the disease. More on the Web • Personalised healthcare: www.roche.com/phc_in_r_d • Roche position statements on PHC, access to medicines and

• • • •



Our Bag of Hope programme partners with the ­ Juvenile Diabetes Research Foundation (JDRF) to distribute bags containing information and dia-­ betes supplies to newly diagnosed type 1 diabetics. To date, this project has helped nearly 100,000 patients to adjust to life with their condition. In 2010 Roche received JDRF’s Chancellor’s Award for ­ this work.

• •



diagnostics, pricing, neglected diseases, and working with patient groups: www.roche.com/policies_guidelines_and_positions Access to medicines report: www.roche.com/ access_to_healthcare Programmes in LDCs: www.roche.com/ programmes_in_least_developed_and_developed_countries Programmes in developed countries: www.GenentechAccessSolutions.com Roche trials and patient safety: www.roche-trials.com; www.roche.com/clinical_trials; www.roche.com/managing_medication_safety List of patient groups supported: www.roche.com/patient-groups Accu-Chek Connect: www.accu-chekconnect.com International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) clinical trials portal: www.ifpma.org/clinicaltrials US National Institutes of Health’s global registry: www.clinicaltrials.gov

In addition, we help healthcare professionals and patient groups to produce newsletters and magazines, information packs, guides for friends, family and ­ caregivers. We also supply needle boxes, counselling hotlines and education programmes. For example, ­ we have partnered with the European Genetics Alli­ ances Network to produce a series of simple leaflets in several languages, which answer patients’ ques­ tions on topics such as clinical trials and bio-banks. These are available at www.biomedinvo4all.com. ­ In 2010 we added leaflets on Personalised Health­ care and the Social and Psychological Aspects ­ of Diagnostic Testing.

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People

Our pursuit of excellence in science provides direc­ tion and purpose during challenging economic times. More than ever, we rely on our people to develop ­ and deliver innovative products to patients and thereby contribute to the future of healthcare. It is the commitment of our 80,653 employees, and their demonstration of our values of integrity, courage and passion, that make a real difference in the lives of patients. As a company dedicated to innovation and science, ­ a highly skilled, passionate and motivated workforce is at the core of who we are and what we do. We want to be a truly great place to work for today’s most talented people, by giving them the chance to make their mark, providing an environment where they can grow and recognising them for their achievements.

As changing demographics and talent shortages con­ tinue to impact the labour market, competition for highly skilled and experienced employees remains an ongoing challenge. We are constantly stepping up our practices to source and attract the best talent in the healthcare industry. Personal and professional development is very impor­ tant to our employees and a priority in an innovationdriven company like ours. This remains the case dur­ ing the significant organisational changes currently underway. We strive for our people to reach their full potential and support them at every stage. We believe in rewarding achievement and commit­ ment with fair and attractive compensation. This approach contributes significantly to attracting, reward­ ing, recognising and retaining the right ­p eople.

Selected external awards and recognitions (with top rankings) Rank 2010

Award

Roche site

1

Science Magazine’s Top Employer Survey

Genentech

1

Universum — The Swiss Professional Survey 2010

Roche Basel

‘Health/medicine sector’ 1

CRF Institute

Roche Germany

‘Top employer for engineers’ 1

CRF Institute

Roche Switzerland

‘Top employer for Switzerland’ 3

San Francisco Business Times

Genentech

‘Best Places to Work in the Bay Area’ 4

Fast Company Magazine’s

Genentech

‘World’s Most Innovative Companies 2010’ 4

San Diego’s Best Places to Work

Genentech

4

Great Places to Work — Denmark

Roche Denmark

Best Pharma Company/Best Multinational Company/ Best medical company 5

Science Magazine Top Employers Survey

Roche Basel

7

Fortune’s ‘100 Best Companies to Work For’

Genentech

‘Large Companies’ 8

Great Places to Work — Austria

Roche Vienna

‘Best Employers with 50–250 Employees’ 8

Great Places to Work — Spain

Roche Madrid

‘Best Workplaces 2010’ 9

JRA Best Workplaces — New Zealand

Roche Auckland

‘Small to Medium Sized Business Category’ 9

Great Places to Work — Urugay

Roche Urugay

‘1 st place amongst pharmaceutical companies’

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People from diverse backgrounds bring a range ­ of perspectives to their work, helping to drive inno-­ vation. This is why we value the experience of all employees and foster an inclusive working environ­ ment in which everyone feels respected regardless ­ of age, background or gender, where they can develop their careers and see the positive impact ­ of their work. The way we implement the organisational changes taking place as part of our recently announced ­ Operational Excellence programme will test our com­ mitment to remaining a great place to work. Being a great place to work Roche was recognised as an attractive employer by ­ a number of awards in 2010. For example, Genentech

Programmes to ensure diversity in the workforce

Global and local leadership programmes to develop inclusive leadership behaviours and foster a culture of diversity

Sponsored employee affinity groups, associations and networks to provide support, exchange of ideas and share learnings

Programmes to improve understanding of the needs of employees with disabilities and to increase number of hires

Mobility programmes to promote international transfer of employees across the globe

has been named best employer in the healthcare industry by Science magazine for eight of the last nine years, and in 2010 Roche rose from 17 th to 5 th place in the same survey. Survey participants gave both companies high ratings for being innovative leaders in the healthcare industry and for doing important, high-quality research. Activities in the field of social responsibility were also rated highly and contrib-­ uted to the positive results. Roche was also recog­ nised in rankings by Universum, Top Employer, and the Great Place to Work Institute ™ . Championing diversity In 2010 Roche’s Executive Committee committed to increasing the percentage of female leaders in key positions by 50% by 2014. Key positions are defined as those roles that are critical to business delivery, drive significant value, and have the greatest breadth and depth of responsibility. Key positions are closely linked to organisational structure. We will therefore revise our current list of around 400 positions to reflect the recent changes that have taken place. Given the commitment to increase female leaders ­ in key positions, we have replaced our previously reported women in senior leadership metric (based on approximately 2,000 positions), with the per-­ centage of women in key positions. The baseline for this new metric was 13% women in key positions ­ in December 2009. We are already seeing a positive impact from the various actions taken to support women in leadership, with an increase of women in key positions to 16% in December 2010. Gender diversity 2010

2009

2008

Women in total ­w orkforce

46%

46%

46%

Women in management

37%

37%

37%

15%

9%

8%

16%

13%

NA

Women in top Attraction and sourcing pro­ cesses and standards to ensure diversity of candidate pools

Programmes focusing on older employees which value their expierience and retain knowledge

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120 executives Women in key positions

Gender is only one element of our commitment to diversity, and we do not tolerate discrimination of any form, as stated in our global Employment Policy. ­ Our approach is to embed diversity in all our main processes and objectives. Our Human Resources

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Corporate Responsibility

function has measures and goals in all key processes relating to recruiting, developing, promoting and ­ recognising employees, to support a diverse work­ force and inclusive environment. In the context of ­ our diversity goal, we have extended our range of programmes and initiatives to encourage and safe-­ guard employee diversity, and support a number of employee associations and networks. These include Roche Basel’s Family and Careers and Women in Leadership groups, Genentech Women Profession-­ als (GWP) and Genentech Out &  E qual (GO & E), Strengthening Ties Across Generations Seniors (STAGES), and African Americans in Biotechnology (AAIB). Fostering innovation Innovation is the core of our business, and is driven by diverse approaches, ideas and experiences. Our talent management processes are all designed to recognise and drive innovation. In addition we con­ duct a broad array of specific and localised activi-­ ties. Our Pharma Research and Early Development research organisation introduced a scientific career ladder in 2010 and sponsored a major recognition programme, the Leo Sternbach Awards for Innovation in Chemistry. This year, the award recognised Dr Brad Graves and his team for new classes of com­ pounds in the area of cancer treatment. Research organisations at both Roche and Genentech partici­ pate in internal and external science conferences and write publications in prestige journals. In 2010 Roche published more than 1,200 sientific articles, ­ of which nearly 60 were in high impact journals such as Nature, Cell, Science and the New England Journal of Medicine. Our Post-doc fellowship programme awards grants to our best scientists, enabling them ­ to conduct exploratory research, and strengthening our R &  D talent pipeline. Several Genentech scien­ tists received prestigious external science awards in 2010, among them Dr Richard Scheller, who received the Kavli Prize in Neuroscience, and Dr Napoleone Ferrara, who won the Lasker-DeBakey Clinical Medi­ cal Research Award. Attracting employees | To attract talent, we continue to leverage our strong and differentiating employer brand through careers websites in 91 countries. These sites had approximately 1.7 million visitors in 2010. In addition, the Genentech career website had 1.2 million visits. We received 266,110

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applications * for specific jobs, and registered 167,800 new candidates * to the Roche Group Talent Pool — a database of job seekers interested in becoming Roche employees. Advertising roles internally also offers greater op-­ portunities for Roche employees, as by joining the Roche Talent Pool they are notified by e-mail as ­ soon as we post a position matching their prefer­ ences and skills. We regularly conduct a global survey to gauge the effectiveness of our recruitment services and train ­ our recruiters worldwide on the latest methods and strategies. Throughout the year, a small group of ­ our recruitment specialists attended business con-­ ferences and events at top international business schools to give prospective employees the chance to learn more about our company and for us to add ­ targeted talent to our pipeline for the future. These and many other initiatives, combined with the work ­ of our professional recruitment teams around the globe, ensure our pool of diverse and talented candi­ dates continues to grow. In 2010 Roche scored amongst the top companies ­ on talent attraction and retention in the Dow Jones Sustainability Indexes. The Talent Selection Survey shows a 10-point in-­ crease in the percentage of Roche recruitment ­ managers who believe their new hire performs well compared with their peers. This places us above ­ the benchmark in this external survey of over 75 mul­ tinational corporations, and suggests that we are successfully attracting top talent. Developing employees | In 2010 we enhanced our support for employees to develop functional, profes­ sional and leadership skills. This year 71% of our employees took part in career development planning discussions. In addition, we work with employees individually to guide their development according to their needs, interests and specialities. Consistent global training materials now reflect our development philosophy, which is based on employee engage­ ment, individual growth and organisational success.

