Annual Report 2002 - Roche

Annual Report 2002 

Roche Group 

Annual Report and Group Accounts 2002 

Roche Holding Ltd, Basel 

Annual Accounts 2002

Figures reported in Figures reported 

the financial statements on an adjusted basis a) 

2002 2001 % change 2002 2001 % change 

Sales 29,725 29,163 +2 26,545 25,761 +3 

EBITDA b) 6,032 6,438 –6 7,721 7,211 +7 

Operating profit 1,335 3,247 –59 4,965 4,438 +12 

Net income (4,026) 3,697 – 3,808 4,562 –17 

Research and development 4,257 3,893 +9 4,132 3,771 +10 

Additions to property, 

plant and equipment 2,044 1,931 +6 1,746 1,647 +6 

Personnel 

Number of employees 

at 31 December 69,659 63,717 +9 62,398 56,223 +11 

Ratios 

EBITDA as % of sales 20 22 29 28 

Operating profit as % of sales 4 11 19 17 

Net income as % of sales –14 13 14 18 

Research and development 

as % of sales 14 13 16 15 

Data on shares and 

non-voting equity securities in CHF c) 

Earnings per share and 

non-voting equity security (diluted) (4.80) 4.37 – 4.49 5.38 –17 

Dividend per share and 

non-voting equity security d) 1.45 1.30 +12 1.45 1.30 +12 

a) The adjusted figures, which are used in the internal management of the Roche Group, represent the results of the 

Group’s underlying on-going operations. They exclude special items and include only the continuing businesses. 

See pages 69–71 for a full description and reconciliation. 

b) EBITDA: Earnings before interest and other financial income, tax, depreciation and amortisation, including impairment. 

This corresponds to operating profit before depreciation and amortisation, including impairment. 

c) Number of shares and all per share information in 2001 is restated for the 100 for 1 share split that took place on 

4 May 2001; see Note 25 to the financial statements. 

d) Dividend 2002 as proposed by the Board of Directors.

Group Performance at a Glance 

Sales by division 

in millions of CHF 

Pharmaceuticals 

30,000 

25,000 

Total 24,662 

14,376 

Total 25,496 

16,487 

Total 27,543 

17,686 

Total 25,761 

18,861 

Total 26,545 

19,306 

20,000 

15,000 

10,000 

4,616 

5,282 

6,252 

6,900 

7,239 

5,000 

3,630 

0 

3,727 3,605 

2,040 

| 98 | 99 | 00 | 01 | 02 | 

Diagnostics 

Vitamins and Fine Chemicals 

Fragrances and Flavours 

Non-voting equity security (Genussschein) price performance 

in CHF 

Roche non-voting equity security (adjusted) 

Swiss Market Index (rebased) 

200 

160 

120 

80 

40 

0 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 

2002

Group figures 

Net income in millions of CHF Net income per share and EBITDA 


non-voting equity security 

in CHF 

7,000 

6,000 

5,000 

4,000 

3,000 

7 

6 

5 

4 

3 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

2 

2,000 

1,000 

1 

1,000 

4,392 

4,401 

14 

5,0 

4,562 

3,808 

0 0 0 

| 98 | 99 | 00 | 01 | 02 | 98 | 99 | 00 | 01 | 02 

5.09 

5.10 

5.96 

5.38 

4.49 

6,423 

6,647 

7,068 

7,211 

| 98 | 99 | 00 | 01 | 02 

7,721 

Operating profit in millions of CHF Research and development in millions of CHF Additions to property, 

plant and equipment 


7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

4,350 

4,094 

4,301 

4,438 

4,965 

3,408 

3,732 

| 98 | 99 | 00 | 01 | 02 | 98 | 99 | 00 | 01 | 02 | 98 | 99 | 00 | 01 | 02 

3,919 

3,771 

4,132 

1,883 

1,985 

2,115 

1,647 

1,746 

1999–2002 figures on an adjusted basis; figures are not fully comparable due to Givaudan 

spin-off, Vitamins and Fine Chemicals demerger, Genentech transactions and accounting policy 

changes. 

All per share information in 2001 is restated for the 100 for 1 share split that took place on 

4 May 2001.

Roche Group 

Annual Report and Group Accounts 2002 


Annual Accounts 2002 

Table of Contents 

Letter from the Chairman 4 

Board of Directors and Executive Committee, Corporate Governance 10 

Group Strategy 16 

Divisions 

Pharmaceuticals 18 

Diagnostics 32 

Vitamins and Fine Chemicals 43 

People and the Environment 46 

Human Resources 48 

Safety and Environmental Protection 51 

Social Involvement 53 

Finance 56 

Financial Review 57 

Consolidated Financial Statements 72 

Notes to the Consolidated Financial Statements 76 

Report of the Group Auditors 119 

Multi-Year Overview 120 

Roche Securities 124 


Financial Statements 128 

Notes to the Financial Statements 130 

Appropriation of Available Earnings 132 

Report of the Statutory Auditors 133 

Roche – a Global Market Presence 134 

Subsidiaries and Associated Companies 136 

Table of Contents 1

At Roche employee development is a top priority. The 

Group’s modern conference centre, Roche Forum Buonas 

(Switzerland), provides just the right pleasant yet professional 

setting for training and development activities.

The sale of the Vitamins and Fine Chemicals Division, 

legal settlements with US direct customers in the 

vitamin case and an impairment of financial assets 

result in significant one-time charges and a substantial 

consolidated net loss 

Pharmaceuticals and Diagnostics Divisions grow faster 

than the global market 

Sales by core Group businesses up by 9% in local 

currencies and by 3% in Swiss francs 

Double-digit rise in operating profit and another 

increase in margins 

Strong cash flow and solid balance sheet 

Quantum leap forward in Japan as a result of Chugai 

alliance 

Pegasys approved worldwide for hepatitis C; 

pharmaceuticals pipeline substantially strengthened 

Diagnostics business expands global market lead 

Double-digit sales growth and stable operating profit 

margin expected for 2003 

Results on an adjusted basis

Letter from the Chairman 

Two very different sets of developments had a major impact 

on the Group’s financial results for 2002. On the one hand, 

our core Pharmaceuticals and Diagnostics Divisions performed 

strongly, posting above-market growth rates and 

further increases in profitability. Gross cash flow reached a 

new record high. On the other, vigorous action to address 

significant unresolved issues from the past resulted in the 

Group’s reporting a substantial net loss. Roche’s financial 

condition nevertheless remains solid. At the Annual General 

Meeting the Board of Directors will propose that the dividend 

be increased by 12% to 1.45 Swiss francs per share and 

non-voting equity security (Genussschein). 

4 Letter from the Chairman

While continuing with the successful 

expansion of our pharmaceuticals and 

diagnostics businesses, we also made it 

one of our primary objectives in 2002 

to address a number of unresolved 

issues relating to the Vitamins and 

Fine Chemicals Division, ongoing 

litigation and the impact of the stock 

market situation on our financial 

assets. Last year we were able to resolve 

many of these challenges, giving us 

the flexibility and room for manoeuvre 

we need to strengthen our company 

in the long term. However, some of 

the measures adopted involved taking 

substantial one-time charges in our 

financial statements for 2002. 

– The provisions recorded and 

announced last autumn for settling 

litigation, primarily with US customers, 

in the vitamin case were 

increased by 570 million to 1,770 

million Swiss francs. We believe this 

amount will cover all outstanding 

claims by direct and indirect customers 

in the United States. 

– While the merger of Nippon Roche 

and Chugai resulted in a net gain, 

this was offset by an impairment 

charge in connection with the sale 

of the Vitamins Division. The net 

effect of these two transactions was 

a loss of 1,064 million Swiss francs. 

– The large equity holdings that 

earned significant returns for Roche 

in the 1990s involve risks that are 

making themselves felt in today’s 

turbulent market environment. As a 

result of stock market developments 

over the past two years, the carrying 

value of our equity portfolio, which 

consists primarily of Swiss SMI 

securities, has declined sharply. In 

line with an anticipated change in 

International Financial Reporting 

Standards, we decided last year to 

revise our accounting policy and 

recognise impairment losses on 

financial assets if the assets’ market 

value remains at least 25% below 

original cost for a period of more 

than six months. As a result of this 

decision, accumulated unrealised 

investment losses totalling 5,192 

While continuing with the successful 

expansion of our operating businesses, 

we also made it one of our primary 

objectives in 2002 to address a number 

of unresolved issues relating to the 

Vitamins Division, ongoing litigation 

and the impact of the stock market 

situation on our financial assets. Last 

year we were able to resolve many of 

these challenges. 

million Swiss francs as of the end of 

2002 have been charged to income. 

Painful as the one-time impact of 

this measure is, it gives us the flexibility 

to allocate resources when and 

where they are needed for the strategic 

development of our operating 

businesses. 

In the first half of 2002 we recorded a 

provision of 778 million Swiss francs 

in respect of a long-standing lawsuit 

involving Genentech. In June 2002 a 

California superior court jury awarded 

City of Hope Medical Center 500 million 

US dollars in additional royalties 

and punitive damages for Genentech’s 

alleged breach of an agreement signed 

with City of Hope in 1976, that is, 

before Roche acquired an interest in 

Letter from the Chairman 5

Genentech. Genentech has appealed 

the jury’s verdict and damages award. 

For the above reasons, Roche recorded 

a consolidated net loss of 4,026 million 

Swiss francs for 2002, despite the 

Group’s strong operating performance. 

Even after this corrective action, 

Roche remains solidly financed, with 

a ratio of equity to total assets of 40%. 

The earning power of the Group’s 

core businesses is reflected by another 

year of strong gross cash flow, 

which in 2002 reached a record high 

of 7.7 billion Swiss francs. 

Of decisive importance for Roche’s future 

outlook is the fact that we achieved our 

operational goals for 2002 and significantly 

strengthened our core pharmaceuticals 

and diagnostics businesses. 

Of decisive importance for Roche’s 

future outlook is the fact that we 

achieved our operational goals for 

2002 and significantly strengthened 

our core pharmaceuticals and diagnostics 

businesses. 

– Worldwide sales of Roche prescription 

medicines increased 10% in 

local currencies, well ahead of the 

global market average (7%), to 

almost 18 billion Swiss francs. This 

growth was driven mainly by our 

strong oncology portfolio, which 

last year surpassed the five-billion 

mark, with an additional boost 

coming from the integration of 

Chugai. We thus further extended 

our leadership in this key anticancer 

market. We also significantly 

strengthened our presence in virol- 

ogy. Pegasys received marketing 

approval in the European Union 

and the United States. Pegasys combined 

with Copegus, Roche’s proprietary 

ribavirin product, is currently 

the hepatitis C treatment with the 

highest response rate. Fuzeon, our 

novel anti-HIV medicine, marks a 

further milestone in the fight 

against AIDS, as the search for a 

cure goes on. Marketing applications 

for the product have been 

granted fast-track review status by 

the US and European authorities, 

and we anticipate positive decisions 

on both filings in the first quarter of 

2003. 

– The acquisition in 2002 of a majority 

interest in Chugai catapulted 

Roche from number 32 to number 

five in Japan. After an overwhelming 

majority of Chugai shareholders 

approved a merger of their company 

with Nippon Roche at the end of 

June and the antitrust authorities 

cleared the transaction, Chugai 

became a member of the Roche 

Group on 1 October 2002. Thanks 

to NeoRecormon (Roche) and 

Epogin (Chugai), we now control 

the global marketing rights to epoetin 

beta, a major anemia treatment, 

outside the United States. The 

smooth and seamless integration of 

Chugai in Japan will be of great 

importance for the future growth of 

our pharmaceuticals business. We 

now have the fourth-largest sales 

organisation to market Roche’s 

established and future products in 

the world’s second-largest pharmaceuticals 

market. Chugai can now 

draw on one of the biggest development 

organisations in the country 

and will help to further consolidate 

Roche’s global number two position 


in biotechnology. At the beginning 

of 2003 the new Chugai started 

restructuring its manufacturing and 

research organisations with the aim 

of eliminating duplication and capturing 

additional synergies. By the 

end of 2005 Chugai aims to achieve 

an operating profit margin of 20% 

(based on Japanese GAAP). 

– 2002 was another successful year for 

Roche’s Diagnostics Division, which 

recorded double-digit growth – further 

extending its lead over its competitors 

and outpacing the global 

in-vitro diagnostics market by a 

substantial margin. Sales by each 

business area and in each of the 

division’s geographic regions grew 

ahead of the market. As a result, 

we are on the way to becoming the 

market leader in Japan, too. In 

February 2003, in a move aimed at 

strengthening our lead in diabetes 

care, we made a tender offer to 

acquire the Swiss medical device 

supplier Disetronic, the world’s 

second-biggest maker of insulin 

pumps. Pioneering development 

efforts at Roche Diagnostics are also 

helping to secure a leadership position 

for the division in the very 

dynamic market for tools that translate 

clinical data into actionable 

health information. 

