011011 - Roche at JP MOrgan_11211_13506[1]

Roche: Ensuring sustained success in a more challenging environment

JP Morgan - January 2011Dr. Erich Hunziker, Deputy Head of the Corporate Executive Committee and CFO

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This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as ‘believes’, ‘expects’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘estimates’, ‘future’ or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this presentation, among others:

1 pricing and product initiatives of competitors;2 legislative and regulatory developments and economic conditions;3 delay or inability in obtaining regulatory approvals or bringing products to market; 4 fluctuations in currency exchange rates and general financial market conditions; 5 uncertainties in the discovery, development or marketing of new products or new uses of existing products,

including without limitation negative results of clinical trials or research projects, unexpected side-effects of pipeline or marketed products;

6 increased government pricing pressures; 7 interruptions in production; 8 loss of or inability to obtain adequate protection for intellectual property rights; 9 litigation;10 loss of key executives or other employees; and11 adverse publicity and news coverage.

Any statements 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 this year or any subsequent period will necessarily match or exceed the historical published earnings or earnings per share of Roche.

For marketed products discussed in this presentation, please see full prescribing information on our website –www.roche.com

All mentioned trademarks are legally protected

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A position of strength

Operational Excellence – adapting to a changing environment

Continued focus on innovation

4

Even in an economic downturn demand for healthcare increases; but funding is and will become more challenging

Funding of healthcare

Today 2020

Paymentsby individuals

Co-payment-systemsSlowdown

of EconomySocial security systems

No. of healthcare events

Today 2020

Higher life expectancy

Population growth

Researchactivities

Access to healthcare

Health awareness

5

Emerging markets show strong growthand are a Roche focus point

20.4UK11

22.9Brazil9

23.4Russia8

26.1Italy7

26.6Spain6

40.1France5

15.6India14

12.4Mexico15

IMS Health Pharma Market Ranking 2013 US $ Bio

20.2Venezuela12

Turkey

Canada

Germany

China

Japan

United States

16.313

20.510

46.14

66.73

93.32

289.81

Source: IMS Health, Market Prognosis June 2009

Growth (CAGR) 2008-14

US, EU 3-4%

APAC, LATAM, CEMAI 9-13%

Total 5-6%

Source: CAGR 08-14 Decision Resource/groupH (+/-1.5% assumed)

6

13.2

11.5

10.3

9.7

8.9

7.2

6.4

6.1

ROCHE

NOVARTIS

ASTRAZENECA

BAYER

SANOFI-AVENTIS

GSK

PFIZER

MERCK & CO

Full Year 2009 YoY Growth %

Emerging markets also reward innovationRoche has the leading growth rate in emerging markets

0 5 10 15

5.4%

5.4%

5.3%

3.6%

3.5%

3.2%

3.1%

3.7%

% Market Share

Source: IMS Health MIDAS FY 2009 US$ LC Roche International Regions: Asia Pac, CEMAI, Lat AM (based on Roche subscription)

7

Biotech products drive growth in both divisions

67%

Biotech products as % of sales

Pharma Division

85%

Diagnostics Division

H1’ 2010

8

Long patent protection Biosimilars facing high hurdles

Long primary patent protection of our key biologics

similar2018Pegasys

earlier2018Rituxan/ MabThera

earlier2019Herceptin

marketed byNovartis

2019Lucentis

similar2019Avastin

EUROW/EM

USPatents

Biosimilars outlook

ROW/EM: investment in countries with strong IP regulations (China)

Brand awareness important

EU: legal and regulatory hurdles likely to remain high for biosimilars

US: 12 years data exclusivity

• 2 routes for biosimilar approval:

- Proof of similarity- Proof of inter-changeability

Both requiring clinical trials (still to be specified by FDA)

99

Biosimilar draft guidelines in Europe

• Phase III clinical trials (double blind, equivalence) as normal route for showing similarity, in particular where no pharmacodynamic (PD) pathway

– In Oncology usually no PD established– End points: Response Rate, PFS where most sensitive. OS data to be collected