* Excluding Genentech, Ventana and Chugai.

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Our leadership development programmes instil what ­ it means to be a leader at Roche, and equip managers to live up to these expectations. To increase the con­ sistency of these programmes worldwide, in 2010 we created a global framework for leadership develop­ ment to be implemented in phases by 2013. This effort will be supported by the continuing rollout of a global Learning Management System, and will provide easier access to learning and development support.

Leadership pipeline 2010

Number of high-potential leaders Percentage of women high-potential leaders

Our Diagnostics and European Pharmaceuticals affili­ ates offered nearly 38,300 courses in 2010 through our common training model, whether online or class­ room-based training sessions, with almost 45,800 employees taking part. Learning and development 2010

2009

2008

150

146

139

1,829

1,794

1,734

1.87

2.16

2.4

23

26

29

780

656

565

Total training ­investment (million CHF)

38%

Percentage of women in leadership programmes

32%

Internal staffing rate of key positions (Top 120)

Our business is becoming increasingly global, and this year we introduced a partnership with GlobalEnglish, a service that provides online business-Eng­ lish training. The on-demand service gives employees access to fast, cost-effective and intensive language courses. To date, over 1,200 employees from 38 coun-­ tries have used the service.

4,681

85%

We completed our suite of global leadership pro­ grammes with the introduction of a module for global employees with high potential in the longer term. Global programmes are now available for high-poten­ tial leaders at all career stages. We have also enhanced our suite of programmes by updating con­ tent to focus on inclusive behaviour and cultural awareness, as well as to build greater collaboration and understanding across divisions, regions and functions. Finally, we have improved the way we select participants, set learning goals and measure the effectiveness of the programmes. Our leadership development programme proved suc­ cessful when several outstanding internal leaders stepped into critical roles during the organisational changes that took place this year. The internal fill rate for all positions is 45%, and 85% for the top 120 executive positions.

Training spend per employee (CHF) Total number of ­t raining hours (million) Average training hours per employee Number of postdocs, students and interns  * * Excluding Chugai.

Developing tomorrow’s leaders | In 2010 we con­ tinued our progress in identifying and developing high-potential leaders capable of taking on critical senior roles in the short, medium and long term.

In 2010 the Dow Jones Sustainability Indexes rated Roche as the best company in the Healthcare sector for human capital development, contributing to our position as healthcare supersector leader. International mobility | We consider international experience to be an important aspect in the pro-­ fessional development of future leaders. In 2010 we saw a marked increase in the number of new inter-­ national assignments, from 247 in 2009 to 364 in 2010. This was partly due to the Genentech integra­ tion and resulting exchange of talented employees between California and other parts of the world. Our 626 expatriates and cross-boundary employees rep­ resent 55 different nationalities, and 27% are women. Moving abroad can be stressful, so we try to make the experience as smooth as possible. In April 2010 we launched revised international assignment ­

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policies, offering additional flexibility to assignees. We now also offer a childcare allowance and in-­ creased spousal support. In addition, we introduced a standard healthcare programme for global assign­ ees, which has come into effect on 1 January 2011. This programme offers competitive health insurance to assignees and their families through a leading specialist provider. Rewarding and recognising employees Performance management | In 2010, 92% of our employees took part in performance management ­d iscussions with their managers to reach a shared understanding of their performance objectives and achievements through the year and determine com­ pensation. As the mobility of our employees increases and many leaders manage organisations across country bor­ ders, we are working to align our performance man­ agement principles globally in 2011 and 2012. The new common approach will put greater emphasis on an ongoing dialogue between employees and man­ agers. We believe this continuous two-way feedback process will contribute to timely input about ideas ­ for improvement, better employee development and ultimately maximise scientific innovation and busi­ ness results. Compensation | Our total remuneration investment in 2010 amounted to approximately 11.9 billion Swiss francs. Our base-pay packages reward performance and commitment, while our bonus schemes incentivise employees for innovation and outstanding results ­ that support our strategic objectives. Bonuses reflect both individual and team achievements, as well as overall business performance. We want employees to share in our success. Through Roche Connect, employees in most countries can purchase non-voting equity securities at a discount of up to 20%. In 2010, 16,824 employees in 42 coun­ tries took part in this programme. This represents approximately 37% of eligible employees, and securi­ ties worth 61 million Swiss francs were purchased ­ in 2010. Additionally, 15,410 managers and employees received non-voting equity securities through the Roche Long Term Plan.

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During 2011 and 2012, our goal is to roll out our glob­ ally aligned compensation strategy, supported by ­ the new Global Performance Management principles. The new common approach will ensure our company remains competitive and sustainable, and continues to create value for all stakeholders. By maintaining a strong link between performance and compensation, we will preserve employees’ opportunity to share in our success. Benefits | Benefits are an important part of the total reward package we offer our employees. Most programmes are tailored to local markets and regu-­ lations, but typical examples include financial support for employees and their dependents upon retirement and in case of illness, disability or death. These bene-­ fits usually supplement local state systems. We also offer wellness programmes that encourage a healthy lifestyle, and benefits that support employees’ work/ life balance. Over 91% of affiliates offer extensive ben­ efits plans. Most go beyond state schemes, and include free access to a wide range of medical ser­ vices. In 2010 we worked to make affiliates’ benefit pro­ grammes consistent within countries. This will ensure employees are treated equally and improve efficien-­ cy by consolidating vendors. In the United States, ­ our combined workforce of 24,000 employees will all enjoy the same attractive and competitive benefit ­ programmes from 1 January 2011. In the United Kingdom, we have extended our flexible benefits pro­ gramme to cover all Pharmaceuticals and Diagnostics employees from 1 April 2011. In addition, we have introduced a global assistance programme to support employees and their families while travelling abroad. This will provide access ­ to medical and security information and emergency assistance from 1 January 2011. During 2010, we continued to closely monitor the status of our major pension funds. Alongside some cash injections, we initiated changes in several ­ local pension plans. Some of our major pension funds removed early retirement incentives and have intro­ duced more flexible retirement models in anticipation of an ageing workforce.

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Aligning human resources processes Over the course of 2011, Genentech and our North American pharmaceutical operations will be incorpo­ rated into our Common HR Information Solution (CHRIS). CHRIS enables globally aligned processes that have been adjusted to reflect the best prac-­ tices of both Genentech and the rest of the Roche Group. Currently, CHRIS covers 181 affiliates and representative offices and 77% of Roche employees.

More on the Web: • Employees: www.roche.com/employees • Group policies, positions and guidelines: www.roche.com/policies_guidelines_and_positions

• Global careers portal: http://careers.roche.com • Employment policy: www.roche.com/employment_policy.pdf • Core standards: www.roche.com/commitments

Human rights and labour relations The Roche Employment Policy governs human rights and labour relations. The Chief Compliance Officer monitors implementation and compliance with this policy and serves as a contact for all employees. We respect the right of employees to freedom of as-­ sociation and collective bargaining. More than 7,030 of our employees are trade union members and ­ over 32,110 are members of organisations that freely represent them (in countries where this is legal). ­ The Roche Europe Forum represents the interests of almost 35,800 employees in 26 countries. Our directive on the protection of personal data ensures that we safeguard employee information and comply with relevant local legislation. A dedicated Employee Relations Officer monitors the level of employee engagement and ensures that appropriate programmes and policies are in place to ensure fair, transparent and respectful treatment ­ of employees, including during the implementation ­ of our Operational Excellence programme. We ­ will manage this programme carefully, keeping em-­ ployees well informed throughout, supporting ­ them through the changes and ensuring those leav­ ing the company are treated with fairness, dignity, ­ and in a socially responsible way. Our locally defined severance packages typically include a range of measures to reflect the different needs of those af-­ fected. Measures include severance pay with ­ options to convert to time, outplacement services, counselling, careers fairs and centres, retraining ­ and redeployment options, as well as an increased focus on internal recruitment and opportunities.