– We are especially pleased with the 

continued increase in profitability. 

Our margins show a steady improvement 

in our return on sales of 

prescription medicines. This has 

been driven largely by sales of Roche 

prescription drugs, which last year 

generated an operating profit margin 

of 25%. In 2002 Genentech’s 

operating profit margin increased 

more than nine percentage points to 

11.8%. We are thus moving steadily 

towards our medium-term goal 

of achieving an operating profit 

margin for Pharmaceuticals that 

approaches 25%. The Diagnostics 

Division’s operating profit margin 

also improved again, from 14.4% to 

15.6%, and is thus on track to reach 

our medium-term target of 20%. 

– We again increased our EBITDA 

margin, the most informative 

benchmark for comparing companies’ 

profitability. The margin for 

Diagnostics is now 27.4%. That for 

Pharmaceuticals is 31%, which is 

high by industry standards. 

– The R&D pipelines of our two core 

businesses are a solid basis for 

future growth. In 2002 we substantially 

expanded our Pharmaceuticals 

pipeline by advancing our own projects 

and signing more than 20 new 

licensing agreements as part of our 

targeted business development 

activities. The number of potential 

new medicines in phase II development 

has risen significantly since 

2001. With over 100 medium and 

large projects, Roche Diagnostics 

boasts the broadest R&D pipeline 

in the industry. 

This positive operating performance is 

the result of our strategy of focusing 

on our core competency – serving the 

high-value healthcare market. 

I would also like to take this opportunity 

to express my appreciation to our 

employees, to whose skill, hard work 

and commitment these good results 

are mainly due. 

Although economic conditions 

remained difficult in 2002, the Vitamins 

and Fine Chemicals Division 

maintained its market lead and, thanks 


to substantial volume gains, posted a 

modest sales increase in local currencies. 

Following the announcement last 

spring of our intention to divest the 

Vitamins and Fine Chemicals Division, 

and after a careful review of the 

options, we sold the division to the 

Netherlands-based DSM group at the 

beginning of 2003. As an industry 

buyer, DSM offers complete familiarity 

with the division’s businesses. 

To facilitate comparisons with 2001, 

this year’s Annual Report once again 

presents the Group’s results on both a 

consolidated and an adjusted basis. 

The principles employed in compiling 

the adjusted figures, which exclude 

one-time special items and represent 

only continuing operations, have 

remained unchanged since 1999. 

A detailed explanation of these principles 

will be found on page 69. 

By demerging the Vitamins and Fine 

Chemicals Division and acquiring a majority 

stake in Chugai, Roche has further 

strengthened its focus on its innovative 

pharmaceuticals and diagnostics businesses, 

and as a result is ideally positioned 

to pursue opportunities in tomorrow’s 

healthcare market. 

Excluding special items, net income 

totalled 3.8 billion Swiss francs, a 

decline of 17% from the previous year. 

A marked drop in net financial income 

and a higher tax charge, which reflects 

the fact that operating income now 

accounts for a higher proportion of 

total income than it has in the past, 

were the two main factors for the 

decline. The appreciable fall in financial 

income, to 736 million Swiss 

francs, was due primarily to lower 

gains from equity investments as a 

result of negative developments on 

world financial markets. Against this 

background, the favourable terms 

on which Roche sold its final tranche 

of LabCorp shares deserves special 

mention. 

Early this year Novartis announced 

that it had increased its holding in 

Roche to nearly one-third of the voting 

shares. The Roche Board of Directors 

and Executive Committee are convinced 

that continuing our company’s 

independent course provides a solid 

basis for sustainable, long-term value 

growth. Maintaining Roche’s clear 

strategic direction and developing 

businesses that continue to create 

value for all stakeholders – patients, 

employees and shareholders – remains 

our top priority. 

By demerging the Vitamins and Fine 

Chemicals Division and acquiring a 

majority stake in Chugai, Roche has 

further strengthened its focus on 

pharmaceuticals and diagnostics and 

the synergies they can generate. The 

combination of these two innovative, 

high-tech businesses means that we 

are ideally positioned to pursue opportunities 

in tomorrow’s healthcare 

market. 

We expect to see further positive 

growth in 2003, with both Diagnostics 

and Pharmaceuticals contributing 

double-digit increases in sales and 

operating profit in local currencies, 

and we expect the operating profit 

margin for the Group as a whole to 


emain stable. Given the volatility of 

financial and stock markets, it is 

impossible at present to predict the 

level of financial income in 2003. The 

measures Roche has initiated will give 

the Group greater financial flexibility. 

Our improved operating results, 

consolidated global leadership in oncology 

and in-vitro diagnostics and stronger 

R&D pipeline are confirmation that we 

are following the right strategy. 

Our improved operating results, consolidated 

global leadership in oncology 

and in-vitro diagnostics and stronger 

R&D pipeline are confirmation that 

we are following the right strategy. 

Over the past few years we have 

steadily strengthened the Group and, 

by combining organic growth with 

complementary strategic moves, 

forged a strong position for ourselves 

in the healthcare sector. We intend to 

maintain this independent course. 

Thanks to the profitability of its operating 

activities and its solid financial 

position and substantial liquid 

reserves, Roche has the strategic flexibility 

it needs to continue growing its 

businesses. 

Franz B. Humer 


Board of Directors and 

Executive Committee, 

Corporate Governance 

Roche is committed to the highest 

standards of good corporate governance. 

It acts on that commitment by operating in 

compliance with the law, the company’s 

Articles of Incorporation and the Swiss 

Code of Best Practice for Corporate 

Governance, promulgated by the Swiss 

business association economiesuisse. 

Franz B. Humer, Chairman of the Board of Directors and CEO 

Board of Directors 

At the 2002 Annual General Meeting 

the American economist DeAnne 

Julius and the German political scientist 

Horst Teltschik were elected as new 

members of the Board of Directors. 

DeAnne Julius was appointed by the 

Board to its Audit and Corporate 

Governance Committee and, effective 

December 2002, was named by the 

Board to succeed Andres F. Leuenberger 

as the committee’s chairman. 

Horst Teltschik was appointed to the 

Finance and Investment Committee. 

Andres F. Leuenberger and Henri 

B. Meier have informed the Board that 

they will step down as members at 

the Annual General Meeting in 2004. 

Fritz Gerber indicated some time ago 

that, for reasons of age, he would not 

stand for re-election to the Board 

of Directors at the Annual General 

Meeting in 2004. 

Andreas Oeri and Walter Frey have 

announced that they will stand for 

reelection to the Board when their 

current terms end. 

Organisational structure of 

the Board of Directors 

Roche’s Board of Directors is organised 

so as to ensure that the Group’s 

10 Board of Directors and Executive Committee, Corporate Governance

Board of Directors as of 

1 January 2003 (from left): 

Walter Frey 

Andres F. Leuenberger 

DeAnne Julius 

Henri B. Meier 

Fritz Gerber 

Peter Brabeck-Letmathe 


Rolf Hänggi 

Horst Teltschik 

André Hoffmann 

Andreas Oeri 

John Bell 

Name, year of birth Term ends Election 

Board of Directors Dr Franz B. Humer (1946) E Chairman 2005 1995 

Dr Andres F. Leuenberger (1938) D Vice-chairman 2005 1983 

Rolf Hänggi (1943) A, C, D Vice-chairman 2006 1996 

Dr h.c. Fritz Gerber (1929) D Honorary Chairman 2004 1978 

Prof. Dr John Bell (1952) C, D 2005 2001 

Peter Brabeck-Letmathe (1944) A, D 2006 2000 

Walter Frey (1943) B, D 2004 2001 

André Hoffmann (1958) A, C, D 2005 1996 

Dr DeAnne Julius (1949) B, D 2006 2002 

Dr Henri B. Meier (1936) D 2005 1994 

Dr Andreas Oeri (1949) B, D 2004 1996 

Dr Horst Teltschik (1940) A, D 2006 2002 

Secretary to 

the Board of Directors Dr Gottlieb A. Keller (1954) 

and Compliance Officer 

A 

B 

C 

D 

E 

Finance & Investment Committee 

Audit & Corporate Governance Committee 

Remuneration Committee 

Non-Executive Member 

Executive Member 

1 January 2003 

Board of Directors and Executive Committee, Corporate Governance 11

usinesses are conducted responsibly 

and with a focus on long-term value 

creation. Some years ago the Board of 

Directors of Roche Holding Ltd 

adopted Bylaws which define its mandate 

more fully and are designed to 

guide the Board in the exercise of its 

duties. Under the Bylaws various 

duties are delegated to four committees: 

the Presidium of the Board of 

Directors/Nomination Committee, 

the Audit and Corporate Governance 

Committee, the Finance and Investment 

Committee and the Remuneration 

Committee. The Bylaws of the 

Board of Directors, containing details 

on the internal structure of the Board, 

the allocation of authority and responsibilities, 

the mandates of the Board 

committees and the oversight and control 

instruments available to the Board 

in its dealings with corporate management, 

can be found on the Internet. 1) 

Remuneration 

The members of the Board of Directors 

receive annual remuneration of 

300,000 Swiss francs for serving on the 

Board; the remuneration paid to the 

Chairman of the Board for his service 

in this capacity is deducted from his 

agreed salary. Members serving on 

Board committees receive additional 

compensation of 10,000 Swiss francs 

for their time and expenses. 

In 2002 the eight members of the 

Executive Committee received fixed 

salaries totalling 12,206,000 Swiss 

francs, variable bonuses totalling 

3,652,500 Swiss francs and a total of 

90,566 stock options. One-third of 

these options are subject to a holding 

period of one year, one-third have a 

holding period of two years, and onethird 

a holding period of three years. 

Each option entitles the holder to purchase 

one Roche non-voting equity 

security (Genussschein) for a price of 

115.50 Swiss francs. The options are 

non-tradable and must be exercised no 

later than 26 February 2009. 2) 

In previous years corporate officers 

were awarded tradable, listed stock 

options with a holding period of three 

years. As of 31 December 2002, the 

members of the Executive Committee 

held the non-exercisable stock options 

listed in footnote 3) below. 

As of 31 December 2002 the non-executive 

members of the Board of Directors 

held 2,260,000 non-exercisable 

ROGUP options. 

A special three-year equity plan (the 

Performance Share Plan) has been 

developed for 42 members of top 

management whose performance has 

a major impact on Roche’s ability to 

1) www.roche.com → Company → Corporate 

Governance (http://www.roche.com/home/ 

company/com_gov_intro.htm) 

2) If the options were tradable, their fair value using 

the Black-Scholes formula – and after deducting 

11% for the average two-year holding period – 

would be roughly 30.10 Swiss francs each. 

3) 763,250 ROGIS options (securities identification 

number 1,229,302); exercise price 

150 Swiss francs; exercise ratio 10:1; expiry 

date 26 April 2006; holding period ends 

23 April 2004; market price on 31 December 

2002: 0.47 Swiss francs; original issue price 

2.49 Swiss francs and taxable value for recipient 

1.49 Swiss francs. 

582,300 ROGUP options (securities identification 

number 378,333); exercise price 

25,000 Swiss francs; exercise ratio 1000:100 

non-voting equity securities plus one registered 

Givaudan share; expiry date 17 February 2005; 

holding period ends 31 January 2003; market 

price on 31 December 2002: 0.06 Swiss francs; 

original issue price 3.65 Swiss francs and 

taxable value for recipient 2.22 Swiss francs. 


Executive Committee 

from 1 January 2003: 

William M. Burns 

Richard T. Laube 

Jonathan K.C. Knowles 

Markus Altwegg 


Erich Hunziker 

Heino von Prondzynski 

Daniel Villiger 

Name, year of birth 

Position 

Executive Committee Dr Franz B. Humer (1946) Chief Executive Officer 

Dr Erich Hunziker (1953) 

William M. Burns (1947) 

Heino von Prondzynski (1949) 

Dr Markus Altwegg (1941) 

Richard T. Laube (1956) 

Prof. Dr Jonathan K.C. Knowles (1947) 

Dr Daniel Villiger (1955) 

Chief Financial Officer + Controlling 

Pharmaceuticals Division 

Diagnostics Division 

Vitamins and Fine Chemicals Division 

Roche Consumer Health 

Research 

Corporate Services 

Secretary to the Pierre Jaccoud (1955) 

Executive Committee 

Statutory Auditors of Ernst & Young Ltd (since 1989) 

Roche Holding Ltd Principal auditors: Jürg Zürcher (since 2000) 

and Conrad Löffel (since 2001) 

Group Auditors PricewaterhouseCoopers AG (since 1989) 

Principal auditor: William D. Kirst (since 1997) 

1 January 2003 


achieve its corporate objectives. If, 

during the three years in which the 

programme is in effect, the price of 

Roche’s non-voting equity securities 

outperforms the average price of 

securities issued by a peer set of 18 

companies operating in the same 

industry, participating executives will 

be awarded a fixed number of nonvoting 

equity securities. If Roche’s 

non-voting equity securities outperform 

securities issued by 75% of the 

peer companies, the Board of Directors 

can elect to double the number of 

non-voting equity securities to be 

awarded. In the event that Roche’s 

non-voting equity securities underperform 

the average price appreciation 

of securities issued by the peer companies, 

no securities will be awarded. 