• Clinical trials required for diseases with different mode of action – Rheumatoid Arthritis, Oncology– Metastatic, adjuvant

• Extrapolation only to indications with same mode of action– Not for different diseases, different mode of action, different dosing, different safety

requirements

• The requirements for clinical evaluation of biosimilar mAbs are open to broad interpretation in the current draft guideline. Roche believes that a number of aspects needs to be clarified prior to final implementation

10% Sales Lost calculated by subtracting given year sales (‘10, ’11, ‘12, ‘13) from full year sales from year prior to LOE.Data excludes sales lost impact of products with LOE prior to 2010.Source: Evaluate Pharma

40%

35%

30%

25%

0%

20%

10%

15%

5%

% o

f US

Sal

es L

ost

to G

ener

ics

/ B

iosi

mila

rs

Roche/Genentech

Pfizer/Wyeth

GlaxoSmithKline

Sanofi-Aventis

AstraZeneca

Johnson & Johnson

Eli Lilly

Merck/Schering Plough

2010 2011 2012 2013

Roche: Limited exposure to patent expiries

Novartis

11

Key Pharmaceuticals & Diagnostics productsA risk-diversified portfolio of drugs and BUs

MabThera/Rituxan

Xeloda

NeoRecormonCellCept

Herceptin

Avastin

Pegasys

Sal

es (

CH

F bn

)

Clinical Chemistry

Immunochemistry

Tarceva

Lucentis

* Sales 2009

0

5

10

15

20

25

30

35

'03 '04 '05 '06 '07 '08 '09

>C

HF

6bn*

>C

HF

1bn*

>C

HF

5bn*

2 with > than CHF 6 bn



Diabetes Care

Molecular DxBoniva/Bonviva

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Actemra/RoActemra in Rheumatoid Arthritis Successful launch

0

20

40

60

80

100

120

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

CHF m

• Uptake remains very encouraging

• In US, Actemra prescribed by nearly 60% of rheumatologists, patient share currently 4-7% following anti-TNFs

• In Japan, launch restrictions lifted, improving patients’ access to Actemra

• Upcoming filing for sJIA in US and EU

Actemra/RoActemra quarterly sales

13

TamifluSales at normalized levels

Tamiflu quarterly sales (CHF m)

746

460

192

458

45 50 36106

304 349

727

533422

17091

119

65

54

233

65

75

97

260

267 663

95

237

0

200

400

600

800

1'000

1'200

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Retail

Pandemic¹

1Governmental & Corporate

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19.8

22.8 22.024.0 24.6

0

5

10

15

20

25

30

HY 2006 HY 2007 HY 2008 HY 2009 HY 2010

1 before exceptional items

Operating profit1 (CHF bn) and margin

Continuous growth in sales and margin

Group sales (CHF bn)

5.8

7.57.0

8.08.8

35.5%33.2%

0

2

4

6

8

10

12

HY 2006 HY 2007 HY 2008 HY 2009 HY 20100%

5%

10%

15%

20%

25%

30%

35%

40%

45%

CAGR: 11%

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16

ApproachComprehensive scope, differentiated measures

Research & Early Dev.

Development

Tech Ops / Sites

Commercial – US/EU

1 Finance, IT, HR, Communication, Legal

Commercial - ROW

GroupFunctions1

G&A/Procurement

Moderate impactStrong impact

gRED pREDPharma

PartneringPharma

Medicines

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Financial impact Expected savings of CHF 2.4 billion by 20121

2011 2012

Pharma Medicines

1’830

2’440

pRED

Other2

Group Functions

2 Pharma Partnering, gRED, Diagnostics sites

Commercial

Tech Ops & Sites

Development

1 In addition to synergies of CHF 1 billion from the Genentech integration

CHF million

140

420

80

120

370

440

270

320

1070900

70

70

18

Impact on headcount – by functionExpected reduction of 4’800 positions by end of 2012