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Key figures

Roche Business Report 2010

121­

Employees (FTE) by function

Our employees Roche employs 80,653 people in 108 countries, ­ clustered in five main regions. Our workforce ­ represents more than 131 nationalities, with 24% ­ of employees working in R &  D .

Servicing

2010

2009

2008

15,160

13,408

12,292

14,770

16,395

15,381

27,536

28,682

28,426

19,039

18,894

18,518

Manufacturing & Logistics Marketing & ­D istribution Research &

Roche employees worldwide (Full-Time Equivalents/FTE)

­D evelopment General & ­A dministration

2010

2009

2008

Europe

35,811

35,310

34,570

North America

23,695

25,412

25,823

Asia

14,964

14,169

13,065

4,633

4,930

4,988

Australia

858

891

887

Africa

692

795

747

80,653

81,507

80,080

Latin America

Total

Total

4,148

4,128

5,463

80,653

81,507

80,080

Staffing rates 2010

2009

2008

8,279

8,192

9,169

Internal staffing rate

45%

29%

35%

External staffing rate

55%

71%

65%

New hires

Employees (FTE) by operating divisions 2010

Pharma  1 Chugai Diagnostics

48,181 2

6,852

6,632

6,590

26,194

25,508 2

25,404

Other

1,272 80,653

2

2008

46,335

Total 1

2009

47,551

1,186 2 81,507

535 80,080

Turnover *

Including Genentech. 2009 restated to reflect consolidation of Finance and IT into Other.

Employees by contract types

Regular (FTE)

2010

2009

2008

78,537

79,632

78,216

Fixed Term (FTE)

Retaining employees In 2010 staff turnover increased from 7% to 9.5%. Driver of the increase is the first wave of employerrelated terminations as part of Operational Excel-­ lence in Australia, Latin America and North America.

2,116

1,876

2,184

Full Time (headcount)

76,767

77,866

76,058

Part Time (headcount)

4,845

4,562

4,342

2010

2009

2008

Total

9.5%

7.0%

9.9%

Europe

5.7%

5.1%

9.5%

North America

12.3%

7.8%

10.4%

Asia

10.0%

7.2%

8.1%

Latin America

19.3%

13.4%

14.3%

Australia

20.2%

10.9%

15.1%

Africa

16.8%

18.3%

11.1%

* Regular and temporary employees under Roche contract.

Reasons for leaving

10_Roche_AR10_ENG_Corporate Responsibility Part1.indd 121

2010

2009

2008

Employee-initiated

46%

51%

56%

Employer-initiated

44%

40%

24%

Neutral

10%

9%

20%

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Corporate Responsibility

Society

Our responsibility extends beyond the healthcare products we provide to patients and the well-being of our employees. We are also committed to supporting the welfare of communities in which we operate.

Breakdown of giving by area |

Our donation programmes seek to give back to communities in four strategic areas: humanitarian and social projects; science and education; arts and culture; and community and environment. In each ­ area, we support programmes that meet the criteria defined by our policy on philanthropic donations ­ and non-commercial sponsorship, as well as programmes that we believe will make a lasting, ­ tangible difference.

Science

Humanitarian and social projects

A rigorous approach To create real change, we have developed ­ a targeted strategy which hinges on four criteria: • Innovative: applies creative and effective solutions to society’s challenges • Sustainable: delivers enduring effects in a dynamic, resource-constrained world • Collaborative: draws on the strengths and capacities of respective partners • Outcome-driven: provides tangible long-term benefits to the people involved

87%

and education

6%

Arts and culture

4%

Community and environment

3%

Launching a programme or contributing to a cause is only the first step in Roche’s social engagement. We carefully consider what we want our philanthropy to achieve, and continually monitor progress towards the desired impact. Therefore, we track the outcomes of our projects, not just the initial investment. Sample philanthropic impacts Patient and community health outreach

— 2 ,000 orphaned children given primary healthcare in Malawi — C ourses for 200 community health workers held in South African villages

Community rebuilding — 5 3 bore holes rehabilitated and strengthening

We make most of our contributions locally, so that each business unit can best address the needs of its own community. Our businesses conceive and ­ implement their community activities to provide the greatest possible impact given the specific challenge and available capabilities.

in 2010

in Uganda — 18 primary school classrooms built and furnished in Malawi

Education

— 100 students receive

enhancement and

­s econdary scholarships;

opportunity

6 receive post-secondary ­a ssistance in Malawi — 6 students enrolled in 6-week

Some issues call for global intervention. In such cases, we work with our international network ­ of partners to support projects that will meet society’s most critical needs. These projects do not often make headlines, but nevertheless help to resolve ­ fundamental obstacles to good health, such as a lack of basic medical supplies or trained healthcare ­ professionals. By mobilising our resources and experience across our four strategic areas, we aim to make a notable difference.

Humanitarian and social projects Improving well-being is at the core of Roche’s philosophy. Humanitarian and social projects account for the largest portion of our giving — and focus on supporting the most vulnerable members of society, often children.

Managing impact Developing and managing our philanthropic activities requires careful coordination. Principles and priorities are set at the Group level, and implemented lo­cally by business units and partners.

Employee participation in our programmes amplifies their impact. For example, 19,500 employees from more than 100 affiliates participated in the 2010 annual Children’s Walk. They generated over 1.2 million Swiss francs, including matching funds from ­

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international research exchange in Germany and the United States

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Corporate Responsibility

the company. This year, 65% of this money will go to support day care centres in Malawi that provide food, shelter, education and skills training to AIDS orphans. The remaining 35% will support local ­ charities that support vulnerable children, selected by affiliates. It is important that employees see the impact of their efforts. Each year, nine of the most successful local Children’s Walk fundraisers visit the programmes we support, to reaffirm our commitment and witness ­ the difference we make in Malawi. They then return home and act as ambassadors for the walk and its objectives. Access to healthcare should be universal, but in many countries this is not the case. We have a number ­ of programmes that help to build infrastructure, provide basic healthcare or transfer knowledge and expertise. For example, the Roche-sponsored Phelophepa health train delivers health supplies and services to poor and remote South African communities. In ­ 2010 — the train’s 16 th year — Roche refurbished the primary health coach, improving ventilation, privacy, and disabled access. Science and education Excellence in science is critical for Roche. We aim to inspire future generations of scientists who will ­ drive the discovery of new treatments and diagnostics for today’s unmet medical needs. We provide young scientists with opportunities to expand their experience in the field through our International Roche Postdoc Fellowship Program. In 2010 we built up the programme to 100 positions with two-year grants, expandable up to four years based on scientific merit. These are for joint R &  D projects with partner universities, including the first postdocs approved in China and Japan. In 2011, additional programmes are planned.

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rily through the 1,600 teachers Roche helped train. This year, we also expanded our Roche Genetics Education Programme, providing teaching materials for secondary teachers in the Basel region. With ­ four laboratory workshops and two Talking Science workshops, the school-based training model raises understanding and interest in genetics. Arts and culture Innovation comes in many forms. We see a strong creative connection between science and the arts. In partnership with the Lucerne Festival, the Cleveland Orchestra and Carnegie Hall, we regularly commission new works from contemporary composers. This August, we welcomed the world premiere of Toshio Hosokawa’s orchestral piece ‘Woven Dreams’, and announced our sixth commission to composer Sofia Gubaidulina. We provide further support for crea-­ tivity and expression through monthly Roche ’n’ Jazz events, where we bring together the local community with world-class musicians to explore modern, inventive music. Now in its fifth year, Roche ’n’ Jazz has entertained more than 15,000 people with performances by 55 ensembles. Community and environment We believe that individual well-being is closely tied ­ to healthy communities. For example, in Kuala Lumpur Roche has established a community-based reha-­ bilitation project with Malaysia’s Department of Social Welfare. The project provides occupational therapy for children with mental, physical, developmental or emotional conditions in rural communities. This ­ helps the children improve basic motor functions and reasoning abilities, and therefore to lead indepen­ dent and productive lives. More on the Web • Roche social programmes: www.roche.com/society • Roche ’n’ Jazz: www.roche-n-jazz.net • Roche Re & Act: www.react.roche.com

Science and health matters often involve ethical considerations. Roche Nutley supports the New Choices, New Responsibilities programme, which introduces middle- and high-school students to bioethics. The curriculum supplement has reached approximately 40,000 students since its introduction in 1990 prima-