This programme provides for a possible 

award of 98,312 non-voting equity 

securities to members of the Executive 

Committee. 

Under an equity plan open to all 

Roche employees (Roche Connect), 

members of the Executive Committee 

received discounts totalling 22,947 

Swiss francs on the purchase of Roche 

non-voting equity securities. Nonvoting 

equity securities purchased 

under this plan are subject to a fouryear 

holding period. 

None of the aforementioned remuneration 

or stock option programmes 

results in a dilution of Roche shares 

or non-voting equity securities. 

A pension plan has been established 

for members of the Executive Committee 

to provide coverage commensurate 

with their salary levels. An initial 

contribution of 3,757,000 Swiss francs 

was due in 2002 for coverage under the 

plan. Future employer contributions 

will equal 12% of the base salaries paid 

to Executive Committee members. 

Other remuneration and emoluments 

and loans to corporate officers 

In 2002 one member of the Board of 

Directors received 194,600 Swiss francs 

as remuneration for assuming additional 

duties for a fixed period of time. 

Otherwise, no additional remuneration, 

severance payments, stock awards 

or additional fees or emoluments 

were paid to members of the Board of 

Directors, former members of the 

Board of Directors or current or former 

members of the Executive Committee. 

The company has made no loans to 

its corporate officers. 

Highest total remuneration 

Chairman of the Board and CEO 

Franz B. Humer was the member of 

the Board with the highest total remuneration 

in 2002; he received a fixed 

salary of 6,030,000 Swiss francs and a 

variable bonus of 1,500,000 Swiss 

francs, for a total of 7,530,000 Swiss 

francs. In addition, he received 45,428 

non-tradable options, which were 

awarded on the terms described above. 

Under the Roche Connect programme, 

Franz B. Humer received a discount of 

3,126 Swiss francs on the purchase of 

Roche non-voting equity securities, 

and under the Performance Share Plan 

he is eligible to receive 50,886 Roche 

non-voting equity securities if the 

specified performance targets are 

achieved. The initial contribution to 

the pension plan amounted to 

1,925,000 Swiss francs. 

Shareholdings 

The Board members André Hoffmann, 

Andreas Oeri and Fritz Gerber and 


persons closely associated with them 

are members of a shareholder group 

with pooled voting rights. Information 

about the shares held by this group is 

to be found in the ‘Notes to the Consolidated 

Financial Statements’. As of 

31 December 2002 the members of the 

Board and persons closely associated 

with them held an additional total 

of 133,851 shares, and as of the same 

date the members of the Executive 

Committee and persons closely associated 

with them held 3,090 shares. 

Additional information relating to 

corporate governance 

– Information about the Group’s 

corporate structure is provided in 

this Annual Report in the section 

‘Subsidiaries and Associated Companies’. 

– Major shareholders are listed in 

the ‘Notes to the Financial Statements’. 

– There are no cross-holdings. 

– Information on Roche’s capital 

structure is provided in this Annual 

Report in the section ‘Roche Securities’. 

Additional details are contained 

in Roche’s Articles of Incorporation, 

which can be found at 

www.roche.com 1) . 

– Information about each member of 

the Board of Directors and Executive 

Committee is contained in the 

lists on pages 11 and 13. Curricula 

vitae and other information 

about Board and Executive Committee 

members are available at 

www.roche.com 2) . 

1) http://www.roche.com/home/company/ 

com_gov_intro/com_gov_arti.htm 

2) http://www.roche.com/home/company/ 

com_gov_intro.htm 

– The participatory rights of shareholders 

are fully defined in Roche’s 

Articles of Incorporation 1) .As 

Roche shares are issued to bearer, 

there are no restrictions on admission 

to the Annual General Meeting, 

with the exception that shares must 

be deposited within a specified 

period before the date of the meeting 

and an admittance card must be 

issued in the shareholder’s name, as 

provided in §12 of the Articles of 

Incorporation. Any shareholder may 

elect to be represented by another 

shareholder at the Annual General 

Meeting, and the Articles of Incorporation 

contain no restrictions on 

the exercise of voting rights. There 

are no quorum requirements except 

for those stipulated in §16, which 

are essentially identical to the 

quorum requirements established 

by law. 

– 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 non-voting 

equity securities would be terminated 

in the event of an acquisition, 

and holding period restrictions on 

pre-existing awards would be 

removed. 

Relationship to Group auditors and 

statutory auditors 

The Group auditors, Pricewaterhouse- 

Coopers AG, received compensation 

of 22.3 million Swiss francs for their 

auditing services. They were also paid 

9.6 million Swiss francs for tax consultancy 

services and 2.5 million Swiss 

francs for other consulting services. 

Ernst & Young Ltd received 250,000 

Swiss francs for its services as the 

statutory auditors of Roche Holding 

Ltd and other Roche financial companies. 

Ernst & Young Ltd is also the 

auditor for Genentech, Inc., and 

Chugai and received from these two 

companies a total of 2,970,000 Swiss 

francs for its auditing services and 

additional compensation of 230,000 

Swiss francs for other services. 

Members of the Executive 

Committee 

Markus Altwegg, Head of the Vitamins 

and Fine Chemicals Division and since 

1986 a member of the Executive Committee, 

will retire from his operational 

role at Roche in spring 2003, following 

the transfer of the division to the 

Netherlands-based DSM group. The 

Board of Directors of Roche Holding 

Ltd would like to take this opportunity 

to express its deep appreciation to 

Markus Altwegg for his great personal 

contribution to the growth and success 

of the Roche Group. He will retain his 

seat on the Board of Directors of 

F. Hoffmann-La Roche Ltd and will 

continue to serve the Group in other 

capacities as well. 

Osamu Nagayama, Chairman and 

CEO of Chugai, will attend some 

meetings of the Corporate Executive 

Committee. 


Group Strategy 

We have set a strategic course that will 

enable us to sustain above-average growth 

as an independent group by exploiting 

the strengths and synergies of our core 

pharmaceuticals and diagnostics businesses. 


Focus on expanding core healthcare 

businesses. Our position as one of 

the world’s leading pharmaceutical 

companies and the global leader in 

diagnostics is built on a long-term 

strategy. At Roche we began sharpening 

our focus on our core healthcare 

businesses relatively early on and 

against the general industry trend. 

In the 1990s our core divisions were 

expanded through a series of major 

business and technology acquisitions. 

These included a majority interest in 

California-based biotech pioneer 

Genentech; the rights to PCR technology, 

the new gold standard for rapid, 

reliable diagnostic testing; Syntex 

Corporation, which marked our entry 

into transplantation medicine; and 

Boehringer Mannheim, the global 

market leader in diagnostics. All these 

transactions have contributed greatly 

to increasing the value of the Roche 

Group in terms of our products, 

pipeline, technology base and market 

presence. 

Over the past five years we have been 

able to step up growth by focusing 

even more strongly on healthcare and 

steadily improving our operating performance. 

The sale of the Vitamins 

and Fine Chemicals Division in 2003 

was a logical strategic follow-on to 

the spin-off of the Fragrances and 

Flavours Division in 2000. At the same 

time we have continued to strengthen 

our pharmaceuticals and diagnostics 

16 Group Strategy

usinesses through targeted acquisitions. 

Important transactions include 

the purchase of AVL (point-of-care 

testing) in 2000, the alliance with 

Chugai in 2002 and the proposed 

acquisition of Disetronic (insulin 

pumps), announced in February 2003. 

Two pillar strategy. Roche is pursuing 

a groundbreaking strategy that sets it 

apart from its competitors. We want to 

position our Group as a global leader 

in pharmaceuticals and diagnostics 

and focus these high-tech businesses 

on developing innovative solutions for 

unmet medical needs. 

Each of our businesses is strong and 

successful in its own right, but Roche 

is more than the sum of its parts. We 

aim to achieve a decisive competitive 

edge in the medium to long term by 

having our Pharmaceuticals and Diagnostics 

Divisions work together whenever 

a joint approach makes sound 

medical, health economic and business 

sense. Our customers – doctors, laboratories 

and patients – will benefit, 

and so will our employees and shareholders. 

Our primary objective is to supply 

medicines offering definite improvements 

over existing therapies. And 

to promote better clinical outcomes, 

we are also working on diagnostic tests 

to predict the efficacy, toxicity and 

risks of drug therapies in individual 

patients and to monitor patients’ 

responses to therapy. Our two divisions 

are tackling joint projects in 

oncology, diabetes, rheumatoid arthritis, 

Alzheimer’s disease and hepatitis C. 

Intensive collaboration between 

Pharmaceuticals and Diagnostics also 

extends to the fields of proteomics 

and genomics/genetics. Our crossdivisional 

Proteomics Initiative, for 

example, includes projects to develop 

new blood tests for the early detection 

of colon and breast cancer. 

The Roche innovation cosmos. Given 

the many diseases for which there is 

still no cure, the need for new and 

better treatments remains enormous. 

Research and development are therefore 

the engine that drives our company. 

Roche is pursuing an innovation 

strategy in which size alone is not 

what counts. We believe that having 

too large an organisation can actually 

slow innovation and reduce productivity 

in healthcare research. So at Roche 

we have taken a different approach, 

one that relies on a network of highly 

motivated centres of excellence that 

collaborate closely on research, 

exchanging information and technologies 

across geographic and organisational 

boundaries, while maintaining 

a large measure of scientific and 

operational independence. 

Roche’s own pharma and diagnostics 

research units occupy centre stage in 

our innovation strategy, with Genentech 

and Chugai, our two most important 

strategic allies, also playing 

a leading role. Complementing and 

strengthening the Group’s dynamic 

R&D capabilities are over 50 scientific 

and commercial collaborations with 

biotech companies and universities. 

Our innovation model also includes 

Roche spin-offs like BioXell, set up 

in 2002, and the biotech company 

Basilea Pharmaceutica as potential 

drug development partners. Licensing 

agreements giving us access to new 

drug candidates and technologies are 

another important part of our strategy 

– last year alone we signed more than 

20 new agreements. Alliances and 

licensing are also a key component of 

innovation management in the Diagnostics 

Division, which last year 

acquired the rights to the Institut Pasteur’s 

patent portfolio pertaining to 

human papillomavirus, to give just 

one example. Roche is considered a 

partner of choice in the healthcare 

industry. 

Thanks to our firm focus on healthcare, 

our strong and innovative core 

pharmaceuticals and diagnostics businesses 

and our extensive network 

of alliances, we are ideally equipped 

to meet the challenges of today’s and 

tomorrow’s healthcare market. 

Group Strategy 17

Martin is passionate about gardening. Thanks to Pegasys, he 

does not have to let his hepatitis C interfere with his hobby. The 

medicine is well tolerated and, because of its long-acting formulation, 

has to be taken just once a week. 

Roche has a broad portfolio of world-class 

products for hepatitis C. Apart from our prescription 

medicines Roferon-A and Pegasys, 

which are prescribed alone or in combination 

with Copegus (ribavirin), we also supply 

two diagnostic tests to detect and measure 

hepatitis C virus in blood samples.

Pharmaceuticals Division in brief 

change 

change in local 

in millions of CHF in CHF currencies 

2002 01/02 01/02 

Sales 1) 19,306 2% 9% 

– Roche worldwide prescription group 1) 17,754 3% 10% 

– OTC 1,552 –7% -2% 

EBITDA 2) 5,982 7% 15% 

Operating profit 2) 4,082 11% 21% 

R&D expenditures 3,451 11% 17% 

Employees 44,901 14% 

1) Sales figures are adjusted to include reclassification of sales to the Vitamins and 

Fine Chemicals Division. 

2) On an adjusted basis. 


Sales and operating profitability improved significantly in the Pharmaceuticals 

Division in 2002. Our oncology portfolio again showed excellent sales growth, as 

did other leading Roche prescription products. Five licensing agreements were 

signed in 2002 to augment the results of our own oncology programmes and will 

help us to expand our global leadership in this therapeutic area in the long term. 

Major milestones in 2002 were worldwide approval of Pegasys for the treatment 

of hepatitis C, our regulatory filings for the HIV/AIDS drug Fuzeon and the merger 

of Nippon Roche and Chugai, which substantially strengthens our position in 

Japan. 