TransferredPositions2

Positionsreduced

PharmaMedicines pRED Diagnostics Other1

1 Group Functions, Pharma Partnering, gRED

Commercial

Development

Tech Ops/Sites

-4‘800

-600

-640-260

-4’800+1‘500

-2‘650

-800

-1‘350

-6‘300

Positionsaffected

2 Total number of positions transferred to other sites (800)/3rd parties (700)

19

1500

1200

900

400

200

400

600

200

Financial impactOne-off restructuring costs of about CHF 2.7 billion

CHF million

2010 2011 2012

Non-Cash

Cash

Total 2010-12

1’500

800

400 2’700

20

0%

25%

50%

75%

100%

9 10 11 12 13 14 15 16 17 19 21 39

EUR USD CHF GBP

Early debt redemption of USD 2.5 bn note due 201233% of Genentech transaction related debt repaid by September 2010

• Exercise of call option on 9 September 2010 to redeem USD 2.5 bn notes originally due 2012

• Repayment of USD 3.0 bn and EUR 1.5 bn floating rate notes in Q1/2010

• Of the CHF 48.2 bn bonds and notes issued to finance the Genentech transaction, cumulative 15.7 bn (33%) will have been repaid as per September 2010 1

• Outlook 2010: USD 0.5 bn ‘Genentech legacy’ note repayment at maturity in July 2010

1) Original net proceeds in CHF

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0utlook for 2010: on track to achieve the goals

Barring unforeseen events;Total Tamiflu sales of up to CHF 1 bn assumed for 2010; LC=Local Currency* Continuous increase in dividend pay-out ratio over the period 2008-2010

Sales growth (in LC) Group & Pharma (excl. Tamiflu): mid single-digitDiagnostics: significantly above market

Core EPS growth (in LC) Double-digit

Synergies 2010: CHF 800 m2011: CHF 1,000 m

Debt 2010: 33% reduction (revised from 25%)2015: Aim to return to net cash position

3 yr Dividend outlook Maintained (as announced in 2008)*

R&D investment Slightly below 2009 level

22

Financial impact 2011 vs. 2010Guidance to be provided with 2010 year-end results

Illustrative

• Price decline

• US health carereform

• Tamiflu

• Avastin mBC

Results from‚OperationalExcellence‘

Profit contributionof underlying

business growth

Riskfactors

Operating

Profit 2010

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Competitors’ strategies to address the trendsTwo distinctly different groups emerging

DiversificationBecoming more “Healthcare” than pure “Pharma”(incl. OTC, vaccines, medical devices, generics, branded generics, bio-similars, eye care, etc.)

FocusPharma / Diagnostics(no generics or bio-similars)

Roche

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Our strategic franchisesFocus on areas with high unmet medical need

CNSHigh unmet medical need - high risk/high reward“The new oncology?”

Virology Focus on hepatitis; existing infrastructure to launch new products.

Metabolism Only dalcetrapib targets primary care; aleglitazar: specialty product.

Oncology Leader in oncology with strong pipeline-Regulatory requirements evolving, raising the bar for new products (including competition)

Inflammation RA biologics: area of high growth – Actemra strongly positioned

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Our DistinctivenessDiversity of approaches fueling global scale and reach

Autonomous centers

GenentechR&ED

Diversity Scale, Reach, Speed

“Federation” of >150 partners

* DBA: Disease Biology Areas

RocheDBAs* Research

Early Dev.

Worldwideexecution

Roche Dx

Chugai

Late-stage development

Manufacturing

Commercialisation

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Roche Group pharma R&D pipeline today

Status as of November 10, 2010

phase I (38 NMEs)

phase II (17 NMEs + 7 Als)

phase III(8 NMEs + 23 Als)

Registration(1 NME + 10 Als)

NMEAdditional Indication

OncologyInflammation/ImmunologyVirologyMetabolic/CardiovascularCNSOphthalmologyOthers

