Annual Report 2014 P E R F OR M A NC E INNOVATION ENGAGEMENT Reporting solid results, Roche From prevention to life- More than 80% of employees will propose an increase of the extending medicines, important are proud to work for Roche. dividend for the 28th year pipeline breakthroughs in 2014 Find out what the company is running. Discover how the new included an HPV test for doing to create a great Chairman, Christoph Franz, cervical cancer and survival workplace where people feel plans to build on this strong data of nearly 5 years for a engaged and inspired to do foundation. Roche breast cancer medicine. their best work. 08 52 108 Contents 04 OPENING SECTION 52 INNOVATION 04 Roche in 2014 54 Diverse approaches to R&D 06 Our business priorities 55 Innovative R&D: targeted therapies 56 Leading innovations from our pipeline 65 Innovative approaches for clinical studies 08 LETTERS 66 Reliable supply to patients 67 Health IT: interpreting Big Data 08 Letter from the Chairman 68 Spotlight on HPV testing 12 Board of Directors 72 Value of diagnostic test results 14 Letter from the CEO 74 Building partnerships around the world 18 Corporate Executive Committee 76 Conducting responsible R&D 78 Pharmaceuticals pipeline 20 BUSINESS REVIEW AND MARKET ENVIRONMENT 80 ACCESS TO HEALTHCARE 22 Solid growth in both divisions 82 An enormous global challenge 24 The big picture 83 Improving affordability 25 Focusing on value 86 Increasing availability of innovative products 25 Access to healthcare 87 Strengthening infrastructure 26 Technological advances 88 Increasing awareness and patient support 27 Growth of emerging markets 90 Spotlight on Africa 28 DIAGNOSTICS 94 RESPONSIBLE BUSINESS 30 Good sales growth in 2014 96 Integrity is at the core of everything we do 32 Setting new industry standards with new instruments 97 Increasing transparency 34 Adding value in healthcare 98 Engaging with our stakeholders 34 Diagnostics business model 100 Managing risk and crisis 36 Spotlight on Diagnostics Korea 101 Safeguarding patients 104 Spotlight on mental health 40 PHARMACEUTICALS 108 PEOPLE 42 Solid performance in 2014 44 Key products performing well 110 Engaging and energising our people 45 Significant breakthroughs in 2014 111 Recognising and rewarding employees 47 Making innovation accessible 112 Appreciating everyone’s contribution 48 Spotlight on biomarkers 113 Preparing the workplace of the future 114 Developing the full potential of our leaders 115 Making the most of employee careers 116 Spotlight on professional development 36 48 120 ENVIRONMENT AND COMMUNITY 122 Reducing our environmental footprint 68 124 Occupational and mental health 125 Environmental sustainability 130 Security 131 Pharmaceuticals in the environment 131 Legislation and compliance 132 Remediation management 134 Spotlight on sustainability 138 Making a difference with philanthropy 140 CORPORATE GOVERNANCE AND REMUNERATION REPORT 142 Corporate Governance 90 152 Remuneration Report 168 Report of the Statutory Auditor 116 170 CLOSING SECTION 170 Assurance Report 172 More on the Web 174 Impressum 176 Our purpose statement 104 134 Roche | Roche in 2014 Roche in 2014 ROCHE IS A RESEARCH-BASED HEALTHCARE COMPANY founded in 1896 and headquartered in Basel, Switzerland. We focus on creating truly innovative medicines and diagnostic tests in areas of unmet medical need. Our business model drives our ambition to make a significant difference to patients, reaching as many people in need as possible whilst continuously reinvesting in innovation to develop diagnostic tests and breakthrough treatments. billion Swiss francs Swiss francs 47.5 sales* 14.29 core earnings per share billion Swiss francs 229 market capitalisation 88,509 employees Pharmaceuticals Diagnostics Product pipeline • Esbriet approved in idiopathic pulmonary • New molecular testing systems, the cobas • Anti-PDL1 immunotherapy medicine fibrosis 6800 and cobas 8800, launched in bladder cancer • RoActemra approved in early rheumatoid • HPV test for primary screening of cervical • Lampalizumab in geographic atrophy arthritis cancer approved of the eye • Avastin approved in cervical cancer and • New diagnostic test for syphilis launched • Cobimetinib and Zelboraf in advanced platinum-resistant ovarian cancer • Investment of 450 million Swiss francs melanoma • Gazyvaro approved in chronic lymphocytic over next three years in new diagnostic • ACE910, an innovative bispecific antibody, leukemia manufacturing facility in China in hemophilia A * Unless otherwise stated, all growth rates in this report are at constant exchange rates (CER; average full year 2013). 