Thanks to increased R&D productivity and a series of new licensing agreements, 

the division was able to further expand and improve its product portfolio during 

the year. 

Pharmaceuticals 19

average. This translated into 2% 

in Swiss franc terms, owing to the 

strength of the franc against the 

Group’s key trading currencies. On 

an adjusted basis, operating profit 

totalled 4,082 million Swiss francs, 

while the division’s operating profit 

margin was 21.1%, an increase of 1.6 

percentage points over the year-earlier 

figure. This improvement was due 

mainly to increased sales of Roche prescription 

medicines and the continued 

positive impact of restructuring 

measures initiated in 2001. Divisional 

EBITDA totalled 5,982 million Swiss 

francs, or 31% of sales, compared with 

a margin of 29.7% in 2001. 

One of our major goals is to be a leader 

in the key medical areas we choose to serve. 

In 2002 we further extended our numberone 

positions in oncology and transplantation, 

and in virology the milestones we 

reached in 2002 have brought us a major 

step closer to achieving this ambition. 

William M. Burns, Head of the Pharmaceuticals Division 

Pharmaceuticals – global market 

growth surpassed. Sales by the 

Pharmaceuticals Division in 2002 

amounted to 19,306 million Swiss 

francs. At 9% in local currencies, sales 

growth was ahead of the global market 

Prescription medicines post doubledigit 

growth. In 2002 worldwide 

sales of Roche prescription medicines 

(divisional sales excluding OTC) 

totalled 17,754 million Swiss francs. 

Growth was 10% in local currencies, 

well ahead of the global market average 

(7%), and 3% in Swiss francs. 

On an adjusted basis, operating profit 

amounted to 3,838 million Swiss 

francs. The operating profit margin 

rose further, to 21.6%, after a 19.7% 

margin the previous year. EBITDA 

totalled 5,694 million Swiss francs, or 

32.1% of sales, compared with 30.6% 

in 2001. 

Prescription sales growth was driven 

mainly by our oncology products 1) , 

sales of which rose 33% 2) to over 5 billion 

Swiss francs, and by the integration 

of Chugai. Other key products 

such as CellCept and NeoRecormon 

1) Oncology portfolio: MabThera/Rituxan, 

Herceptin, Xeloda, Bondronat, Kytril, Furtulon, 

Neupogen, NeoRecormon (25%), Roferon-A 

(60%), Neutrogin, Picibanil. 

2) All growth rates in local currencies. 

20 Pharmaceuticals

also posted double-digit gains. 

Although Rocephin, the leading hospital 

antibiotic, is now off patent in all 

major markets except the United States 

and Italy, sales of the product declined 

only slightly. Sales erosion following 

loss of patent protection for Roaccutane/Accutane 

was less than expected, 

as generic competitors did not reach 

the US market until November. 

North American sales of prescription 

products continued to grow at a double-digit 

rate, fuelled by Roche’s strong 

oncology franchise. The sharp upturn 

of over 80% in sales in Japan was due 

mainly to the consolidation of Chugai 

since 1 October 2002. This new 

alliance has catapulted Roche to number 

five in the world’s second-largest 

pharmaceutical market. Sales growth 

in Europe was in the mid-single-digit 

range. Latin American sales were 

affected by the region’s macroeconomic 

difficulties but declined slightly 

less than the market as a whole. Sales 

in all other regions showed high single-digit 

growth. 

Chugai – a new member of the 

Roche Group. The merger of Nippon 

Roche and Chugai has created the 

fifth-largest pharmaceuticals company 

and the fourth-largest sales force in 

Japan. This provides powerful leverage 

for existing and future Roche products 

in this key market. Moreover, Chugai 

now has one of the biggest development 

organisations in Japan, a factor 

that will help us to develop and launch 

products faster in the coming years. 

Shortly after the Roche-Chugai 

alliance was announced, the two partners 

signed a research agreement 

covering the development of common 

technology platforms to facilitate and 

advance research projects. Scientists at 

Roche and Chugai will share information 

through Roche’s leading-edge 

data management system, which links 

the Group’s research centres worldwide. 

This will enable both companies 

to broaden their respective capabilities 

and expertise in the complex field 

of small molecule development. 

Pharmaceuticals sales 1998–2002 

21,000 

18,000 

15,000 

12,000 

9,000 

6,000 

3,000 

0 

14,376 

| 98 | 99 

16,487 


17,686 

Chugai’s new research and development 

network includes the Fuji 

Gotemba Research Laboratories. Integration 

of the former Nippon Roche 

research centre in Kamakura will add 

to the Japanese company’s existing 

strengths in oncology. Expanding 

capabilities in genomics, proteomics 

and life science technology will be 

another priority. This will give Chugai 

a solid base on which it can grow into 

a leading Japanese pharmaceuticals 

company with strong international 

drug discovery capabilities in Japan 

and other Asian countries, Europe and 

the United States. 

18,861 

| 00 | 01 1) | 02 1) 

1) Sales figures are adjusted to include reclassification of sales 

to the Vitamins and Fine Chemicals Division. 

19,306 

Pharmaceuticals 21

Key Chugai products 

Product Generic name Indication 

Epogin epoetin beta anemia in chronic renal failure 

Neutrogin lenograstim neutropenia associated with chemotherapy 

Sigmart nicorandil angina pectoris 

Alfarol alfacalcidol osteoporosis 

Roche worldwide prescription group 

As a result of the merger, there are 

currently 22 compounds in the development 

pipeline in Japan. 

Chugai’s main therapeutic areas are 

oncology, renal medicine, bone and 

joint disease, cardiovascular disease, 

transplantation and infectious and 

immune diseases. The company’s management 

has set itself ambitious goals: 

by the end of 2005 it intends to raise 

sales to roughly 315 billion yen and 

achieve an operating profit margin of 

20% (based on Japanese GAAP). 

Oncology – lead position extended. 

In 2002 Roche reinforced its position 

as the world leader in oncology, with 

the Group’s anticancer medicines 

delivering over 5 billion Swiss francs in 

sales. Our largest and fastest-growing 

therapeutic area now accounts for 

nearly one third of total prescription 

drug sales. The innovative products 

leading our oncology portfolio, 

MabThera/Rituxan, Herceptin and 

Xeloda, have only been on the market 

for a few years, and all three have been 

shown to extend patient survival. Last 

year we expanded our strong oncology 

pipeline through alliances with companies 

such as Antisoma, Kosan and 

Beaufour Ipsen. 

MabThera/Rituxan, the first humanised 

monoclonal antibody for non- 

Hodgkin’s lymphoma (NHL), posted 

sales of 2.3 billion Swiss francs, making 

it our top-selling prescription 

medicine. Studies have shown that this 

product in combination with CHOP 

chemotherapy confers a survival benefit 

in patients with aggressive NHL. 

In March MabThera/Rituxan received 

EU approval for use in this patient 

population. Thanks to strong demand 

for the medicine, both for indolent 

and for aggressive NHL, MabThera/ 

Rituxan became the number-one 

branded anticancer product in the 

United States and number two worldwide. 

Roche is actively pursuing development 

of MabThera/Rituxan for 

the treatment of rheumatoid arthritis. 

Interim results from an efficacy trial 

published last autumn indicate that 

the drug could provide an alternative 

approach to managing this common 

disease. 

Sales of Herceptin, a monoclonal antibody 

for targeted therapy of advanced 

breast cancer, rose 33% to over 1 billion 

Swiss francs. All major markets 

contributed to this increase, particularly 

the United States, Japan and 

22 Pharmaceuticals

Western Europe. In November this 

novel medicine was awarded the Prix 

Galien, the pharmaceutical industry’s 

«Nobel prize». 

Xeloda sales were also up strongly for 

the year, advancing 82% to 444 million 

Swiss francs. This oral drug for breast 

and colorectal cancer is converted to 

its active form in tumour cells. Used in 

combination with Taxotere, Xeloda 

improves survival in patients with 

metastatic breast cancer. The product 

was approved by EU regulators for 

monotherapy and combination therapy 

in this indication in March. 

Development of our phase III anticancer 

medicines, Tarceva and Avastin, 

is progressing as planned, and we 

expect the results of our clinical trials 

to be available before the end of 2003. 

Tarceva targets the human epidermal 

growth factor receptor HER1, which 

is critical for cell growth in many 

tumours. Tarceva is currently being 

tested in phase III trials in patients 

with advanced solid tumours, including 

non-small cell lung cancer and 

pancreatic cancer. Avastin is a monoclonal 

antibody that specifically 

inhibits a cell growth factor which 

plays a key role in the development of 

new blood vessels, a process known as 

angiogenesis. Interrupting this process 

may be a way of halting or slowing 

tumour growth. 

Sales of Kytril, a potent antiemetic 

used to control nausea and vomiting 

in chemotherapy patients, returned to 

growth in 2002, increasing 12% to 

451 million Swiss francs. In August the 

product was approved by the FDA 

for the prevention and treatment of 

postoperative nausea and vomiting. 

Roche worldwide prescription group 

Japan 9% Others 9% 

Latin America 8% 

Sales by region 

North America 41% 

Europe 33% 

Central nervous system 8% 

Metabolic disorders 10% 

Dermatology 6% 

Sales by therapeutic area 

Transplantation 7% 

Oncology 29% 

Infectious disease 

10% 

Cardiovascular disease 9% 

Inflammatory disease/bone 3% 

Virology 7% 

Others 6% 

Anemia 5% 

A marketing application for Bondronat, 

a third-generation bisphosphonate, 

was filed as planned in 

Europe for the treatment of metastatic 

bone disease in breast cancer patients. 

A decision on the filing is expected 

in the fourth quarter of 2003. Recent 

trial data have shown Bondronat to 

be the only oral treatment option that 

improves patients’ quality of life, 

reduces pain and is just as effective as 

intravenous bisphosphonates. Bondronat 

is currently used to manage 

Pharmaceuticals 23

Top-selling products – Roche worldwide prescription group 

Change 

Sales 2002 

in local 

Product Generic name Indication in millions of CHF currencies 

MabThera/Rituxan 1) rituximab indolent non-Hodgkin’s lymphoma 2,332 48% 

Rocephin ceftriaxone bacterial infections 1,548 –2% 

NeoRecormon, Epogin 2) epoetin beta anemia 1,192 67% 

CellCept mycophenolate mofetil transplantation 1,173 18% 

Herceptin 1) trastuzumab metastatic breast cancer 1,007 33% 

Roaccutane/Accutane isotretinoin severe acne 911 –16% 

Xenical orlistat weight loss, weight control 763 –16% 

Nutropin, Protropin 1) somatropin, somatrem growth hormone 477 19% 

Kytril granisetron chemotherapy- and radiation 

therapy-induced nausea and 

vomiting 451 12% 

Xeloda capecitabine colorectal or breast cancer 444 82% 

Dilatrend carvedilol heart failure 329 18% 

Activase, TNKase 1) alteplase, tenecteplase myocardial infarction 322 –6% 

Viracept nelfinavir mesylate HIV infection 320 –26% 

Pulmozyme 1) dornase alfa/DNase cystic fibrosis 320 7% 

Cymevene, Valcyte ganciclovir, valganciclovir cytomegalovirus infection 296 8% 

Furtulon doxifluridine cancer of colon, breast or stomach 248 –9% 

Lexotan bromazepam anxiety and tension states 244 –6% 

Madopar levodopa + benserazide Parkinson’s disease 239 2% 

Inhibace, Inhibace Plus cilazapril hypertension 223 –2% 

Torem torasemide hypertension 216 –4% 

1) Jointly marketed by Roche and Genentech. 

2) Jointly marketed by Roche and Chugai. 

hypercalcemia (abnormally elevated 

levels of calcium in the blood) in 

cancer patients. 

Anemia – strenghtened presence. 

Combined sales of NeoRecormon 

and Epogin rose to nearly 1.2 billion 

Swiss francs, a double-digit gain of 

67%. NeoRecormon is the leading 

product for anemia in patients with 

cancer or renal disease. Epogin, from 

Chugai, is approved for use in renal 

anemia. In 2002 we submitted a European 

marketing application for 

a once weekly, needle-free version 

of NeoRecormon for patients with 

chronic renal failure. This product 

is also increasingly being prescribed 

for cancer patients, thanks in part to 

European approval in the second half 

of the year of a once-weekly dosing 

schedule in some oncological indications. 

In 2003 we plan to apply for 

approval of NeoRecormon prefilled 

syringes for use in anemia associated 

with cancer. 

