Roche delivers solid results in 2014

• Group sales up 5% at constant exchange rates , 1% in Swiss francs
• Pharmaceuticals Division sales up 4%, driven by oncology (HER2-positive breast cancer medicines, Avastin) and strong growth in immunology (Actemra, Xolair)
• Diagnostics Division sales up 6%, driven by Professional Diagnostics and Molecular Diagnostics
• Core earnings per share increased by 5% to 14.29 Swiss francs; up 7% excluding one-time double charge of the US Branded Prescription Drug fee 
• Board proposes dividend increase of 3% to 8.00 Swiss francs, 28th consecutive year of dividend growth
• Outlook for 2015: Sales expected to grow low-to mid-single digit, at constant exchange rates. Core earnings per share targeted to grow at constant exchange rates ahead of sales. Roche expects to further increase its dividend in Swiss francs

Commenting on the Group's results, Roche CEO Severin Schwan said: "We made good progress in 2014 with solid growth in both divisions driven by our newly launched medicines and diagnostic tests. In addition, we have now made ten targeted acquisitions to complement our existing portfolio in Pharma and Diagnostics. Initial demand for Esbriet, a breakthrough medicine in lung fibrosis which was recently launched in the US following the InterMune acquisition, is strong. In Diagnostics, we successfully launched the cobas 6800/8800 platform, which brings the automation of molecular testing to a new level. With our strong product portfolio and pipeline we are well positioned for the future."

Group Results

Solid sales growth in both divisions
Group sales reached 47.5 billion Swiss francs in 2014. Growth in Pharmaceuticals was driven by medicines for HER2-positive breast cancer (+20%), as well as Avastin (+6%). New products, Perjeta and Kadcyla for HER2-positive breast cancer, made a significant contribution to growth, more than offsetting declining sales of Xeloda, a medicine that now faces generic competition. There was also strong demand for immunology medicines, notably Actemra/RoActemra (+23%) for rheumatoid arthritis and Xolair (+25%) for chronic hives and allergic asthma. Sales of Tamiflu (+54%) increased considerably late in the year, as a result of the US flu epidemic. In Diagnostics, sales continued to be driven by the Professional Diagnostics business, which grew 8%, whilst Molecular Diagnostics was 6% higher. There was also positive early uptake for the new molecular laboratory testing systems, launched during the year, the cobas 6800 and the cobas 8800.

The Swiss franc rose against a number of currencies in 2014, mainly the Japanese yen, along with a number of Latin American currencies and the US dollar. Overall, this led to a negative impact on the results reported in Swiss francs.

Core operating profit and cash flow generation remains strong
Core operating profit increased by 3%. This includes a double charge of 202 million Swiss francs of the US Branded Prescription Drug fee, following final regulations issued by the Internal Revenue Service, which advanced the timing of recording the liability. Excluding this double charge, core operating profit was 5% higher.

Operating free cash flow was 15.8 billion Swiss francs. The strong cash generation of the underlying operations was offset by higher capital investments in manufacturing facilities and other site development projects, resulting in a 2% decrease at constant exchange rates. Free cash flow was 5.3 billion Swiss francs, 1% higher at constant exchange rates.

Net income impacted by impairments and restructuring
IFRS net income was negatively impacted by debt restructuring, impairments and restructuring costs in 2014. The Group restructured part of its debt in 2014 to take advantage of the low interest environment. Net of tax, this measure resulted in a one-time loss of 279 million Swiss francs, but will lead to interest savings over the longer term. Intangible impairments increased by 1.1 billion Swiss francs, in particular in Tissue Diagnostics, following the reassessment of a product in late-stage development and cuts in US laboratory test reimbursement. Costs for restructuring increased by 252 million Swiss francs due to a non-recurring, one-time income effect in the 2013 IFRS results.

In total, these costs and impairments resulted, after taxes, in a 10% lower net income on an IFRS basis in 2014 (down 16% in Swiss francs). Core net income, which excludes these items, was 6% higher than 2013 (stable in Swiss francs).