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Responsible practices

Our reputation is one of our most valuable assets. ­ It is vital that all employees comply with laws, regulations and internal standards to fulfil our commit-­ ment to act with integrity. This is the minimum our stakeholders expect. For these reasons, we judge ourselves not only on our results, but also on how ­ we achieve them. Integrity and compliance The Roche Group Code of Conduct sets clear ex-­ pectations for our people. It guides employees on correct business behaviour, how to act with integrity, and how to speak up in case of compliance concerns. We encourage employees to speak to their line manager, the local compliance officer or the Chief ­ Compliance Officer. They can also report compliance concerns anonymously using the SpeakUp telephone line and web service. Launched in December 2009, SpeakUp operates in 47 languages and 98 countries, making it available to almost 70,000 employees. Between 1 December 2009 and 31 December 2010, 122 reports were made via the system. Roughly ­ half were general comments about Roche’s business, which are not classed as non-compliances. The ­ other half related to alleged violations of the Code of Conduct. Analysis of the issues reported shows that employees are using the SpeakUp Line responsibly. In 2010, 110 material business ethics incidents were reported in total, including seven cases reported through the SpeakUp line. After investigating each incident and taking corrective action where nec­ essary, we terminated 61 employment contracts as ­ a result of unethical behaviour. We carried out various activities to strengthen ­ compliance in 2010. We updated our online training programmes on our Code of Conduct and on anti-­ trust issues by clearly listing the options available for reporting concerns. In 2010 we began rolling out ­ a more user-friendly online training programme, called Roche Behaviour in Business (RoBiB), and set a ­ target for 95% of employees to complete it in 2011. We held several meetings for local compliance offi­ cers to share best practice in 2010. We now use the Genentech’s tagline ‘Compliance is good business’ ­ to communicate a consistent message throughout

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Roche. We asked local managers to implement a comprehensive anti-corruption compliance programme, and launched a global Roche Marketing and Sales Compliance Questionnaire to further ­ promote the importance of good business conduct. ­ We will continue these meetings throughout 2011. Risk and crisis management Our Risk Management Charter defines our risk management approach and responsibilities. It is available on our website along with a list of risks to our business. We use stakeholder feedback to help identify and assess social, environmental and ethical risks and opportunities, and include the most significant in the Group risk management process. We have in-­ troduced a new system to determine exposure from sales and marketing risks that are not yet fully mitigated. The Group and all subsidiaries have established crisis management teams to ensure we act quickly in an emergency. These teams regularly rehearse different crisis scenarios, alerts and escalation procedures. ­ We are using our experience of our pandemic preparedness plan in response to the H1N1 influenza pandemic in 2009 to strengthen our business continuity procedures globally. Sustainable supply chain We spent around 18 billion Swiss francs in 2010 with 3rd parties on raw materials, active pharmaceuti-­ cal ingredients and other direct spend, plus indirect spend like contract R &  D , licences, laboratory supplies, equipment, consultancy, marketing services and others. Ensuring that the companies supply-­ ing these products and services act responsibly is ­ an essential part of sustainable procurement. Roche is a member of the Pharmaceutical Supply Chain Initiative (PSCI) and endorses the PSCI Principles, which set standards for suppliers in the areas ­ of ethics, labour, health and safety, the environment, and related management systems. Our Supplier Code of Conduct, introduced in 2009, incorporates these Principles, as well as other important topics such ­ as innovation, financial security and supplier diversity. At the end of 2010 the majority of key suppliers ­ had provided their written commitment to the Supplier Code, which is now included in new supplier contracts.

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Risk

Roche supplier assessment — prioritisation Direct spend

Indirect spend

Contract manufacturers API manufacturers Hazardous-chemical manufacturers

CROs, R & D laboratories 3 rd -Party waste management Animals

Chemicals/Biotech raw materials Primary packaging

Temp labour, Logistics services Construction, Marketing services Fleet services, Travel, Facility management

Secondary packaging

Informatics, General & a dmin services Consulting services, Engineering services Equipment

Priority for auditing and improvement

The Roche Supplier Code of Conduct demands high ethical standards from suppliers. It further demands high standards on social responsibility, safety, health, environment and management systems. It also demands cooperation with suppliers on additional important topics such as innovation, economic sustainability and supplier diversity.

In May 2010 we introduced online training to teach procurement staff how to encourage sustainability among our suppliers. The training is available on our intranet in Chinese, English, German and Spanish. More than 3,000 employees have taken the course to date. Some classroom training sessions were also held. Our pharmaceutical division introduced a new Procurement Code of Conduct to guide procurement managers in responsible sourcing. We will continue to implement both the Supplier and Procurement Codes of Conduct during 2011. We also plan to work with selected high-impact suppliers to measure and reduce their environmental footprints, following a pilot project with a logistics supplier. We monitor compliance with our sustainability requirements at critical suppliers using internal and external audits. We take a risk-based approach ­ to prioritise the companies to audit, which factors ­ in risk levels by industry as well as previous sus-­ tainability performance. In 2010 we conducted 36 audits in the direct spend area (e.g. API, chemicals and biologicals suppliers, contract manufacturers). For the first time, we began audits of critical service providers. We audited 27

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contract research companies, temporary labour agencies, marketing agencies, logistics providers and other service providers. The majority of sup-­ pliers met our standards, while findings requiring action related mainly to labour conditions, health ­ and safety. We will work with suppliers to correct problems found and provide training to prevent future issues. As part of our work with the PSCI, we have begun to align our supplier sustainability audit protocol with those of other member companies. This will promote transparency and enable us to share audit findings, reducing bureaucracy and duplication of effort. We have successfully piloted the aligned audit proto-­ col with two suppliers so far. Responsible research Our business model relies on scientific excellence and a detailed understanding of the mechanisms of ­ disease, so we can translate scientific breakthroughs into innovative medicines and diagnostics that make a difference. However, ethical questions inevitably arise as we explore the potential of cutting-edge technologies. We carefully consider and manage any ­ concerns to make sure we maintain our integrity while making sure that no opportunities are lost.

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Ethics in R &  D | We have clear policies and procedures in place to preserve high ethical standards ­ in our research and development (R &  D ) activities. Our position on clinical research defines these stan­ dards and clarifies our views on specific areas of ­ concern. Employees who encounter an ethical dilemma in ­ their work, and cannot resolve this with their immediate colleagues, can contact our Global Ethics Liai-­ son Office. In 2010 this office received and resolved 23 queries, without the need for escalation. The ­ vast majority related to informed consent and the use of samples from biobanks. The Global Ethics Liaison Office consults experts within and outside the company to broker a solution as needed. In 2010 we merged our external Science and Ethics Advisory Group (SEAG) with the Clinical Research Ethics Advisory Group (CREAG) to form one indepen-­ dent body that advises us on ethical issues in our R &  D activities. The new SEAG comprises external experts in ethics, law and social science, as well as patient advocates. It will continue to provide advice as required and meet formally once a year.

We provide regular online ethics training for em-­ ployees and in April 2010 launched a new online module based on case studies. Animal welfare | We take public concern about animal research very seriously. We promote the use of alternative methods and work hard to identify options other than the use of animals. However, animal testing remains indispensable to biomedical research for scientific and legal reasons. Regulatory authorities require all healthcare companies to test the safety and efficacy of new drugs in animals before they can be used in humans. In 2010 we used 502,105 animals in our research, ­ a slight increase on 2009. For the first time, we also report the number of animals used by contractors carrying out research on our behalf — 55,913. Around 97% of all animals were mice and rats. We follow and promote the 3Rs approach to animal research. This means we replace animal tests where possible, reduce the number of animals used, and refine tests and animal welfare standards. All em­ployees and contractors who perform animal research for us are required to meet or exceed applicable laws and industry standards.

Key activities in 2011

Access to healthcare

Employee engagement

Expand successful ­ access programmes in developing countries ­ to other countries

Achieve positive ratings in employee engagement surveys (80% positive ratings by end 2014)

Diversity

Philanthropy

Suppliers

Increase percentage ­ of women in key positions (50% increase from ­ 2009 to 2014)

Systematically collect ­ and report outcomes of affiliate philanthropic ­ activities and corporate ­ signature programmes

Continue implementation ­ of both the Procurement ­ and Supplier Code of ­ Conduct



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We use incentives, training and communications to promote the 3Rs. These include the Roche 3Rs ­ Award for employees globally, which next takes place in 2011. This year we began work on a 3Rs database for sharing good practices throughout the Group, which will be launched in 2011. Roche was one of the founders of the new Swiss Charter on Animal Welfare, adopted in 2010 by Interpharma, the association of research-based pharmaceutical companies in Switzerland. The Charter ­ commits us to consistently high standards of ani-­ mal welfare through a programme of auditing, em-­ ployee training, stakeholder dialogue, promotion ­ of the 3Rs and management of external contractors. We will report our progress in implementing the Charter. Our Animal Welfare Ethics Committee became fully operational and met four times in 2010. The committee has developed recommendations for the use ­ of contractors for animal research and will examine all new studies using non-human primates (NHPs), particularly those carried out by contractors. The committee has created a questionnaire to help re-­ searchers submit NHP studies for examination. It also advises employees on best practices when working