24 Pharmaceuticals

Transplantation – strong growth 

for our leading product. In early 2002 

CellCept became the top-selling 

branded product in the United States 

for preventing organ rejection. Total 

sales rose 18% for the year to nearly 

1.2 billion Swiss francs. This medicine 

is a recognised cornerstone of potent, 

low-toxicity immunosuppressive 

regimens. In addition, recent trial 

results suggest that CellCept may 

extend graft life and patient survival. 

None of the competitor products now 

on the market has demonstrated any 

significant advantage over CellCept. 

Sales of Zenapax, which is used in 

combination with CellCept to prevent 

acute transplant rejection, grew 6%. 

Valcyte, an oral antiviral medicine used 

to prevent and treat eye infections 

(cytomegalovirus retinitis), is steadily 

replacing the original formulation, 

Cymevene, as the treatment of choice. 

Valcyte was first approved in the United 

States in 2001 for use in HIV patients, 

and European approval for this indication 

followed in 2002. We expect Valcyte 

to receive additional approval in 

both regions this year for use in organ 

transplant patients. Combined sales of 

Valcyte and Cymevene rose to 296 million 

Swiss francs in 2002. 

In April we strengthened our transplantation 

portfolio by signing an agreement 

with Isotechnika to co-develop its 

novel immunosuppressant ISA 247. 

Early trials suggest that this drug may 

be more effective and less toxic than 

other immunosuppressants in its class. 

Virology – moving towards leadership. 

Pegasys, a new generation interferon 

for chronic hepatitis C, met all its 

filing and approval targets in 2002. 

The product received US regulatory 

approval in October for monotherapy 

and in December for use in combination 

with Copegus, our proprietary 

ribavirin product. Centralised approval 

of the monotherapy and combination 

regimens was granted in the European 

Union in the summer. Pegasys was then 

swiftly launched in Germany, the 

United Kingdom and other EU markets 

and within months had already captured 

substantial market share. Our 

Japanese filing for the monotherapy 

indication has been given fast track 

review status. Pegasys has been 

approved in over 60 countries worldwide. 

The dispute with ICN Pharmaceuticals 

and Ribapharm over ribavirin 

patents was settled in January 2003. 

Our protease inhibitors, Viracept, 

Invirase and Fortovase, posted combined 

sales of 501 million Swiss francs 

in 2002. Although this class of medicines 

is still the mainstay of many 

HIV regimens, sales declined 21%. 

An intensely competitive protease 

inhibitor market and discounts offered 

to developing countries were mainly 

responsible for the decrease. Positive 

Pharmaceuticals 25

Major product approvals and launches in 2002* 

Product Generic name Indication Country 

Copegus + interferon alfa ribavirin hepatitis C EU, USA, Switzer- 

+ interferon alfa land, Australia 

Dilatrend carvedilol severe chronic heart failure EU 

chronic heart failure 

Japan 

Kytril granisetron prevention and treatment of postoperative nausea 

and vomiting 

USA 

MabThera/Rituxan rituximab in combination with CHOP** chemotherapy EU, Switzerland, 

in aggressive non-Hodgkin’s lymphoma 

Australia 

NeoRecormon epoetin beta anemia in patients with solid tumours Switzerland 

once weekly dosing schedule in patients 

with hematological cancers 

EU 

Pegasys peginterferon alfa-2a monotherapy in hepatitis C EU, USA 

Pegasys + Copegus peginterferon alfa-2a 

+ ribavirin hepatitis C EU, USA 

Tamiflu oseltamivir treatment of influenza A and B in children 

and adults 

EU, Japan*** 

prevention of influenza A and B in adolescents 

and adults 

EU, Japan*** 

Valcyte valganciclovir prevention of cytomegalovirus infection 

in AIDS patients 

EU, USA 

Xeloda capecitabine monotherapy in metastatic breast cancer EU 

Xeloda + Taxotere 

capecitabine 

+ docetaxel metastatic breast cancer EU, Switzerland 

Xenical orlistat label change incorporating new data on overweight 

and obese patients with type 2 diabetes 

EU 

Zenapax daclizumab pediatric renal transplantation EU 

***Includes supplemental indications. 

***Cyclophosphamide, doxorubicin, vincristine and prednisone. 

***Launched in Japan; Japanese approval obtained in 2001. 

new clinical data led to a fourthquarter 

increase in combined sales of 

Invirase and Fortovase, particularly in 

the important US market. We are 

developing new dosage strengths of 

Viracept and Invirase to facilitate 

patient compliance and enhance the 

competitiveness of these products. 

In the summer findings from a phase 

III trial showed our new HIV 

medicine, Fuzeon (T-20), to be even 

more effective than anticipated in 

patients infected with resistant strains 

of HIV. Marketing applications for the 

drug, which is the world’s first fusion 

inhibitor, were filed in September in 

the United States and Europe; Roche is 

developing Fuzeon in partnership with 

Trimeris. The US and European 

authorities have both granted Fuzeon 

fast track review status. We are expect- 

26 Pharmaceuticals

ing positive decisions on both filings 

early in 2003. Production of Fuzeon is 

extremely complex, and our manufacturing 

facilities are working around 

the clock to ensure that supplies will 

be available to the greatest possible 

number of patients once the product 

is approved. 

Our influenza medicine, Tamiflu, is 

now available worldwide, following 

approval last summer in the European 

Union for the treatment and prevention 

of influenza A and B. While sales 

nearly doubled, they still amounted 

only to a relatively modest 170 million 

Swiss francs, owing to last year’s mild 

flu season both in the Northern and in 

the Southern Hemisphere. 

product on the condition that the 

same strict prescribing rules would 

apply and the manufacturers would be 

required to institute patient safety 

programmes similar to Roche’s. 

Sales of Xenical, the world’s leading 

medicine for weight loss and weight 

control, were down 16%, in line with 

the overall decline in this market segment. 

Data submitted to regulators in 

the first half of 2002 on the role of 

Xenical in treating overweight patients 

Other key products. Sales of 

Rocephin were down slightly from the 

previous year, declining 2% as a result 

of generic erosion in Europe and last 

year’s relatively low influenza activity. 

Even after 20 years on the market, 

Rocephin remains the injectable 

antibiotic of choice. Thanks to its high 

and undiminished efficacy, this product 

again posted sales of over 1.5 billion 

Swiss francs in 2002. 

Sales of Roaccutane/Accutane, our 

medicine for severe acne, decreased 

16% to 911 million Swiss francs. The 

decline was due primarily to tighter 

prescribing restrictions in the United 

States. Overall, however, sales were 

better than expected. Although Roaccutane/Accutane 

went off patent in the 

United States, its biggest market, in 

February, it did not face any competition 

from generics there until late in 

the second half of the year. In November 

and December the FDA granted 

licences for two generic versions of the 

with type 2 diabetes led to label 

changes in the European Union and 

approval of the medicine for type 2 

diabetes in Canada and Australia. 

Recently, data from a landmark trial, 

Xendos, demonstrated that weight loss 

with a regimen combining Xenical 

and lifestyle changes was significantly 

better than lifestyle changes alone 

in preventing type 2 diabetes. 

Dilatrend posted sales of 329 million 

Swiss francs, a double-digit increase 

over the previous year. Approval to 

Pharmaceuticals 27

market the product for chronic heart 

failure in Japan and for severe chronic 

heart failure in Europe have strengthened 

Dilatrend’s position in this segment. 

Findings from a major study 

have shown that starting patients early 

on treatment with Dilatrend and an 

ACE inhibitor can significantly 

improve clinical outcomes in mild 

to moderate heart failure. 

Clinical development of ibandronate, 

a highly effective bisphosphonate for 

the treatment and prevention of osteoporosis, 

is moving ahead well. In partnership 

with GlaxoSmithKline, Roche 

is planning to market novel oral and 

intravenous formulations that will 

offer benefits for both patients and 

physicians. Applications were filed in 

2002 for European and US approval 

to market ibandronate for postmenopausal 

osteoporosis. 

Roche Consumer Health. In 2002 

sales of non-prescription medicines by 

our OTC business, Roche Consumer 

Health (RCH), declined 2% in local 

currencies and 7% in Swiss francs to 

1,552 million Swiss francs. 

Weak US sales of Aleve and Latin 

America’s currency problems, particularly 

the devaluation of the Argentinian 

peso, were two factors hampering 

growth last year. Sales of Aleve in 

the United States, where the brand is 

marketed through a joint venture with 

Bayer, were down 11% from 2001. In 

Latin America we were unable to offset 

the effects of falling currencies despite 

the price adjustments made in these 

markets. Sales in all other markets, 

which account for 85% of our business, 

grew at a rate of 3%. 

By building strong, competitive 

brands, we are creating lasting value. 

Moreover, our ability to develop 

brands equips us to respond to the 

difficult challenges facing us in 

many markets. 

Richard T. Laube, Head of Roche Consumer Health 

The above factors, coupled with a 

strong Swiss franc, had a negative 

impact on operating profit, which 

declined 14% to 244 million Swiss 

francs. EBITDA decreased 17% to 

288 million Swiss francs. 

Roche Consumer Health’s key 

brands posted good growth. The only 

exception was Redoxon, which generates 

over half of its sales in Latin 

America. 

28 Pharmaceuticals

Research and development – 

substantial number of new products 

expected in medium term. Roche 

research is based on a distinctive innovation 

model (see page 17), and a clear 

strategy in which partnerships play a 

key role. Apart from Roche’s own 

powerful in-house research organisation, 

the Pharmaceuticals Division’s 

R&D network also includes Genentech 

and Chugai, which function as largely 

independent research satellites. In 

addition, Roche has opt-in rights to 

the programmes of external development 

organisations it has created, 

such as BioXell, set up in 2002, and 

Basilea Pharmaceutica. This is a further 

source of promising compounds for 

our pipeline. 

With 25 agreements concluded with 

other companies last year, Roche now 

ranks among the industry leaders in 

terms of licensing. 

Roche is currently (as of 31 January 

2003) pursuing 135 pharmaceutical 

research projects inhouse. In 2002 

12 new molecular entities (NMEs) 

entered phase 0 and 7 entered phase I 

clinical testing. The Pharmaceuticals 

Division currently has 65 NMEs in its 

development pipeline. This includes 

opt-in opportunities (9), potential 

new medicines that Genentech will 

develop (6) and Chugai projects (10). 

Roche has the right to license-in 

any projects for which Chugai seeks 

a partner outside Japan and South 

Korea. 

Consumer self-medication 

Sales by therapeutic area 

Analgesics 27% 

Leading OTC brands 

Change 

Sales 

in local 

Product Uses in millions of CHF currencies 

Aleve, Naproxen analgesic 267 2% 

Supradyn multivitamin 151 4% 

Bepanthen skin care 141 2% 

Rennie antacid 124 0% 

Redoxon vitamin C 93 –12% 

The increased number of promising 

NMEs compared with 2001 is a result 

of structural adjustments in our pharmaceutical 

R&D organisation. The 

number of projects in phase II development 

has increased significantly 

during the past two years. The seamless 

R&D process which we have established 

in recent years promotes better 

decision-making and thus contributes 

to creating greater future value. 

Ongoing initiatives are concentrating 

on further optimising productivity, 

with the focus more on the value generated 

by each project than on quantity. 

Progress has been achieved by 

implementing a number of tools for 

compound selection and profiling at 

the early research stage. These have 

been harmonised across all research 

centres. 

Vitamins 40% 

Speciality skin care 16% 

Gastrointestinal products 11% 

Cold remedies 3% 

Others 3% 

Pharmaceuticals 29

The innovative way in which we manage 

the research activities of the Roche 

Group allows us to exploit synergies, 

generate more competitive knowledge 

and, ultimately, create medicines and 

diagnostic products that provide greater 

benefits for patients. 

Jonathan K.C. Knowles, Head of Research 

The pharmaceutical R&D network also 

includes numerous alliances and collaborations 

with major industry and 

science institutions around the globe. 

One example is our partnership with 

deCODE genetics, which in the last 

3 years has led to the identification 

of thirteen genetic risk factors for 

common diseases, including stroke, 

rheumatoid arthritis and schizophrenia. 

As a result of these discoveries, 

Roche pharmaceutical research is 

already investigating various new drug 

targets, such as glucokinase activators 

for the treatment of diabetes. In 2002 

Roche and deCODE entered into a 

new three-year alliance. 

Outlook. Roche expects the Pharmaceuticals 

Division’s organic growth to 

be further enhanced by the launches 

of Pegasys and Fuzeon. Our oncology 

business should continue its strong 

growth trend thanks to its key products 

MabThera/Rituxan, Xeloda and 

Herceptin. NeoRecormon and Cell- 

Cept will also remain growth drivers. 