The performance of the underlying business remained strong, with core earnings per share 5% higher at constant exchange rates, and stable in Swiss francs. Excluding the one-time double charge of the US Branded Prescription Drug fee, core earnings per share were 7% higher.

Based on the strong business results, the Board of Directors has recommended the 28th consecutive dividend increase, 3% to 8.00 Swiss francs per share.

Product approvals and positive data from the pipeline
Two new indications were approved for cancer medicine, Avastin, platinum-resistant ovarian cancer and cervical cancer, whilst Gazyvaro was approved for the treatment of chronic lymphocytic leukemia in Europe. Esbriet, the newly acquired idiopathic lung fibrosis medicine, was granted FDA Breakthrough Therapy Designation in July and subsequently launched in October. The FDA also granted Breakthrough Therapy Designation for Lucentis in diabetic retinopathy and for a new cancer immunotherapy compound, anti-PDL1, in bladder cancer.

Clinical trial data from the phase III CLEOPATRA study of Perjeta in HER2-positive metastatic breast cancer was one of the highlights of 2014. The results showed that adding Perjeta to Herceptin and chemotherapy, increased survival time for previously untreated patients to an unprecedented almost five years. Clinical trial results for cobimetinib combined with Zelboraf in advanced melanoma (tested against Zelboraf alone), were also announced during the year, showing that treatment with the combination halved the risk of the disease worsening. Roche now has over 30 different combination therapies in its oncology pipeline.

Phase III studies of bitopertin for schizophrenia did not meet primary endpoints, and a phase III study of gantenerumab  in early-stage Alzheimer's disease was discontinued after a pre-planned futility analysis.

In first-line treatment of HER2-positive advanced breast cancer, the MARIANNE study of antibody drug conjugate, Kadcyla, in combination with Perjeta, showed similar progression-free survival time to Herceptin with chemotherapy, but did not show superiority in this specific setting. These results do not impact existing use of Perjeta or Kadcyla, both of which have been shown to significantly extend survival in HER2-positive breast cancer. Kadcyla is approved for people with previously treated disease (second and later lines). Perjeta is approved in combination with Herceptin and chemotherapy for people with previously untreated disease (first-line).

Fourteen key diagnostic products launched, further broadening the portfolio
Roche launched a range of new diagnostic instruments in 2014 including the cobas 6800 and cobas 8800 systems for molecular testing, the cobas 6500, which combines urine strip testing and digital urinary microscopy, and a number of new tools for the management of diabetes. New tests were also launched for the identification of infectious disease-causing microorganisms, and in women's health for fertility and pre-natal diagnosis. These tests further strengthen the broad portfolio of tests for a wide range of applications, from fertility and pregnancy testing, breast, cervical and ovarian cancer management to monitoring and management of chronic, age-related conditions like osteoporosis.

Building capabilities with strategic acquisitions
Over the last ten months, Roche has made ten targeted acquisitions to complement its current product portfolio in both divisions, including InterMune, the developer of Esbriet for idiopathic lung fibrosis, and Seragon Pharmaceuticals, which is researching treatments for hormone receptor-positive breast cancer. In Diagnostics, acquisitions were made to expand into point-of-care molecular testing and to add new technologies in gene sequencing.

In early 2015, Roche acquired Ariosa Diagnostics to enter the non-invasive prenatal and cell-free DNA testing markets. Roche also entered into a strategic partnership with Foundation Medicine in the field of molecular information and genomic analysis in oncology. The collaboration aims to advance personalised healthcare, by leveraging use of molecular information for comprehensive assessment of tumours.

Outlook for 2015
In 2015, Roche expects sales to grow low- to mid-single digit, at constant exchange rates. Core earnings per share are targeted to grow ahead of sales at constant exchange rates. Roche expects to further increase its dividend in Swiss francs. more

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