RG-No Roche Genentech managedCHU Chugai managedEVO Evotec

RG105 MabThera is branded as Rituxan in US and Japan

RG1569 Actemra is branded as RoActemra in EU

* approved in EU** filed in US

hedgehog path inh operable BCCRG3616Met Mab mNSCLCRG3638

pertuzumab EBC HER2+RG1273

hedgehog path inh advanced BBCRG3616 Avastin mBC 2nd lineRG435**

pertuzumab mBC HER2+ 2nd lineRG1273

topoisomerase I inh gastric cancerCHUnavitoclax (ABT-263) sol & hem tumorsRG7433

OX40L huMab asthmaRG4930lebrikizumab (anti-IL13) asthmaRG3637palovarotene emphysemaRG667

rontalizumab (IFN alpha Ab) SLERG7415

Xolair chronic idiopathic urticariaRG3648HPV16 cervical neoplasiaRG3484 nucleoside polymerase inh. HCVRG7128* danoprevir (protease inh) HCVRG7227SGLT2 inh type 2 diabetesRG7201

nic alpha7 ADRG3487mGluR5 antag (2) TRDRG7090NMDA receptor antag TRDEVO

ocrelizumab RRMSRG1594

anti-glypican Mab liver cancerCHUrhuMab Beta7 ulcerative colitisRG7413

anti-LT alpha RARG7416

serine palmitoyltransf inh HCVCHU

gantenerumab (A-beta) Alzheimer‘sRG1450

anti-factor D geographic atrophyRG7417

BHT-3021 type 1 diabetesRG7426

mGluR2 antag (2) depressionRG1578

anti-Abeta Alzheimer‘sRG7412triple reuptake inh depressionRG7166

11 beta HSD inh metabolic diseasesRG4929P selectin huMab PVDRG1512

ABCA1 inducer dyslipidemiaRG7273anti-oxLDL sec prev CV eventsRG7418

GABA-A a5 inv ago cogn. disordersRG1662

anti-IL-17 Mab RARG4934anti-M1 prime Mab asthmaRG7449

nucleoside analogue HCVRG7348

BRaf inh met. melanoma 2nd/3rd l.RG7204

EGFR huMab solid tumorsRG7160CIF/MEK solid tumorsRG7167Raf & MEK dual inh solid tumorsRG7304

anti-PLGF solid tumorsRG7334anti-NRP1 solid tumorsRG7347

MDM2 ant (2 ) solid & hem tumorsRG7112

MEK inh solid tumorsRG7420

PI3 K/mTOR solid & hem tumorsRG7422

PI3 kinase inh solid tumorsRG7321

anti-EGFL7 solid tumorsRG7414

dulanermin cancerRG3639

AKT inhibitor solid tumorsRG7440

MEK inh solid tumorsRG7421

CD22 Mab vcMMAE solid tumorsRG7593

MabThera iNHL maint 1st lineRG105*

Avastin mBC combo std chemos 1st l.RG435Avastin mBC combo docetaxel 1st l.RG435*

Edirol osteoporosisCHUEPOCH chemo induced anemiaCHU

Tarceva NSCLC EGFR mut 1st lineRG1415

CRTH2 antag asthmaRG7185

Rituxan NHLfast infusionRG105pertuzumab mBC HER2+ 2nd lineRG1273BRaf inh(2) BRAF mutated melanomaRG7256 Avastin adj BC HER 2+RG435

Avastin ovarian cancer 1st lineRG435Avastin mBC combo Herceptin 1st lineRG435Avastin adj NSCLCRG435

Actemra sJIARG1569GA101 anti-CD 20 aggr. NHLRG7159

HCV pol (9) HCVRG7342

T-DM1 EBCRG3502

GlyT1 inh schizophreniaRG1678

Avastin adj BC HER2-RG435

Avastin relapsed ovarian caRG435Avastin high risk carcinoidRG435Avastin glioblastoma 1st lineRG435