135 research projects 

in major therapeutic areas (31 January 2003) 

Metabolic disorders 30 

Oncology 37 

Central nervous system 24 

Virology 10 

Vascular diseases 8 

Urogenital diseases 9 

Inflammatory diseases 17 

We anticipate that our established 

products Rocephin and Roaccutane/ 

Accutane will remain important 

revenue earners in 2003 but will lose 

their current prominence through 

generic erosion. 

Over the next five years Roche plans to 

file up to 29 new drug applications in 

key therapeutic areas such as oncology, 

HIV/AIDS and anxiety/depression. 

We intend to additionally strengthen 

our portfolio by continuing our intensive 

in-licensing activities. 

In 2003 the Pharmaceuticals Division 

is looking to outperform the global 

market, with the division’s strong 

30 Pharmaceuticals

Substantially expanded pipeline 

Indication/ 

Therapeutic area Project/Product Type (generic name) Major line extension Phase 0 Phase I Phase II Phase III 

Anemia R744 next generation anemia treatment renal anemia or cancer-related anemia 

R1516 1) anemia treatment anemia 

NeoRecormon 2) glycoprotein (epoetin beta) in radiotherapy 

Inflammation/Bone R484/ibandronate 3) bisphosphonate (ibandronate) treatment and prevention of osteoporosis 

R1487 kinase inhibitor in rheumatoid arthritis 

R1503 kinase inhibitor in rheumatoid arthritis 

MabThera 4) monoclonal antibody (rituximab) in rheumatoid arthritis 

Metabolism R1438 enzyme inhibitor type 2 diabetes 

R1439 nuclear receptor modulator type 2 diabetes 

R1440 enzyme modulator type 2 diabetes 

R483 insulin sensitizer type 2 diabetes 

Xenical lipase inhibitor (orlistat) (development in Japan) a) 

adolescent indication 

prevention of diabetes 

Nervous system R673 GPCR modulator depression and anxiety 

R1067 GPCR modulator depression 

R1204 GPCR modulator depression and anxiety 

R1533 5) enzyme inhibitor Alzheimer’s disease 

Oncology R1492 6) enzyme inhibitor (epothilone D) solid tumours 

R1068 GPCR modulator emesis 

R1124 GPCR modulator emesis 

R1273 7) monoclonal antibody (pertuzumab) solid tumours 

R1453 enzyme inhibitor solid tumours 

R1454 enzyme inhibitor solid tumours 

R1549 8) monoclonal antibody (pemtumomab) ovarian cancer 

R1550 8) monoclonal antibody breast cancer 

R1536 9) enzyme inhibitor (diflomotecan) solid tumours 

R1559 (BN80927) 9) enzyme inhibitor solid tumours 

R1415/Tarceva 10) kinase inhibitor (erlotinib) solid tumours 

Bondronat bisphosphonate (ibandronate) metastatic bone disease in breast cancer 

Herceptin 7) monoclonal antibody (trastuzumab) adjuvant treatment of breast cancer 

MabThera 4) monoclonal antibody (rituximab) chronic lymphocytic leukemia 

Xeloda (capecitabine) adjuvant and metastatic combination 

treatment of colon cancer; 

adjuvant breast cancer 

Respiratory R411 integrin antagonist asthma 

R667 nuclear receptor agonist emphysema 

R1295 integrin antagonist asthma 

Transplant R1524 11) calcineurin inhibitor acute renal transplant rejection 

Valcyte nucleoside analogue (valganciclovir) prevention of cytomegalovirus infection 

in solid organ transplantation 

Urology R701 GPCR antagonist overactive bladder, pelvic hypersensitivity 

R450 GPCR modulator stress and mixed urinary incontinence 

R1484 GPCR modulator stress urinary incontinence 

R1554 GPCR antagonist overactive bladder, pelvic hypersensitivity 

Virology R944 protease inhibitor HIV infection 

R1495 12) non-nucleoside reverse transcriptase inhibitor HIV infection 

R1479 polymerase inhibitor hepatitis C 

R1518 13) new generation nucleoside analogue 

(levovirin prodrug) hepatitis C 

14) 

Filed

R698 (T-20)/Fuzeon 15) fusion inhibitor (enfuvirtide) HIV infection 

R724 (T-1249) 15) fusion inhibitor HIV infection 

R1270/Levovirin 13) new generation nucleoside analogue (levovirin) hepatitis C 

Fortovase protease inhibitor (saquinavir) pediatric formulation 

Pegasys pegylated interferon (peginterferon alfa-2a) chronic hepatitis B 

Viracept 16) protease inhibitor (nelfinavir mesylate) HIV infection, new formulation 

Participation through Genentech b) 

MLN-02 antibody 

(former LDP-02 antibody) monoclonal antibody inflammatory bowel disease 

TF Fab monoclonal antibody fragment acute coronary syndrome 

Avastin anti-VEGF antibody (avastin) solid tumours with chemotherapy 

AMD fab monoclonal antibody fragment age-related macular degeneration 

Raptiva (formally Xanelim) anti-CD11a antibody (efalizumab) psoriasis 

rheumatoid arthritis 

Xolair anti-IgE antibody (omalizumab) asthma 

Participation through Chugai b) 

AHM monoclonal antibody multiple myeloma 

CHS13340 recombinant parathyroid hormone osteoporosis 

CHC12103 polyglutamate TXL breast cancer 

CAL monoclonal antibody bone metastases 

ED-71 vitamin D derivative osteoporosis 

BO-653 anti-oxidant coronary heart disease 

GM-611 motilin agonist gastroparesis 

VAL liver regenerator post hepatectomy 

Antevas subarachnoid hemorrhage 

MRA monoclonal antibody rheumatoid arthritis 

Evista 17) (raloxifene HCl) osteoporosis in postmenopausal women 

Renagel 18) (sevelamer HCl) hyperphosphatemia 

Femara 19) (letrozole) breast cancer in postmenopausal women 

Opt-in opportunities c) 

Antisoma (DMXAA) vascular targeting agent solid tumours 

TheraFab monoclonal antibody fragment non-small cell lung cancer 

Axovan AXV034343 endothelin A receptor antagonist subarachnoid hemorrhage 

Basilea Pharmaceutica (BAL2299) nuclear receptor modulator psoriasis 

(BAL4079) 9-cis retinoic acid chronic hand eczema 

(BAL5788) antibiotic bacterial infection 

(BAL8349) antifungal fungal infection 

(BAL8557) antifungal fungal infection 

Speedel R639 (SPP301) endothelin A receptor antagonist cardiovascular disease 

External partners: 

1) Gryphon Sciences 

2) Genetics Institute 

3) GlaxoSmithKline 

4) Genentech/IDEC 

5) Memory Pharmaceuticals 

6) Kosan Biosciences 

7) Genentech 

8) Antisoma 

9) Beaufour Ipsen 

10) Genentech/OSI 

11) Isotechnika 

12) Medivir 

13) ICN 

14) Stressgen 

15) Trimeris 

16) Agouron 

17) Eli Lilly 

18) Genzyme/Kirin Brewery 

19) Novartis 

a) 

For competitive reasons, some projects may not 

have been identified. 

b) 

Full consolidation. 

c) 

Roche retains the right to license the product. 

Blue type represents new molecular entities (NMEs). 

Current as of 31 January 2003. 

There are currently 65 NMEs in the Pharmaceuticals Division’s development pipeline. Of these, 19 are in 

early-stage development (phase 0), 14 have entered phase I clinical testing, 24 are in phase II, and 8 in 

phase III/filed. 

Phase 0: Transition from preclinical to clinical development 

Phase I: Initial studies in healthy volunteers 

Phase II: Small-scale efficacy, tolerability and dose-finding studies in patients 

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

oncology portfolio, the roll-out of 

Pegasys and Fuzeon and the integration 

of Chugai expected to fuel solid 

double-digit growth. We anticipate 

that the synergies resulting from the 

integration of Chugai will take full 

effect in 2004. The division remains 

committed to raising its operating 

profit margin towards 25% in the next 

two years. 

Pharmaceuticals 31

Tools for networking, organising and analysing data are increasingly in 

demand in all kinds of healthcare settings, from laboratories and hospitals to 

patient self-testing. The challenge of translating raw data into actionable 

healthcare information is one of the major tasks being addressed by our 

Diagnostics Division. 

Because Christian has an artificial heart valve, he is taking 

an anticoagulant, whose effects have to be monitored regularly 

with blood tests. Roche’s CoaguChek S, a device that 

enables patients to monitor their own coagulation status, 

suits Christian’s active lifestyle perfectly. It is small enough 

for Christian to take it with him everywhere, and it provides 

him with the reliable information that is vital to his health.

Diagnostics Division in brief 

change 



2002 01/02 01/02 

Sales 7,239 5% 11% 

– Diabetes Care 2,511 8% 14% 

– Near Patient Testing 590 0% 5% 

– Centralized Diagnostics 2,587 2% 8% 

– Molecular Diagnostics 977 11% 19% 

– Applied Science 574 1% 7% 

EBITDA 1,984 8% 15% 

Operating profit 1,131 14% 22% 

R&D expenditures 676 8% 12% 

Employees 17,068 4% 

Diagnostics 

In 2002 the Diagnostics Division further extended its global market leadership. 

Sales by all business areas grew ahead of the market in each of the division’s 

five geographic regions. As well as gaining market share, we also increased profitability. 

In addition to systematic customer focus and market development, a number 

of strategic initiatives to reshape and expand the division, making it not only 

a supplier of diagnostic tests and systems but also a provider of actionable health 

information, helped us to deliver this strong performance. Research and development, 

alliances, licensing and internal venture projects are the key components 

that are helping to drive this process forward. 

Diagnostics 33

market in each of the division’s business 

areas. Continued above-average 

gains by Diabetes Care and Molecular 

Diagnostics reflect the innovative 

strength and focused market development 

activities of these two business 

areas. In 2002 Roche Diagnostics further 

strengthened its position as the 

world’s leading in-vitro diagnostics 

company, expanding its global market 

share to 19%, compared with 18% 

in 2001. 

As the industry leader, we will continue 

to play a responsible and active role in 

helping to shape the market. The goal is 

to give doctors, patients and healthcare 

payers optimal access to reliable information 

and thus support or enable timely, 

effective decision-making. At the same 

time it is critical for us to grow faster 

than the market. 

Heino von Prondzynski, Head of the Diagnostics Division 

Market leadership extended. Sales 

by the Diagnostics Division in 2002 

totalled 7,239 million Swiss francs, a 

year-on-year increase of 11% in local 

currencies and 5% in Swiss francs. 

Once again, sales grew faster than the 

Divisional profitability also increased, 

with operating profit up 14% to 

1,131 million Swiss francs and EBITDA 

advancing 8% to 1,984 million Swiss 

francs. The division’s operating profit 

and EBITDA margins were 15.6% and 

27.4%, respectively, an increase of 1.2 

and 0.8 percentage points. Increased 

expenditure, particularly for research 

and development and licensing activities, 

was more than offset by the strong 

sales growth. 

Sales outpace market growth in all 

regions. In 2002 sales grew ahead of 

the market in each of the five regions 

served by the division. Continued 

growth in North America was driven 

mainly by the diabetes monitoring 

business, molecular diagnostics products 

and the Elecsys immunochemistry 

product line. In Europe the dynamic 

growth seen in 2001 continued, with 

important contributions resulting 

from increased harmonisation of analytical 

platforms and reagents for 

clinical laboratories. The double-digit 

gains recorded in the two biggest 

regions were surpassed, once again, 

in Japan and Asia–Pacific. Sales in 

Iberia/Latin America suffered as a 

result of the continuing economic 

crisis in Latin America. 

34 Diagnostics

Helping to shape the future. Roche 

is playing an active role in shaping 

tomorrow’s in-vitro diagnostics market. 

To meet the need for actionable 

health information, Roche is developing 

solutions that combine cuttingedge 

diagnostics with information 

management and connectivity. The 

aim is to link, organise and translate 

diagnostic data into information that 

supports and enhances clinical decision-making. 

The division has already 

begun creating the infrastructure 

needed to serve this young but fastgrowing 

market and has secured access 

to the necessary technologies. 

Mellibase, an on-line service package 

that has been launched in its first markets, 

is one example of actionable 

health information from Roche. Using 

Mellibase, doctors and health insurers 

can provide diabetes patients with 

individualised, evidence-based information 

about the potential medical 

complications and economic consequences 

of their condition, explain 

treatment options and motivate 

patients to adhere to an optimised 

treatment routine. 

The division’s active licensing policy 

continues to play a strategic role. By 

granting licences on intellectual property 

that underpins its existing business, 

Roche is promoting wide use of 

the associated technology and systems. 

This applies particularly to PCR. In 

addition, by acquiring licences in 

health information and other areas, 

the division is moving to secure its 

innovative strength for the future. 