Customer relationship management

Responsible marketing

Provide added value through customer satisfaction assessments ­ to meet or exceed ­customer expectations

Apply the new Sales & ­ Marketing Compliance Questionnaire Group-wide

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with animals. The committee covers Roche research facilities in Europe and the USA, and will include our Shanghai site and Chugai from 2011. Innovation and new technologies | Breakthroughs in science create opportunities for new drug dis-­ covery, development and delivery. For example, stem cells and their applications offer tremendous potential for relieving chronic pain and even curing serious conditions such as arthritis, diabetes and Parkinson’s disease. In particular, the discovery of induced plurip-­ otent stem cells derived from adult cells provides an alternative to embryonic stem cells, opening up additional opportunities in this promising field. We are involved in stem cell research partnerships, including the Institute for Stem cell Therapy and Ex-­ ploration of Monogenic diseases (iSTEM) in France and the Massachusetts General Hospital and Harvard University in the United States. In 2009 we established Stem Cells for Research (SCR) in Basel and Nutley to develop our expertise in this area. This group focuses on drug discovery, pre-clinical safety testing and disease modelling. We are committed to responsible and transparent stem cell research. We have therefore established

CR reporting

Green IT

Energy efficiency

Evaluate and implement improved IT systems ­ for reporting on key con­ tributions to healthcare ­ institutions, patient organisations, and individual HCPs

Promote best practices of use of virtual IT to reduce energy consumption and solutions to reduce travel and enable expanded communication

Reduce energy con­ sumption and improve energy efficiency ­ (10% reduction from ­ 2009 to 2014)



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Animals used in research (Roche and contract research organisations) | in 2010

Mice and Rats

97.1%

Other rodents and rabbits

1.1%

Dogs

0.3%

Primates

0.5%

Other (fish, frogs)

1.0%

binding principles for stem cell research in consul-­ tation with internal and external stakeholders, which we will publish in 2011. In partnership with biopharmaceutical company ­H alozyme, we are exploring a new method of drug ­d elivery that could make it possible to give biological medicines such as Herceptin and MabThera/­ Rituxan by subcutaneous injection rather than intravenously. Halozyme’s Enhanze technology allows subcutaneous injection of large volumes of medicine in just three to five minutes, making it more con-­ venient and cost effective than intravenous delivery.

Responsible marketing Strict regulations and industry guidelines govern ­ the sale and marketing of medicines and diagnostics, to make sure they are prescribed, administered ­ and used correctly, and that patients understand the benefits and risks of taking them. However, regulations vary from country to country, even within Europe. In 2010 Roche and other corporate members of the European Federation of Phar-­ maceutical Industry Associations (EFPIA) developed a Leadership Statement which provides guidance ­ in five sensitive areas. These relate to: patient infor-­ mation; training for medical sales representatives; ­ the provision of medical samples to healthcare professionals; organising meetings for healthcare ­ professionals; and relationships with patient organisations. Roche has fully committed to following ­ this guidance. In addition, our Chief Compliance Offi-­ cer joined EFPIA’s new Trust Reputation and Com-­ pliance Policy Committee. Roche managers are responsible for ensuring all marketing activity under their control complies ­ with our Code of Conduct and industry marketing codes. In 2010 we launched the Roche Marketing

Working with stakeholders to make the best product

Regulators and policy makers

Physicians and healthcare providers

– Input into regulatory filings – Clinical trial design – Shape treatment guidelines

– Clinical trial design, participation and results publication – Feedback on product performance and profile – Input into training and education material – Shape treatment guidelines

Product

Patients and patient groups

Payers and reimbursers

– Market research on patients needs – Focus groups on product profile (e.g. ease of use) – Co-develop support, awareness and educational material – Training for patient groups

– Health outcome studies – Determination of medical value – Reimbursement programmes

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and Sales Compliance Questionnaire (RMSCQ), to help managers assess how well their operations ­ perform on sensitive compliance topics. All General Managers have to sign a declaration that confirms their compliance. We also ran refresher training on responsible marketing for global product strategy teams in the pharmaceutical business. 2011 we will carry out refresher courses on antitrust issues and anti-corruption. Customer relationship management Our customers range from patients, healthcare professionals, hospitals and reference laboratories to public and private healthcare payers. It is important to manage these relationships in a professional ­ and transparent way. We consider their needs and views when developing our products and services. We focus on building strategic, long-term partnerships with healthcare administrators, as well as specialists in individual disease areas. This helps us ­ gain a broader overview of patient needs across all areas of healthcare, and enables us to offer a full range of appropriate pharmaceutical and diagnostic products. This approach aligns more closely with ­ our vision for personalised healthcare, and will im-­ prove customer service, identify additional oppor-­ tunities and create efficiencies and cost savings. For example, Genentech employs Thought Leader Liaisons, who work with external medical experts to ensure we understand their opinions and establish lasting, mutually beneficial partnerships. We carry out comprehensive market research and analysis to better understand the needs of specific customer groups and markets. In 2010 indepen-­ dent research among 246 cancer specialists in the United States and five European countries showed that Roche’s customer retention in these markets ­ is 90% — compared with an average rate of 72% among our peers. In addition to product efficacy, ­ the main drivers of customer retention was found to be the sales representative’s conduct, knowledge ­ and expertise, and the information and support provided for patients and clinicians. Public policy We share our views and expertise with governments and regulators to help develop effective laws, regula-

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tions and policies for public health as well as for more general areas, such as the assessment of the value of healthcare and our work with public ­ health organisations, think tanks and academics. One example is our contribution to the European Commission Process on Corporate Responsibility in the field of pharmaceuticals. This process was launched in 2010 to improve transparency and business ethics, access to medicines in developing ­ countries, and pricing and reimbursement systems ­ in Europe. We are also participating in a project ­ to develop market access for biosimilar drugs. In 2010 we developed guidelines for sharing information on the potential of misuse of drugs in sports, ­ in association with the World Anti-Doping Agency (WADA). Roche and WADA signed a memorandum of understanding describing the process to follow when suspicion arises. WADA presented Roche with an award in recognition of our role in this area. We also contribute to policy development through our membership of industry bodies such as the ­ European Diagnostics Manufacturers Association (EDMA), the European Biopharmaceutical Enterprises (EBE), the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), and the European Federation of Pharmaceutical Industry Associations (EFPIA). In 2010 EFPIA approved four priority areas for the next two years. These relate to: improving the effectiveness of health technology assessments; strengthening intellectual proper-­ ty frameworks; enhancing ethics, trust and reputation; and attracting more R &  D to the European Union. Through EFPIA, we contributed to updates to European Union (EU) legislation aimed at strength-­ ening systems for monitoring the safety of medicines, in particular to protect against counterfeit medi-­ cines and ensure patients receive reliable information on prescription medicines. This work will continue ­ in 2011. We have contributed to the revision of the EU Directive on the Protection of Animals used for Scientific Purposes since the process began in 2001. The Directive aims to balance the needs of research and patients with animal welfare. Significant new provisions include a mandatory ethical review process and ­ the development and implementation of alternative ­

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methods that tangibly improve animal welfare. The Directive will apply in all EU member states from November 2012. We contributed to responses from EDMA and EBE ­ to a European Commission consultation on in vitro diagnostics (IVDs) in 2010. We support the Commission’s proposed risk-based classification system for IVDs, as long as manufacturers are given enough time to adjust to the increase in development costs ­ it will incur. More clarity is needed on proposed requirements for providing clinical evidence for highrisk IVDs. Also through EDMA, we contributed to the European Commission’s review of the medical devices sector, which identified major challenges relating to competitiveness, innovation and patient access. Combating counterfeits | Counterfeit medical products are illegal and a serious global public health problem. They endanger patients, undermine confidence in the healthcare industry, breach intellectual property rights, and waste healthcare budgets. We work with relevant stakeholders to improve product security, strengthen and enforce existing laws, train local officials and educate the public. Through EFPIA, we have contributed to the proposed European Commission Directive on Counterfeiting. Eliminating counterfeits requires a comprehensive, universal approach across the pharmaceutical industry. This should include standardised product serialisation and universal safety features. 2010 saw the conclusion of an EFPIA pilot project of one potential approach: a system for verifying that medicines dispensed in pharmacies are genuine. On each pack, a unique barcode smaller than a fingernail holds a ­random serial number, and the product code, batch number, and expiry date. Before dispensing a medicine, pharmacists scan the barcode to check it is authentic. Pharmacists in 25 stores scanned and verified almost 100,000 packs from 14 manufacturers, including Roche. The results show that the technology is a feasible, cost-effective and secure means ­ of enhancing patient safety and supply chain security. Biosimilar products | Unlike traditional medicines which contain small molecules produced by chemical synthesis, biological medical products have complex molecular structures. They are produced from living systems using sophisticated manufacturing pro­