Avastin adj BC Triple negRG435

aleglitazar CV risk reduction in T2DRG1439

taspoglutide T2DRG1583dalcetrapib atherosclerosis CV risk red.RG1658

Lucentis diabetic macular edemaRG3645Lucentis AMD high doseRG3645

pertuzumab mBC HER2+ 1st lineRG1273

Herceptin sc formulation HER2+RG597Herceptin adj BC HER2+ (2yrs)RG597

GA101 anti-CD 20 iNHLRG7159BRaf inh met. melanoma 1st lineRG7204

Tarceva adj NSCLCRG1415

Actemra early RARG1569

T-DM1 mBC 1st line HER2+RG3502

GA101 anti-CD 20 CLLRG7159

Actemra RA DMARD IR H2HRG1569

Avastin mCRC TML RG435

T-DM1 mBC 2nd line HER2+RG3502

Actemra sc formulation RARG1569

Tarceva NSCLC EGFR mut 1st lineRG1415

Actemra Ankylosing SpondylitisRG1569

Rituxan ANCA assoc vasculRG105**

Her3 Mab solid tumorsRG7597Antiangiogenic solid tumorsRG7594

IAP antag(2) oncologyRG7459FGFR3 oncologyRG7444

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Impact on product pipelineIndustry-leading late stage pipeline maintained

2007 2008 2009 2010E

Number of NMEs

2

4

10Metabolic

Oncology

Inflammation

ocrelizumab

dalcetrapib

pertuzumab

dalcetrapib

taspoglutide

Actemra

ocrelizumab

aleglitazar

CNS

taspoglutide

ocrelizumab

pertuzumab

T-DM1

Hedgehog inh

BRAF inhibitor

RG7159 (CLL)

GlyT-1 inh

up to 14Virology

1 LIP and phase III decision pending

dalcetrapib

taspoglutide

aleglitazar

SGLT2 inh1

GlyT-1 inh

ocrelizumab MS1

lebrikizumab1

HCV pol inh

pertuzumab

BRAF inhibitor

T-DM1

Hedgehog inh

RG7159(CLL, NHL)

MetMAb

29

Impact on product pipelineProgressing Personalized Healthcare

T-DM1Metastatic breast cancer

(HER-2 expression level)

PertuzumabMetastatic breast cancer

(HER-2/3 expression level)

RG 7128Hepatitis C

(HCV viral load, genotype)

1 LIP and phase III decision pending

MetMAbNon-small cell lung cancer

(MET status)

Lebrikizumab1

Asthma

(periostin level)

RG7204Metastatic melanoma

(BRAF V600E mutation)

30

Diagnostics Continued high growth driven by need for medical value

HPVearly diagnosis

BRAF testpatient selection

dual HER2protein & gene

IVD <2 % total worldwide healthcare spendInfluences >60 % of critical decision making

MRSAscreening

Potential to improve healthcare efficiency

Innovative tests in areas of medical need

Digital Pathologytissue analysis

Patch pump diabetes care

Testing efficiency

Diagnosis

Companion Diagnostics

medical value

31

• We do not sacrifice our long-term future by short-term

cost cutting: innovation remains key !

• We have established an entrepreneurial model for our R&D – setup

• We are preparing for fundamental changes

in the healthcare environment

Roche delivering now – but still investing into the future!

The Roche advantages

32

We Innovate Healthcare

33

Impact on headcount – by geographyMain impact in US and Europe

USA CHEurope

(excl. CH) ROW

-3’550

-770

-1’300

-680 -6‘300

Positionsaffected

TransferredPositions1

Positionsreduced

1 Total number of positions transferred to other sites (800)/3rd parties (700)

-4’800+1‘500

34

Financial impactOne-off restructuring costs of about CHF 2.7 billion

Total 2010-12

2’700

IT / Other costs

Portfolio prioritization costs

Site closure and transfer costs

Employee-related costs

CHF million

400

1200

800

300

35

Advanced Non-Small Cell Lung Cancer

Avastin: Portfolio within a portfolioKey treatment option in multiple tumor types

MetastaticColorectal

• Superior OS 1st and 2nd line• Superior PFS 1st and 2nd line

• Superior OS 1st line• Superior PFS 1st and 2nd line

Ovarian • Superior PFS front line

• Superior PFS in multiple 1st

line trials • Superior PFS in 2nd line

MetastaticBreast

• Unsurpassed PFS and OSRecurrent

Glioblastoma

Renal • Superior PFS in 1st line

2009 Sales

75%- 80%

20%-25%

Documents

011011 - Roche at JP MOrgan_11211_13506[1]