Thanks to the internal venture process 

initiated in 2001, Roche Diagnostics 

has also succeeded in bringing together 

Diagnostics sales 1998–2002 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

4,616 

5,282 


6,252 

creativity, skill and entrepreneurial 

initiative from throughout its international 

organisation. Designed to 

identify and mobilise untapped talent 

and ideas, the initiative has so far led 

to the evaluation of several thousand 

business proposals, focusing on projects 

that are likely to result in new 

products or open up new market 

opportunities. Four of these ‘companies 

within the company’ are already 

generating revenue just one year after 

being established. 

6,900 

| 98 | 99 | 00 | 01 | 02 

7,239 

Diagnostics 35

Accu-Chek Monitor, a continuous 

blood glucose monitoring system that 

takes readings every five minutes for 

four days, marks a major milestone 

towards the development of an artificial 

pancreas for use by diabetes 

patients, one of Roche’s long-term 

goals. The system has the longest 

monitoring capability on the market. 

Accu-Chek Monitor is scheduled for 

initial launch in Germany in 2003, 

where it will be marketed to medical 

professionals for use mainly in clinical 

trials. 

Asia–Pacific 

Japan 5% 6% 

Others 3% 

Near Patient Testing 8% 

Applied Science 8% 

Europe 42% 

Molecular Diagnostics 13% 



Sales by business area 

Diabetes Care 35% 

Iberia/Latin America 8% 

Centralized Diagnostics 36% 

Strong growth in all business areas 

Diabetes Care. Thanks to the continued 

success of the Accu-Chek product 

line, Diabetes Care further extended 

its lead in the blood glucose monitoring 

segment, posting local currency 

growth of 14%. Once again, the Accu- 

Chek Advantage glucose meter was 

one of the main growth drivers. Successful 

launches in Europe and Japan 

continued the global roll-out of Accu- 

Chek Compact, the first glucose meter 

featuring integrated test strips and 

automatic checks of strip integrity. 

Global roll-out of Accu-Chek Active, 

an extremely lightweight, user-friendly 

glucose meter that provides test results 

in seconds, was successfully completed. 

The second quarter of 2002 saw FDA 

approval of Accu-Chek Pocket Compass, 

a software designed for personal 

digital assistants that enables data to 

be downloaded directly from a blood 

glucose meter. 

The introduction of a new test strip 

for the Accu-Chek Compact glucose 

meter is scheduled for 2003. Giving 

faster results from less blood, it will 

make self-monitoring of blood glucose 

even easier. A second-generation version 

of the Accu-Chek Compact, 

which will include an integrated lancing 

system, is currently in development. 

This innovation will help us to 

take a leading position in the fastgrowing 

integrated spot monitoring 

segment (glucose meters that combine 

test strips, automatic checks of strip 

integrity and lancing system). 

In February 2003 Roche announced 

its intention to acquire the medical 

device supplier Disetronic, the world’s 

second-biggest maker of insulin 

pumps. This move will enable Roche 

to offer comprehensive solutions for 

diabetes management that cover every- 

36 Diagnostics

thing from glucose self-monitoring to 

individualised insulin delivery using 

the latest in insulin pump technology. 

The proposed acquisition is subject to 

approval by Disetronic’s shareholders, 

who will vote on Roche’s offer at a 

special general meeting, and the transaction 

will also have to be cleared by 

antitrust authorities. 

Near Patient Testing. Sales by Roche 

Near Patient Testing, which supplies 

products and services for doctors’ 

offices, ambulances and intensive care 

units, were up 5% in local currencies, 

again confirming this business area’s 

market leadership. 

Eight years’ continuous market development 

have made Near Patient Testing 

the leading supplier in the coagulation 

monitoring segment. The trend 

towards self-monitoring of coagulation 

status by patients continued, 

resulting in substantial sales and market 

share growth for the CoaguChek 

product line in 2002. Growing acceptance 

of coagulation self-monitoring 

tests by health insurers and increased 

prescribing of oral anticoagulants are 

the reasons for this development. 

Roche’s technological leadership in 

this area will be further underscored 

by the launch of a new, improved 

test strip, scheduled for 2003. 

Sales by the Hospital Point of Care 

unit, which supplies rapid diagnostic 

products for emergency rooms and 

intensive care units, grew almost twice 

as fast as the market. This good performance 

was driven primarily by sales 

of cardiac assays and of OMNI C, a 

new analyser that measures ten of the 

most important critical care parameters. 

In its first year on the market 

OMNI C has become one of the main 

revenue earners in its segment. Roche 

Diagnostics hopes to duplicate this 

success in 2003 with the launch of 

OMNI S, a new multiple parameter 

blood gas analyser. 

There is increasing demand for information 

to be extensively networked 

and rapidly available wherever it is 

needed. Accordingly, Roche Diagnostics’ 

strategy of packaging its systems 

as global solutions in combination 

with IT products such as DataCare has 

also had a very positive impact on 

sales. 

In the primary care segment (compact 

systems for doctors’ offices) Roche 

confirmed its leadership in the markets 

for point-of-care urinalysis and 

multiparameter systems such as the 

Reflotron product line. Roche Diagnostics 

is planning a special web portal 

for direct communication with customers. 

This will give physicians and 

pathologists access to information 

and services related to the division’s 

primary-care products. 

Diagnostics 37

From researchers to patients: the broadest range of diagnostics products on the market 

Research market Healthcare providers Consumers 

Research labs Service labs Patients 

University hospitals Hospitals Consumers 

Doctors’ offices 

GPs 

Applied Science 

LightCycler, MagNa Pure LC, 

Rapid Translation System 

(RTS), ProteoExpert, reagents 

for research and industry 

Molecular Diagnostics 1) 

Cobas Amplicor, Cobas AmpliPrep, 

Cobas TaqMan, Cobas AmpliScreen 

Centralized Diagnostics 1) 

Modular Analytics SWA, Roche/Hitachi, 

Cobas Integra, Elecsys, Cobas Core, 

Stago, Sysmex, Elecsys proBNP 

Near Patient Testing 1) 

CoaguChek, Cardiac Reader, 

Troponin T, OMNI, Reflotron, 

Combur Test, Chemstrip, 

Accutrend GCT, DataCare 

Diabetes Care 

Accu-Chek product line (Accu- 

Chek Compact, Accu-Chek 

Sensor/Advantage, Accu-Chek 

Active, Softclix) 

1) The division’s Centralized Diagnostics, Molecular 

Diagnostics and Near Patient Testing 

businesses, which serve the needs of health 

professionals, are linked together in the 

Lab Network organisation. 

Applied Science 

Reagents and innovative systems and 

technologies for medical and biotech 

research and food safety testing; 

biochemical reagents for industry 

Molecular Diagnostics 

PCR-based tests and analysers for 

diagnosis, identifying disease predisposition 

and monitoring disease 

progression and response to therapy 

Centralized Diagnostics 

Integrated solutions for in vitro diagnostic 

laboratories, including everything 

from analysers and test reagents 

to intelligent workflow optimisation 

and service offerings. Innovative diagnostic 

parameters and systems for use 

in laboratory diagnostics. 

Near Patient Testing 

Products and services for point-ofcare 

testing, including coagulation 

monitoring, electrolyte and blood gas 

analysis, rapid urinalysis; clinical 

chemistry analysers; systems and rapid 

tests for cardiac markers; information 

management and connectivity software. 

Diabetes Care 

Innovative blood glucose monitoring 

systems, services and information 

for patients with diabetes and health 

professionals involved in diabetes 

management. 

38 Diagnostics

Centralized Diagnostics. Sales by our 

Centralized Diagnostics unit, the leading 

supplier of integrated analytical 

systems for hospitals and high-volume 

laboratories, advanced 8% in local 

currencies, outpacing the market by 

a substantial margin. The increase 

was driven primarily by our Elecsys 

(immunochemistry) and Integra 

(clinical chemistry) product lines and 

by the hematology products we market 

in North America and a number of 

European and Asian countries for our 

Japanese partner Sysmex. 

test not only detects the disease but 

also helps doctors to determine its 

severity and the likely prognosis. 

Thanks to proBNP, heart failure can 

now be detected at an early stage and 

treatment significantly improved. 

There are nearly 5 million symptomatic 

heart failure patients in the 

United States alone, and roughly 

half a million new cases are diagnosed 

there every year. 

Roche’s presence in this segment 

has been further strengthened by the 

global roll-out of Modular Analytics 

SWA, the first commercially available 

serum work area to combine highthroughput 

clinical chemistry and 

immunoassay testing on a single platform. 

The platform can be configured 

to individual laboratories’ needs and 

is capable of processing roughly 90% of 

patient samples in a single pass, thus 

setting new standards of efficiency and 

productivity. 

The wide range of high-quality tests 

available for Modular Analytics SWA 

is another reason why the system 

has received such a positive market 

response. In 2002 the menu was 

expanded to include tests for hormones, 

cardiac markers and markers 

of bone metabolism. This brings to 

50 the number of clinical parameters 

that can now be determined using 

Elecsys analysers. 

The year also saw the successful launch 

of Elecsys proBNP, the first commercial, 

fully-automated test for diagnosing 

heart failure and monitoring 

patients’ response to treatment. The 

Roche has lodged an appeal against the 

judgement issued in the Igen lawsuit in 

April 2002 by a lower court in the 

United States. At the same time we are 

in discussions with Igen with the aim 

of establishing a successful basis for 

future cooperation that will benefit 

both parties. 

Molecular Diagnostics. Roche 

Molecular Diagnostics, the market 

leader in its field, posted a 19% sales 

increase in local currencies, a growth 

rate that is once again well ahead of 

the market average. The business area’s 

AmpliScreen tests for screening 

donated blood and blood products 

Diagnostics 39

Unparalleled product pipeline 

Near Patient Testing 9 

All business areas expected to contribute 

major innovations in the next five years 

and its tests for hepatitis B and C and 

sexually transmitted diseases delivered 

especially robust growth. 

The gains in this business area reflect 

strong demand for products based 

on the highly sensitive polymerase 

chain reaction (PCR) technique. Using 

PCR technology, it is possible to copy 

specific segments of genetic material 

millions of times over, including even 

the tiniest fragments of bacterial or 

viral DNA. PCR-based tests thus afford 

a means of diagnosing a number of 

conditions rapidly and very reliably. 

Diabetes Care 22 

Molecular Diagnostics 34 

Applied Science 21 

Centralized Diagnostics 20 

Following successful launches in a 

number of markets, a new version of 

our highly sensitive Amplicor HIV-1 

test was cleared in the United States 

in mid-2002 for use in monitoring 

patients’ responses to AIDS therapy. 

In December 2002 the FDA also 

granted regulatory clearance for our 

Cobas AmpliScreen System, further 

strengthening our position in the 

blood screening sector; FDA approval 

of Roche’s PCR-based hepatitis C and 

HIV tests designed for use with the 

system followed later the same month. 

Roche tests are already used to screen 

all donor blood in Japan, the Netherlands 

and the United Kingdom. 

A broad portfolio of human papillomavirus 

(HPV) patents acquired from 

the Institut Pasteur has given us a solid 

basis for developing and marketing 

products for the early detection of 

HPV infection. HPV is the leading 

cause of cervical cancer, a disease in 

which early diagnosis and treatment 

are critical for a positive prognosis. 

Late in 2003 we plan to market an 

HPV test that we expect will supplant 

conventional Pap smear testing in the 

mid term. 

Agreements like the one signed with 

the Institut Pasteur and another establishing 

a strategic alliance with Qiagen 

to develop and commercialise an integrated 

nucleic acid diagnostics system 

are carefully targeted at reinforcing 

our leadership in molecular diagnostics. 

In January 2003 Roche Diagnostics 

and Affymetrix signed an agreement 

that grants Roche non-exclusive rights 

to Affymetrix’s array and instrument 

technologies for up to 18 years. One 

of the benefits of having access to 

GeneChip technology is that it will 

enable us to develop specific diagnostic 

laboratory tests for a wide range 

of diseases. We are confident that the 

synergies between Affymetrix’s 

GeneChip platform and Roche’s PCR 

technology will establish new standards 

in genetic testing, making it possible to 

tailor therapies to individual patients’ 

profiles, and will further enhance 

Roche Diagnostics’ attractiveness as 

a partner for companies working on 

the development of markers to guide 

individualised therapies. 

40 Diagnostics

The global roll-out of Cobas TaqMan 

48, a fully automated PCR analyser, 

is progressing on schedule. Its ‘big 

brother’, Cobas TaqMan, was successfully 

launched in the United States in 

January 2002. Together with the Cobas 

AmpliPrep sample preparation system, 

these analysers represent another 

milestone in our ongoing efforts to 

develop this market. 

New medical applications for PCR in 

blood screening, HPV tests for women 

and tests for sepsis (blood poisoning) 

are expected to stimulate additional 

growth in this business area, as are 

new PCR-based products for use in 

genomics. 