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cesses that are difficult to reproduce. Copies of a biological product are therefore similar but not identi-­ cal to the original. These ‘biosimilar’ products cannot be considered generic medicines, or approved ­ based on the limited data set most regulatory bodies accept for generics. We support the development of a clear regulatory framework for the approval of biosimilar products, which compares them with the original drug. The European Medicines Agency has established such a system, and published additional draft guidelines on similar biological medicinal products containing monoclonal antibodies for review. The US Congress introduced a legislative process for approving biosimilars as part of the healthcare reforms in March 2010. For countries where there is no specific framework for approving biosimilars, we believe that regulatory authorities should follow the World Health Organi­ zation (WHO) Guidelines on Evaluation of Similar Biotherapeutic Products, where a comparison with an original biological product is required to establish similarity. In 2010 we engaged with regulatory author-­ ities and biosimilar manufacturers around the world to promote the WHO guidelines as the minimum stan-­ dard. We will continue to do so to ensure similar ­versions of our biotherapeutic products brought to market are safe and effective. An updated position ­ on biosimilars is available on our website. Political contributions | Roche does not fund individual politicians. Employees in the USA can make personal contributions through Roche’s Good Government Committee (GGC) and Genentech’s GenenPAC. Both are voluntary political action committees (PAC). In 2010 employees donated 340,899 US dollars to political campaigns through these PACs. More on the Web

• All position papers: www.roche.com/ policies_guidelines_and_positions

• Responsible marketing, risk management and compliance: www.roche.com/business_integrity_and_responsible_­marketing www.roche.com/risk_management_and_compliance • The Pharmaceutical Industry Principles for Responsible Supply Chain Management: http://pharmaceuticalsupplychain.org • Patents, counterfeiting and biosimilars: www.roche.com/medical_value_patents_and_pricing; www.roche.com/patents • New products and technologies: www.roche.com/csr_research_and_development www.roche.com/innovation_and_technologies

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Safety, security, health and environmental protection Roche is dedicated to good health. We are as committed to preserving the safety and well-being of ­ our employees and the environment as we are to im-­ proving health and quality of life for patients. Managing SHE Good safety, security, health and environmental (SHE) management is essential to our business. We em-­ ploy a team of 20 dedicated people at our headquarters in Basel, which is complemented by a team of ­ 13 in the United States. While over 600 full-time em-­ ployees support our SHE programme across our sites, maintaining good performance is every em-­ ployee’s responsibility. Each site identifies its specific SHE risks and opportunities, and communicates these according to local preferences. This ensures that colleagues understand and adhere to our SHE policy and guidelines. Our policy is to internally audit critical sites such as chemical and pharmaceutical manufacturing facilities every three years, and all other relevant sites period-­ ically according to risk. These audits rate SHE per-­ formance according to internal standards, and stipu-­ late future improvements. We have incorporated Genentech sites into the corporate SHE audit programme and these are now assessed against the same standards as other Roche operations. SHE audits 2010

2009

2008

Worldwide audits

24

27

25

First-time audits

4

2

2

supplement these courses. In 2010 we expanded ­ the number of languages our online SHE training is ­ available in, bringing the total to 13 and ensuring ­ all Roche employees can understand the materials. This enabled 53,000 employees to access the programme and 41% of these have participated. In 2011 we will expand this programme to Genentech employees. Security The vision of security at Roche is to protect our employees and visitors, physical assets, intellectual property and products from harm or loss. Our global network of site security officers worked with Roche’s Chief Security Officer in 2010 on supply chain securi-­ ty, travel security, incident management, and training. We have launched a pilot project in Latin America to systematically assess transport security risks in our supply chain such as trucks being intercepted, and implement additional security measures as neces-­ sary. We have also improved the help available for employees should emergency situations arise during business travel. This includes security analysis before travelling to dangerous countries, and a security and medical advice service for use during travel. Regional security risks need tailored solutions. In 2010 the Group security team chaired a series of re-­ gional security workshops to reinforce this approach. For example, a workshop in Indianapolis, United States, enabled participants to exchange insights and experiences in the areas of intellectual property protection, workforce violence and supply chain security. Health and safety

In 2010 we visited 24 sites, four for the first time. Of the 20 sites previously audited, almost all had im-­ proved their performance. Recommended improvements in 2010 include increased training on topics such as emergency management, business continuity, and safe driving. As we expect similarly high ­ SHE standards from our suppliers, our procurement department conducts SHE audits at third party ­ locations and issues follow-uprecommendations. Training is at the core of our SHE strategy. Local managers provide tailored training through lectures and courses customised to site-specific SHE risks. Regular regional SHE conferences and workshops

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Roche accident rate

2010

2009

2008

0.078

0.065

0.074

Occupational accidents

432

392

474

Occupational illnesses

184

227

270

Work-related fatalities

0

0

0

2.97

2.92

3.42

Work-related accidents per million working hours

Employee health and safety is one of our foremost priorities. We have rigorous policies to safeguard their well-being, and expect the same standards from our contractors.

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Investments in SHE training appear to be paying ­ off. We have reduced work-related accidents per million working hours by 36% since 2005. Employees reported 432 occupational accidents in 2010, a 10% increase in frequency compared with last year. However, the average severity — the resulting number of lost days — decreased 4%. Overall, the Roche accident rate — a measure that combines frequency with severity — improved by approximately 11%. Occupational illness improved in both incidence and severity, with 184 cases reported.

Total environmenttal impact — eco-balance Use of resources

energy

14,495 TJ

raw materials

67,529 t

water Emissions

19,667,601 t

air VOC

164 t

SO 2

7t

NO x

262 t

CO 2

1,070,794 t

halogenated hydrocarbons

Our occupational accident and illness profile remains consistent, with slips, falls and repetitive strains ­ representing the majority of work-related complaints in 2010. There were no major accidents this year — for the third consecutive year.

3,796 t

particles

33 t

water TOC

242 t

heavy metals

0.463 t

phosphorus

33 t

nitrogen

Though we are pleased with this positive trend, we recognise the need to remain vigilant. We have installed defibrillators in central locations at almost all sites, and continue to support our employees’ well-being, both during and outside of work hours. Many Roche sites organise campaigns to reduce accidents outside the workplace, such as selling protective sports equipment, and running motorcycle safety courses. Environmental footprint Our total environmental footprint is comprised of many individual impacts, including energy use, water and waste. We measure our total impact using the ‘eco-balance’ metric developed by the Swiss Agency for the Environment (BAFU). This weights the impacts of air and water emissions, landfill waste, primary energy, and raw material usage to calculate a total footprint. We also calculate impact per employee so we can measure our progress as the business grows. We set ourselves a target to improve our ecobalance by 10% from 2005 levels by 2015. We are pleased to have reached this goal early, and now plan to improve our eco-balance a further ­ 15% from 2010 levels by 2020. This year, in keeping with an updated BAFU eco-balance methodology, ­ we have included additional parameters such as ­ water use, resulting in an eco-balance of 7.17.

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Landfilled waste

136 t

inert waste

1,226 t

construction waste

14,900 t

reactor waste

7,208 t

mio impact points Eco-balance

per employee

7.17

Eco-efficiency rate (EER)

Sales (million CHF)

2010

2009

2008

47,473

49,051

45,617

194

186

209

591,592

572,983

564,328

0.414

0.460

0.387

Environmental Expenditure (million CHF) Environmental damage (10 9 environmental damage units) EER

We assess the efficiency of our environmental investments and running costs by comparing sales figures with our total environmental expenditures and impact, as calculated according to the BAFU methodology. Our resulting eco-efficiency rate (EER) has decreased to 0.414, a 10% change from 2009. ­ There is a detailed definition at www.roche.com/ fact_sheet_eco_efficiency.pdf.

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Energy and climate change As Roche’s greenhouse gas emissions result mainly from energy use, our climate and energy strategies are inextricably linked.

Greenhouse gas emissions |

133­

CO2 equivalent

2010

2009

2008

1.077

1.053

1.062

22.69

21.47

23.28

Total emissions (million tonnes)

Our priority is to reduce emissions while remaining a viable, profitable company. We plan to do this by increasing energy efficiency and switching to sustainable energy. Through a Group directive, we have ­ developed a systematic approach for conserving energy. This includes measures such as designing ­ new plants and buildings to be more energy efficient, and optimising and retrofitting existing assets. The directive covers all aspects of our business, from purchasing and operations, to research, marketing, administration, and transport.

