Annual Report 2018 PATIENTS INNOVATION PARTNERS In cancer, modern care helps Advanced analytics enable us to Roche is expanding its colla b­ where no effective treatments were create a wealth of new data insights orations, combining its own available previously. Innovative and opportunities across the strengths with the unique tools of therapies allow this woman on entire product lifecycle and R&D its partners to elevate personalised the cover picture to carry on with value chain to ultimately improve healthcare to a new level for many her life. See back cover for more. outcomes for patients. more patients. Keith Terry, Genentech, USA “This was an emotional hire for me.” I am the Medical Doctor Talent Scout for Genentech with family and friends—and not dwell on the in South San Francisco and work closely with our negative. It has taught me to stay in the moment. Product Development Neuroscience team. Ironically, There have been some down times too, when I I had a big win with the hiring of a senior medical experienced a relapse. I felt so fatigued that it was director for Ocrevus, the medication that I currently an effort just to breathe. It is difficult to imagine use to treat my multiple sclerosis (MS). This was an this level of fatigue until you have experienced it. emotional hire for me. This illness has really increased my capacity for empathy for those that are ill. I was diagnosed with multiple sclerosis 16 years ago at the age of 37. I had been experiencing extreme But overall there have been many positives. I have fatigue and loss of some motor function in my hands met so many amazing people through my MS for some time. Then it was numbness in my torso and experience. I have been an active member of the arms. I believe I had MS for about a year before actually MS society and led a support group for individuals being diagnosed. Prior to that, I had just ignored the with MS for over five years. I also participated in fatigue and thought this must be happening because the local MS walk in my community. I try to get of getting older or not getting enough vitamins. I used some exercise every day in some capacity; this seems to power through when I felt fatigued, but then a major to really help. Also, having a good diet has been event occurred and I could not ignore it any more. important. There are challenges, though. The motor function in my hands has definitely decreased. This happened as I was leading a hiring initiative Also, my short­term memory has been affected. for a bank. I was writing on a white board and kept dropping the pen. I felt really weak in my left arm For others with MS, I would say—get involved. There and hand. I thought I was having a heart attack. I are great things going on in the MS community. Also, ended up in the emergency room but it was not a heart do not ignore your symptoms, including depression. condition. I was sent home but kept feeling worse and It is a common symptom and often ignored. I had worse. I visited four different emergency medical depression related to MS, too. I used to have good centres before an MRI showed lesions on my spinal days and bad days with my illness. However, since cord and in my brain. It was multiple sclerosis. I started taking Ocrevus about a year and a half ago, now almost all my days are good with a high level The diagnosis has made me focus on the important of energy. And I am thankful for that! things—developing and enhancing relationships Innovation: It’s in our DNA We have always worked across disciplines and geographies to drive scientific discovery and redefine what is possible to improve patients’ lives. We are working on understanding how diseases We are also the world leader in the in vitro diagnostics differ down to the molecular level so we can develop business. This track record allows us to build lasting new tests and medicines that prevent, diagnose and meaningful partnerships across the world with and treat diseases, and bring them to the patients research academia and public healthcare institutions. who need them. With our combined strengths in diagnostics and pharmaceuticals, our personalised The founding families continue to hold the majority healthcare strategy aims to fit the right treatment voting stake in the company. This stability allows for to the right patient. a tradition of sustainable thinking, so we can learn from setbacks and focus on lasting value for patients As the world’s largest biotech company, we develop and society. We remain dedicated to the highest breakthrough medicines, improving the standard standards of quality, safety and integrity. Our legacy of care across oncology, immunology, infectious is based on respect for the individual as well as the diseases, ophthalmology and neuroscience. communities and the world we live in. 94,442 employees* worldwide North America Europe 25,135 employees 41,127 employees Genentech, South San Francisco, US ( ) Basel, Kaiseraugst and Rotkreuz, Switzerland ( ) Roche Diagnostics, Indianapolis, US ( ) Mannheim and Penzberg, Germany ( ) Asia 21,849 employees Chugai, Tokyo, Japan ( ) Shanghai and Suzhou, China ( ) Latin America 4,431 employees Africa Australia/New Zealand 1,220 employees 680 employees 30 26 Research and development sites in Manufacturing sites in Pharmaceuticals and Pharmaceuticals and Diagnostics worldwide Diagnostics worldwide Roche Group headquarters Manufacturing sites in Pharmaceuticals and Diagnostics Largest sites based on number of employees Sales sites in Pharmaceuticals and Diagnostics Research and development sites in Pharmaceuticals and Diagnostics * Number of employees expressed in full-time equivalents Highlights Supporting continued growth Progressing Alzheimer’s diagnosis With CHF 2.4 billion in sales—Ocrevus for two forms of FDA breakthrough device designation for Elecsys assays to MS most successful new product launch for Roche support early and improved diagnosis of Alzheimer’s disease Read more on page 33 Read more on page 29 Treating rare blood disorder Improving access to healthcare Hemlibra now indicated for most haemophilia patients in Roche takes a lead role in the scale-up of the City Cancer the US Challenge 2025 to change global landscape of cancer care Read more on page 35 Read more on page 61 Fighting influenza infections Contributing to sustainability Xofluza—first single-dose oral medicine to treat influenza Roche ranked most sustainable healthcare company in the approved in the US Dow Jones Sustainability Indices for the tenth successive year Read more on page 36 Read more on page 13 Key figures CHF 56,846 million CHF 11,047 million Group sales +7%** R&D core investments +6% CHF 20,505 million 30 Roche medicines Core operating profit +9% on the WHO Model List of Essential Medicines CHF 8.70 127 million patients Dividend treated with Roche medicines ** All growth rates in this report are at constant exchange rates (CER; average 2017). Contents 4 Overview 8 Our strategy 2 1 Chairman’s shareholder letter 16 Interview with the CEO Roche Group 20 Business performance 22 Group performance 24 Diagnostics performance 32 Pharmaceuticals performance 40 Science and innovation 42 Data insights for better informed decisions 49 Harnessing frontline scientific technologies 58 Access to healthcare 62 Digital platforms to support patients 64 Continuing the fight against HIV/AIDS 68 People 71 Increasing agility to drive and manage change 74 Nurturing and attracting talent 78 Environment 82 Decreasing energy consumption 84 Reducing greenhouse gas emissions 88 Community engagement 90 Paths to strong societies 92 Unlocking potentials and growing talents 94 Integrity in business 98 Ensuring operational resilience 100 Partnerships for a lasting future 104 Corporate Governance 107 Board of Directors 108 Corporate Executive Committee 120 Remuneration Report 122 Principles 126 Remuneration components 4 Our reporting approach Roche is committed to transparent reporting and we endeavour to drive our economic, social and environmental performance with the same diligence as our financial performance. Reporting scope and boundaries our emerging sustainability risks and opportunities Our financial and non­financial reporting consists of is provided on our risk management web page. the Annual Report, the Finance Report and the online report. It contains the annual financial statements, A consolidated Group Risk Report, which covers consolidated financial statements and non­financial all material risks, is discussed annually with the performance indicators. It covers all regions and Corporate Executive Committee and reviewed by the divisions from 1 January to 31 December 2018. The Audit Committee of the Board of Directors and by the financial reporting scope is defined and outlined in our Board of Directors. The effectiveness of the Group risk Finance Report, and there have been no significant management process is regularly monitored by the Group changes in scope in 2018 compared to 2017. Risk Advisory team, and the overall process is reviewed externally when appropriate. Risk management is Reporting in accordance with the latest embedded at all levels of the Group. Our Pharmaceuticals GRI guidelines and Diagnostics Divisions and global functions conduct We have followed the GRI G4 guidelines (Global a formal risk assessment process at least once a year and Reporting Initiative) since 2014. By using the GRI must develop risk plans for their most material risks. guidelines, we disclose the most critical impacts of our activities on the environment, society and the economy. Group Risk Advisory facilitates risk discussions to As of the 2017 reporting period, we transitioned to support the business in many specialist areas such as the newly introduced GRI Standards, which are based IT security, as well as compliance and sustainability. on the key concepts and disclosures of the GRI G4 Training sessions and platforms have been established guidelines.