4 | Roche Annual Report 2014 Roche in 2014 | Roche No. 1 in biotech in oncology in in vitro diagnostics in hospital market Acquisitions Sustainability Group • InterMune in idiopathic pulmonary fibrosis • Dow Jones Sustainability Indices Group • Christoph Franz elected as Chairman • Seragon Pharmaceuticals in hormone leader for sixth year running of the Roche Board of Directors receptor-positive breast cancer • Global access programme to test viral loads • 4 billion Swiss francs of investments • Ariosa Diagnostics in non-invasive pre-natal in people with HIV infections launched announced in state-of-the-art R & D, testing • 5.8 million people treated in 20 years production facilities and infrastructure • Genia Technologies in next-generation gene through the Phelophepa train, a mobile • Increase in dividend proposed for the sequencing health clinic in South Africa 28th consecutive year • IQuum in molecular diagnostics • 71% fully engaged employees • More than 100 new external partnerships Roche Annual Report 2014 | 5 Roche | Our business priorities Our business priorities WE HAVE A CLEAR SET of business priorities aimed at achieving sustainable growth and delivering value to all our stakeholders. Focus on patients Excellence in science Personalised healthcare We focus exclusively on developing innovative We strive to address unmet medical needs We combine our strengths in pharmaceuticals medicines and diagnostic tests that help through excellence in science. Breakthrough and diagnostics to better fit treatments to patients live longer, better lives. Two thirds innovation in science and technology patients. When genetic differences can be of all known diseases are either still not increasingly allow us to understand precisely identified, the efficacy and safety of medicines treated adequately or not treated at all. This what is malfunctioning in the body and can be improved enormously. To this end medical need is an enormous challenge develop drugs to counter the problem. We we have a companion diagnostic strategy for and better diagnostics and medicines can focus on oncology, immunology, infectious every molecule we develop. make a huge difference to the lives of millions diseases, ophthalmology and neuroscience. of patients and their families. However, we remain flexible and follow the science as new insights become available. Performance in 2014 19 million patients on a Roche top 25 selling 66 new molecular entities (NMEs) >350 personalised healthcare collaborations medicine in the pipeline within Roche More than 6 million women tested for HPV 11 pharmaceutical product approvals >15 companion tests in development More than 6.5 billion test strips for blood >170 manuscripts puplished in 41 NMEs with companion diagnostic glucose monitoring sold top-tier journals programmes in pipeline 6 | Roche Annual Report 2014 Our business priorities | Roche Access to healthcare Great workplace Sustainable value We aim to bring our medicines and diagnostic We are committed to constantly maintaining We run our business in a way that is ethical and tests to as many people in need as possible. and strengthening highly attractive aims to create long-term value for shareholders Every healthcare system comes with different workplaces where every person feels valued and all our stakeholders. We want to create challenges and we customise solutions and respected and can grow to his or her value through developing medical solutions and for individual markets. We work with many full potential. Our people make our business. we aim for as many people to benefit from different local partners to reduce barriers to They discover, develop and manufacture our them as possible. We believe that our success accessing healthcare and establish innovative, products and ensure they reach the patients lies in our ability to develop strategies where sustainable ways to bring effective and who need them. We believe that the key to both industry and society benefit in a affordable healthcare to patients. our success lies in our ability to attract, retain sustainable way. and motivate a highly skilled and diverse workforce. Performance in 2014 250,000 women screened for breast cancer 81% of our employees are proud to 11.5% improvement in eco-impact in North Africa through a Roche mobile unit work for Roche 28th consecutive year dividend 1.3 million infants tested for HIV as part 71% fully engaged employees increase proposed of Roche’s AmpliCare programme 48% of total workforce are women 6 times Group leader Dow Jones Global access programme for HIV viral Sustainability Indices load testing launched Roche Annual Report 2014 | 7 Letter to shareholders | Christoph Franz 8 | Roche Annual Report 2014 Christoph Franz | Letter to shareholders Supporting a strategy of lasting success 2014 WAS ANOTHER SUCCESSFUL YEAR FOR ROCHE, with a solid business performance, highly promising medical advances and ground-breaking investments.