Roche Business Report 2010

Total emissions per million CHF of sales (tonnes)

Energy use |

terajoules

Total energy use

2010

2009

2008

14,495

13,898

13,662

0.305

0.283

0.299

0.176

0.176

0.178

Total energy use per million CHF of sales Total energy use per

In 2005 we set a goal to improve energy efficiency ­ — measured as consumption per employee — by 10% by 2010. With an improvement of 7.4% in five years, we missed this goal. This shortcoming is largely due to recent acquisitions and corresponding increases ­ in business travel, which have raised our overall energy consumption. The energy efficiency of buildings, plants and machinery has improved by more than 20% during this period. We are firmly committed to improving our performance. This year we defined plans for a further 10% efficiency improvement by 2014, from 2009 levels. ­ In the longer term, we aim to reduce usage by 20% per employee by 2020, from 2010 levels. Achieving these goals will require significant learning and investment. We are improving our energy measurement and management processes, defining accountabilities, and developing frameworks for communication and knowledge-sharing. Each business unit and site will need to contribute if we are to reach our energy efficiency goals. This year we asked the 58 largest energy-consuming sites across the business to create energy reduction action plans. The response has been very positive, resulting in total potential savings of 1,400 terajoules per year. A significant proportion of these savings come from retrofitting refrigeration, heating, ventilation and airconditioning systems. We are confident that successfully implementing the submitted plans will achieve our 2014 goal, and will closely monitor implementation of the plans to make sure they stay on track.

11_Roche_AR10_ENG_Corporate Responsibility Part2.indd 133

employee

Employee awareness and motivation will also be criti­ cal to achieving our goals. We are fortunate to have innovative and dedicated employees. Our annual Responsible Care Award recognises this by encouraging employees to collaborate on ideas for energysaving projects. This year we rewarded sites that included remarkable projects in their energy reduction plans. We recognised eleven sites for on-site energy conservation projects, and five received awards for projects involving their fleets and flights. While we are reducing the amount of fuel we use ­ to heat, cool and run our buildings and manufacturing sites, business travel is proving more of a challenge. Business air travel is increasing, and now represents almost 17% of overall energy use. Introduced in 2009, our policy of using only cars that emit a maximum 120 grammes of CO2 per kilometre in our European Pharma fleet by 2012 is bearing fruit, and has improved fuel consumption efficiency by 4% ­ in one year. While efficiency measures will play a large role in reaching our energy target, we must also consider the types of fuel we use. Our long-term strategy is to continue to replace fossil fuels with sustainable energy sources wherever practical and feasible. As a Group, our goal is to increase the proportion of sustainable energy we use to 20% by 2020.

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Roche Business Report 2010

Corporate Responsibility

Energy use by type |

acquired sites will work towards separate timelines to give them the same time frame as operations involved in the original process (for Genentech thus the target to be met is 2022).

%

Fuel used by company vehicles Oil

10.0

Achieving these targets will require significant investment. Though we are searching for alternatives, there are currently no viable substitutes in some circumstances. We will continue to examine alternatives and work with refrigeration suppliers to make further reductions in the future.

1.6

Fuel due to business air travel

16.7

Grid electricity

29.0

District heating

3.8

Emissions to air |

2010

2009

2008

164

177

213

33

27

27

Nitrogen oxides

262

286

193

Sulphur dioxide

7

9

10

Waste/ Renewable energy

1.2

VOCs Particulates

Natural gas

37.7

Halogenated hydrocarbons |

Holdings

Emissions

tonnes

2010

2009

2008

205.2

179.8

144.6

3.8

6.5

3.4

It has been challenging to reduce emissions of chemical refrigerants that are either ozone-depleting, such as CFCs and HCFCs, or have a high global warming potential, such as HFCs. The volume of refrigerant holdings reported significantly increased in 2010 as Genentech’s figures include rented ­ or leased buildings and equipment for the first time. We committed to phase out all CFCs and HCFCs from our operations by 2010, and all halogenated hydrocarbon refrigerants by 2015. Though we have made significant progress — a 100% reduction of halons and an 82% reduction of fully halogenated compounds in seven years excluding Genentech sites — our recent acquisitions and lack of technical solutions for some applications have made this goal un-­ realistic. In consultation with our engineers, sites, and business representatives, we decided to revise our goal. We now plan to reduce halogenated ­ refrigerants at Roche sites by 90% by 2015. Newly

11_Roche_AR10_ENG_Corporate Responsibility Part2.indd 134

tonnes

Our manufacturing operations emit volatile organic compounds (VOCs), particulates, nitrogen oxides (NO x) and sulphur dioxide (SO 2). These contribute to various forms of pollution, including air pollution, smog, and acid rain. We minimise emissions to air wherever possible through a variety of technologies and practices. Flue gas scrubbers reduce NO x and SO 2 . VOCs are reduced through various incineration and freezing processes. Though still under investi­ gation in Switzerland and the US, the latter may ­ also reduce energy use. The table shows our emissions to air in 2010. Particulates, NO x and SO 2 fluctuate from year to year, but always at very low levels. Waste |

tonnes

2010

2009

2008

27,249

19,828

42,823

0.57

0.40

0.94

29,020

27,605

31,295

0.61

0.56

0.69

General waste ­p roduced General waste per ­m illion CHF of sales Chemical waste ­p roduced Chemical waste per million CHF of sales

Roche’s increased waste production this year reflects a number of operational changes. The 37% increase in general waste includes large amounts ­

28.01.2011 09:17:48

Corporate Responsibility

of construction waste from demolished buildings ­ in Mannheim, Germany, and Belleville, USA. Chem-­­ ical waste increased slightly in line with higher ­ production volumes. Water 2010

2009

2008

19.6

18.6

21.0

3.6

2.8

2.4

6.3

5.2

7.3

242

154

592

463

426

545

Water withdrawn ­( million cubic metres) Water used (million cubic metres) Wastewater discharged to treatment plant ­( million cubic metres) Organic matter ­discharged to water-

Roche Business Report 2010

135­

our operations discharged 463 kilogrammes of heavy metals, into watercourses, primarily flushed out ­ from metal pipes. We discharge these pollutants only if this fully complies with all relevant regulations, including pre-treatment requirements. We are striving to reduce total wastewater toxicity by 10% between 2015 and 2020, and are currently developing analytical methods and performance measures to help us achieve this. Biodiversity Pharmaceuticals and the natural world have been closely linked for centuries. Nature holds much ­ inspiration and potential for treating illness, and we must guard against species loss. We support the principles of resource stewardship as defined in the Convention on Biological Diversity (CBD).

courses after treatment (tonnes) Heavy metals ­d ischarged to watercourses after treatment (kilogrammes)

Water availability is increasingly critical for Roche and for society, and varies geographically. While Roche currently has no high-usage operations in areas of water scarcity, we adapt conservation and reduction programmes according to local conditions and needs. For example, our Californian sites use drought-resistant landscaping. At other sites, we collect and recycle water from our cooling towers, ­c reating a closed-loop system that reduces water use. We carefully manage both water use and wastewater discharges. Our withdrawal and consumption in-­ creased in 2010 due largely to the inclusion of two new sites. This year, our operations withdrew 19.6 million cubic metres of water. Reducing total withdrawal is an important part of our overall environmental target, and our revised method for calculating environmental impact (eco-balance) now includes water usage to reflect this. We carefully control the quality of water emissions. ­ In 2010 we discharged 6.3 million cubic metres to ­ treatment plants. After treatment, we discharged 242 tonnes of organic matter — an increase primarily caused by the acquisition of a substantial Singapore biotech operation. In line with low-level fluctuations,

11_Roche_AR10_ENG_Corporate Responsibility Part2.indd 135

The winners of Roche’s 2010 ECOmpetition award have found a surprisingly simple, yet effective way to counter the prevalence of invasive plant species. ­ Our Colorado site recently welcomed a herd of moun­ tain goats with an appetite for the weeds threat-­ ­e ning the local ecosystem. Compared with harsh chemicals or labour-intensive alternatives, the goats provide a low-impact and cost-effective means to solving a significant environmental challenge. Pharmaceuticals in the environment (PiE) Traces of pharmaceutical products make their way into the environment, primarily through natural ­ processes following normal patient use. Manufacturing and improper disposal by patients also con­­-­ trib­u te a small proportion. Current evidence suggests that exposure to these low-level concentrations in surface, ground and drinking water does not pose any harm to human health, but we recognise the need ­ for further research into the effects and support sci­ en­t ific work in this field. The risks to aquatic life are thought to be greater. Studies to date do not suggest any short-term effects from exposure to low-level concentrations of pharmaceuticals, but more research is being conducted to evaluate the potential impact of long-term exposure. We consider the entire lifecycle of our drugs, and take steps to minimise releases into the environment at all stages. We design our manufacturing sites to

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Roche Business Report 2010

Corporate Responsibility

reduce the risk of active ingredients entering wastewater, and use financial incentives to encourage ­ customers to return unused product for proper disposal. Compliance and incidents We meet all local laws or regulations as a mini-­ mum, but set our sights higher. Our Group policies ­ are often more rigorous than external standards. ­ We received no significant SHE fines in 2010 for the eighth consecutive year. However, we paid three small fines this year for minor infractions. These related to a water quality viola­-­ tion, a physical defect in a storage tank, and excessive use of a boiler. While none of these incidents presented a significant risk to our employees or the local community, we take all incidents seriously. ­ We have taken steps to correct each problem and prevent similar incidents from occurring in future. More on the Web • SHE performance and goals: www.roche.com/she_performance • Environmental protection: www.roche.com/environment • SHE policy: www.roche.com/safety_health_and_environmental_ protection.pdf

• Group fact sheets, positions, policies and guidelines: www.roche.com/policies_guidelines_and_positions

• Genentech sustainability report: www.gene.com/gene/about/environmental

11_Roche_AR10_ENG_Corporate Responsibility Part2.indd 136

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Independent Assurance Report

Roche Business Report 2010

137­

Independent Assurance Report

To the Corporate Governance and Sustainability Committee of Roche Holding Ltd, Basel (‘Roche’). We have performed assurance procedures to provide assurance on the following aspects of the 2010 corporate responsibility reporting of Roche.

The Roche Corporate Governance and Sustainability Committee is responsible for both the subject matter and the criteria. ­ Our responsibility is to provide a conclusion on the subject matter based on our assurance procedures in accordance with ­ the International Standard on Assurance Engagements (ISAE) 3000.

Subject matter Data and information disclosed in the corporate responsibility reporting of Roche and its consolidated subsidiaries, excluding Chugai Pharmaceutical Co., Ltd., for the business year ended ­ 31 December, 2010 on the following aspects: • The management and reporting processes with respect to the corporate responsibility reporting and to the preparation of SHE and people key figures as well as the control environment in relation to the data aggregation of these ­ key figures; • The SHE key figures in the tables on pages 131 to 136 and some selected people key figures disclosed on pages 115 to 121 of the Roche Business Report 2010.

Main assurance procedures Our assurance procedures included the following work: • Evaluation of the application of Group guidelines | Reviewing the application of the Roche internal corporate responsibility reporting guidelines; • Site visits | Visiting selected sites of Roche’s Pharmaceuticals and Diagnostics Divisions in Germany, Hungary, ­ Russia and the US. The selection was based on quantitative and qualitative criteria; ­ Interviewing personnel responsible for internal corporate responsibility reporting and data ­collection at the sites ­ we visited and at the Group level to determine the understanding and application of Roche internal corporate responsibility guidelines; • Assessment of the key figures | Performing tests on Criteria • The Roche Group internal corporate responsibility reporting a sample basis of evidence supporting selected SHE and people key figures (Roche accident rate, energy con­ guidelines based on the Responsible Care programme sumption, CO2 emissions related to energy consumption, Health, Safety and Environmental Protection reporting guide-­ ­lines published by the European Chemical Industry Council release of halogenated hydrocarbons, use of water, ­ CEFIC and the ‘Sustainability Reporting Guidelines G3’ pub-­ fines in relation to safety and environmental protection, lished on October 2006 by the Global Reporting Initiative headcount/FTE data, staff turnover and senior manage­ (GRI); and ment positions) concerning completeness, accuracy, ­ • The defined procedures by which SHE and people key adequacy and consistency; • Review of the documentation and analysis of relevant figures are gathered, collated and aggregated internally. policies and basic principles | Reviewing the relevant documentation on a sample basis, ­including group sustain­ Responsibility and methodology ability policies, ­management and reporting structures ­ The accuracy and completeness of corporate responsibility indiand ­documentation. cators are subject to inherent limitations given their nature ­ • Assessment of the processes and data con­solidation | and methods for determining, calculating and estimating such data. Our assurance report should therefore be read in con-­ Reviewing the appropriateness of the management and nection with Roche’s internal guidelines, definitions and procereporting processes for corporate responsibility reporting; dures on the reporting of its corporate responsibility perfor­ and Assessing the consolidation process of data at the mance. group level.

11_Roche_AR10_ENG_Corporate Responsibility Part2.indd 137

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Independent Assurance Report

Conclusions In our opinion • The internal corporate responsibility reporting guidelines are being applied properly; • The internal reporting system to collect and aggregate SHE and people key figures is functioning as designed and provides an appropriate basis for its disclosure. Based on our work described in this report and the assessment of criteria, nothing has come to our ­attention that causes us to believe that the corporate responsibility information ­ mentioned in the subject matter and ­disclosed with the corporate responsibility reporting in the Roche Business Report 2010 does not give a fair ­picture of Roche’s performance. Zurich, 21 January 2011 PricewaterhouseCoopers AG

The Global Reporting Initiative sustainability reporting guidelines With this years’ Annual Report we continue our approach ­ of aligning our sustainability reporting to the guidelines of the ­ Global Reporting Initiative (GRI). As for the last three Annual Reports, Roche is of the opinion that the A+ level of the GRI G3 guidelines applies to its Annual Report 2010. This was checked with and confirmed by the GRI. Details of how we report against each indicator can be found ­ at www.roche.com/reporting_and_indices

Dr Thomas Scheiwiller   Stephan Hirschi

Severin Schwan

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Published by F. Hoffmann-La Roche Ltd 4070 Basel, Switzerland Tel. +41 (0)61 688 11 11 Fax +41 (0)61 691 93 91 Media Office Group Communications 4070 Basel, Switzerland Tel. +41 (0)61 688 88 88 Fax +41 (0)61 688 27 75 Investor Relations 4070 Basel, Switzerland Tel. +41 (0)61 688 88 80 Fax +41 (0)61 691 00 14 World Wide Web www.roche.com Corporate Sustainability Committee Tel. +41 (0)61 688 40 18 E-mail: corporate.sustainability @ roche.com To order publications Tel. +41 (0)61 688 83 39 Fax +41 (0)61 688 43 43 E-mail: basel.webmaster @ roche.com Next Annual General Meeting: 1 March 2011

Cautionary statement regarding forward-looking statements This Annual Report 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 ­s imilar expressions or by discussion of, among other things, ­s trategy, 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 Annual Report, 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 ­g eneral ­f inancial market conditions; (5) uncertainties in the discovery, development or ­m arketing of new products or new uses of existing products, including without limitation negative results of clinical trials or research projects, ­u nexpected side effects of pipeline or ­m arketed 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 ­c overage. 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 2010 or any subsequent period will necessarily match or exceed the ­h istorical published earnings or earnings per share of Roche. All trademarks mentioned enjoy legal protection. Links to third party pages are provided for convenience only. We do not express any opinion on the content of any thirdparty pages and expressly disclaim any liability for all thirdparty information and the use of it. The Roche Annual Report is published in German and ­E nglish. Printed on non-chlorine bleached, FSC-certified paper. The Roche Annual Report is issued by F. Hoffmann-La Roche Ltd, Basel, Group Communications.

On the cover: Jone F. (USA), a participant in the phase III EMILIA trial, is receiving treatment with T–DM1 for advanced HER2-positive breast cancer.

12_Roche_AR10_ENG_Imprint.indd 139

28.01.2011 15:55:33

12_Roche_AR10_ENG_Imprint.indd 140

28.01.2011 09:19:19

626 x 297

210

11

210

195

Key figures Roche Group

Index 2008 = 100

Sales

2010

F. Hoffmann-La Roche Ltd 4070 Basel, Switzerland © 2011

4,699

2009

49,051

8,893

2008

45,617

4,979

www.roche.com

2009

9,509

5,175

2008

8,704

4,313 Number of employees

mCHF

2010

16,591

80,653

2009

16,272

81,507

2008

15,068

80,080 Total employee remuneration

mCHF

mCHF

2010

3,135

11,934

2009

3,287

12,080

2008

3,604

11,129

Net income

Patients on clinical trials 4

mCHF

2010

8,891

327,804

2009

8,510

302,063

2008

10,844

277,674

Core Earnings per Share

Eco-efficiency rate 5

CHF

0.414

2010

12.78

2009

12.34

0.46

2008

11.17

0.387

Price development of non-voting equity security (Genussschein) |

Roche | Annual Report 2010

00_Roche_AR10_UG_ENG.indd 1

mCHF

5,693 3

9,050

Income taxes 2

7 000 898

Total dividend

mCHF

2010

Operating profit 2

All trademarks are legally protected.

mCHF

47,473

Research and development 2

Roche Annual Report

Free cash flow

mCHF

2010

2008

in CHF

2009

2010

300 250 200

Creating value for patients

150 100

Roche non-voting equity security

1 2 3 4 5

E

00_Roche_AR10_ENG_Front Cover.indd 1

27.01.2011 20:09:22

Key figures indexed to 2008 = 100. Core results. Proposed by the Board of Directors. Development phase I to IV. For calculation of the Eco-Efficiency Rate see: www.roche.com/environment

00_Roche_AR10_ENG_Key figures.indd 1

Swiss Market Index (rebased)

Figures for 2008 as in Annual Report 2009. For a full index of Global Reporting Initiative (GRI) indicators used in the report see: www.roche.com/reporting_and_indices

28.01.2011 11:45:52 28.01.2011 11:41:2