Applied Science. Roche Applied 

Science, which makes reagents and 

high-tech systems for scientific and 

industrial research, recorded sales 

growth of 7% in local currencies and 

maintained its position in last year’s 

particularly challenging biotech business 

environment. This strong performance 

was driven by sales of the 

MagNa Pure LC and LightCycler PCR 

workflow system used primarily in 

genetics research and gene-based diagnostics. 

LightCycler is an instrument 

that amplifies genetic material for 

DNA analysis. MagNa Pure LC is a 

module that automates PCR sample 

preparation. 

In 2002 Applied Science was again 

successful in its efforts to expand into 

new markets. One example is the 

collaboration begun in autumn with 

IDEXX Laboratories (USA) in veterinary 

diagnostics. Another is the extension 

of our range of products for food 

testing: new LightCycler-based tests 

enable rapid, precise detection of the 

foodborne pathogens Salmonella and 

Listeria and of genetically modified 

food constituents. 

Also new is a range of research tests 

codeveloped with Innogenetics for the 

detection of dangerous bacteria, an 

important step on the road to a comprehensive 

portfolio of direct assays 

for microbial pathogens in blood. 

The Rapid Translation System (RTS) is 

the world’s first commercial system for 

cell-free protein expression. Roche further 

extended the RTS product range 

in 2002 with the launch of the RTS 

ProteoMaster, a highly versatile system 

for a wide range of applications in 

proteomics. 

With its entry into the field of scientific 

services Roche Applied Science 

is seeking to develop a completely new 

market segment. ProteoExpert is 

an internet-based information service 

designed to help scientists working 

with the RTS to achieve faster, more 

efficient protein synthesis. It was 

developed in cooperation with Biomax 

Informatics of Germany. 

Diagnostics 41

Launches of additional products and 

services are expected to further 

strengthen Applied Science’s market 

position. These include a system for 

producing customised biochips for use 

in research, an expanded version of the 

LightCycler, the new IndyCycler PCR 

instrument, and a new service (the 

result of an internal venture project) 

that offers synthesis of special proteins 

for industrial clients. 

connectivity in order to strengthen our 

market lead and remain the industry 

trendsetter. Roche Diagnostics is ideally 

positioned to continue its active 

role in shaping the in-vitro diagnostics 

market of the future. 

Outlook. The division’s excellent performance 

in 2002 is further confirmation 

that we are pursuing the correct 

strategy with the realignment initiated 

two years ago. For 2003 we expect 

that divisional sales will continue to 

advance well ahead of the market. 

We remain confident of achieving an 

operating profit margin of slightly 

better than 20% in 2006. 

We expect to see further dynamic sales 

growth, particularly in Europe, the 

United States, Asia–Pacific and Japan. 

In the medium term we intend to 

strengthen our market leadership with 

launches of innovative new products. 

We will continue to pursue a threepronged 

success strategy driven by our 

strong commitment to R&D (where 

we invest more in absolute terms than 

our competitors), our internal venture 

process that provides a source of new 

business models, products and services, 

and a network of alliances with 

leading technology companies. 

We will also continue to systematically 

evolve the division into a provider of 

actionable health information through 

targeted strategic initiatives. In particular, 

we will focus on improvements 

and innovations in areas such as hospital 

information management and 

42 Diagnostics

Vitamins and Fine Chemicals Division in brief 

change 



2002 01/02 01/02 

Sales 3,391 –4% 1% 

– Vitamins 1,760 –2% 5% 

– Carotenoids 665 –8% –2% 

– Other fine chemicals 966 –6% 0% 

EBITDA 1) 462 –20% –7% 

Operating profit 1) 223 –36% –17% 

R&D expenditures 125 2% 2% 

Employees 7,261 –3% 

1) Before charges for the vitamin case and before impairment of the division’s net assets. 


In February 2002 Roche announced its intention to divest its Vitamins and Fine 

Chemicals Division in order to concentrate fully on its core pharmaceuticals and 

diagnostics businesses. Six months later the Group disclosed its plans to sell the 

division to DSM in the Netherlands. The contract was finalised in February 2003. 

The actual closing date will then depend on how soon the authorities approve 

the sale. 

Although economic conditions remained difficult in 2002, the Vitamins and 

Fine Chemicals Division held its market share and posted substantial volume gains. 

Vitamins and Fine Chemicals 43

currencies increased in the second half 

of 2002. Operating profit – before 

charges for the vitamin case and before 

impairment of the division’s net assets 

– declined by 123 million Swiss francs, 

and EBITDA was down by 115 million 

Swiss francs. The division’s operating 

and EBITDA margins were thus 6.6% 

and 13.6%, respectively. Among the 

factors contributing to this weaker 

performance were the unfavourable 

exchange rate of the US dollar relative 

to the Swiss franc, restructuring and 

other one-time costs and lower prices 

for some products. 

In 2002 we aggressively continued our 

strategy of developing and commercialising 

new and better products that 

deliver differentiated benefits to our 

customers. This has put us in a stronger 

position to extend our global market 

lead further. 

Markus Altwegg, Head of the Vitamins and Fine Chemicals Division 

Global market leader steps up 

volume growth. The Vitamins and 

Fine Chemicals Division recorded sales 

of almost 3.4 billion Swiss francs in 

2002. Compared with the previous 

year, this was equivalent to an increase 

of 1% in local currencies and a decline 

of 4% in Swiss francs. Although last 

year’s anticipated market upturn has 

yet to occur, sales growth in local 

The volume of products sold by the 

division rose by a substantial 7%, with 

especially strong gains being recorded 

for new products. Growth in the animal 

nutrition segment was led by the 

division’s Hy.D feed supplement and 

enzyme products. Robust volume 

gains were also posted in the food segment 

with natural-source vitamin E, 

polyunsaturated fatty acids and the 

new carotenoids lycopene, lutein and 

zeaxanthin. In the fiercely competitive 

cosmetics segment the division scored 

major sales successes with its stable 

vitamin C formulation STAY-C 50 and 

with Parasol SLX, a new-generation 

UVB sunscreen launched only last year. 

With vitamins A, E and C, the B-complex 

vitamins and other products still 

experiencing significant pricing pressures, 

the division took steps to offset 

the impact of price erosion by implementing 

additional programmes to 

restructure its manufacturing operations 

and marketing infrastructure. 

In North America the division continued 

to gain market share. Despite 

downward pressure on prices, the 

44 Vitamins and Fine Chemicals

division outperformed expectations in 

this region, recording year-on-year 

volume gains and increased sales in 

local currencies. In Europe the negative 

trend noted early in the year was 

reversed. By contrast, the situation in 

Latin American markets remained 

critical because of the region’s currency 

problems. The division’s overall 

share of the astaxanthin market 

remained stable, despite a downturn in 

demand from Chile’s salmon-farming 

sector. Sales growth was especially 

positive in the high-potential Chinese 

market. The division posted substantial 

growth in local currency terms in 

the Asia–Pacific region. 

fermentation process is fully under way, 

and the process is living up to the 

division’s high expectations. Following 

start-up difficulties, the new biotin 

plant in Grenzach was able to meet 

increased demands for this vitamin at 

mid-year. Prices were adversely 

affected in the second half of 2002, 

however, as supply exceeded demand. 

Nevertheless, biotin sales were significantly 

better than in 2001. Production 

of vitamin C was down for the year 

as a result of delays in construction 

work at the vitamin C plant in Dalry 

(Scotland). 

Sale to DSM. After swiftly completing 

preparations, announced last spring, 

to divest the Vitamins and Fine 

Chemicals Division, Roche decided in 

August to sell the division to the 

Netherlands-based DSM group. As a 

core business of DSM – a chemicals 

company with a strong life sciences 

focus – the division will be even more 

solidly positioned to extend its market 

and technology leadership and will 

benefit from new opportunities for 

growth. The division remains firmly 

committed to pursuing its plans and 

objectives. All ongoing capital expenditure 

and restructuring projects, 

for example, will be implemented as 

Asia–Pacific 19% Food 22% Cosmetics 5% 


Sales by customer segment 


19% 

North and Latin America 42% 

Europe and Africa 39% 

Animal feeds 54% 

Strategic investments in production 

and research. The Vitamins and Fine 

Chemicals Division reinforced its lead 

as a premix supplier by opening new, 

state-of-the-art plants for feed premixes 

in Chile, Hungary and Vietnam 

and for food premixes in China and 

South Africa. 2002 was another very 

successful year for the division’s premix 

business. 

Construction work on the world’s 

most advanced vitamin E manufacturing 

facility is proceeding on schedule 

in Sisseln (Switzerland). At the 

Grenzach (Germany) site production 

of vitamin B 2 using an industrial 

The division continued to focus its 

research efforts on developing innovative 

new products and more efficient 

manufacturing processes. In a further 

move designed to support the division’s 

‘50:10 Initiative’ (aimed at 

reducing costs by 50% in ten years), 

a new biotech centre was opened in 

Grenzach; progress with this initiative 

is on track. Divisional research units 

developed a number of new formulations, 

increasing the level of differentiation 

in existing product lines. 

Stepped-up efforts to drive innovation 

were reflected in the number of new 

patent applications filed, which doubled 

compared with 2001. 

planned. Any residual liabilities relating 

to the vitamin case will remain 

with the Roche Group. Negotiations 

with DSM to finalise the contract were 

successfully concluded in February 

2003. 

Branded vitamin products such as 

Supradyn, Berocca and Redoxon will 

continue to be marketed by Roche 

Consumer Health, our non-prescription 

medicines business, and are 

therefore not part of this transaction. 

Vitamins and Fine Chemicals 45

Every year more than 40,000 people are treated on the Phelophepa 

Health Train. Besides providing general medical services, dental and 

eye care and psychological counselling, the Phelophepa project also 

aims to help people help themselves. Volunteers from every community 

visited by the train attend a basic health education course and 

then act as ‘multipliers’ by passing on what they have learned to 

others in their communities. 

Since 1994 Roche has supported the Phelophepa Health 

Train, a clinic on rails that brings affordable primary health 

services to people living in rural areas of South Africa. 

Roche provides all operating funding for the Roche Health 

Clinic, whose staff also visit area schools at each train stop 

to educate people on health issues and raise public awareness 

about specific problems.

People and the Environment 

Human resources, safety and environmental protection and social involvement. 

Three distinct areas with a common concern: people. 

Last year we introduced Roche Connect to give everyone who works at Roche 

a chance to share financially in the company’s success. And we continued to 

promote a corporate culture that rewards performance. 

Ongoing efforts to enhance safety and environmental protection resulted in 

further reductions in energy consumption and emissions of harmful pollutants, 

benefiting our employees and the communities where Roche facilities are 

located. 

And we remained actively involved in efforts to overcome the critical lack of 

healthcare that affects so many people in developing countries. 

People and the Environment 47

Human Resources 

We have established a culture that rewards 

performance and promotes entrepreneurial 

thinking at all levels of the organisation. 

Our Roche Connect employee equity plan 

is an opportunity for all employees to share 

directly in Roche’s success. 

Daniel Villiger, Head of Corporate Services 

Healthy growth leads to rise in 

headcount. The healthy sales growth 

posted by the divisions in 2002 led 

to selective affiliate staffing increases. 

At year end the Roche Group 

employed 69,659 people in around 

60 countries. The Diagnostics Division 

recruited 723 new employees, primarily 

in Europe and North America. 

Pharmaceuticals Division headcount 

was up by 5,409, mainly as a result of 

new hires in the United States, Latin 

America and Eastern Europe. The consolidation 

of Chugai also contributed 

to the rise in the division’s headcount, 

increasing the number of employees 

in Japan by 4,247 to 5,797. At the end 

of 2002 total headcount was up 5,942, 

an increase of 9% over the 2001 figure. 

As a result, the cost of wages, salaries 

and employee benefits rose by 112 to 

7,528 million Swiss francs. 

Equity ownership programmes 

promote employee identification with 

Roche. In 2002 a new programme 

called Roche Connect was launched 

with the aim of giving employees 

48 Human Resources

worldwide the opportunity to purchase 

Roche non-voting equity securities 

(Genussscheine) at a discount and 

thus participate in the Group’s success. 

Up to the end of February 2003 the 

programme had been introduced in 25 

countries. Around 20% of the employees 

in these countries have signed up 

for Roche Connect so far. The programme 

is scheduled for roll-out in a 

further 20 countries in 2003. 

2002 also saw the launch of a new 

non-voting equity security option programme 

for high-level employees. As 

the Group buys the underlying securities 

and other equity instruments on 

the stock market, there is no dilution 

of the value of Roche securities. 

Headcount by division at year end 

2002 2001 change % change 

Pharmaceuticals 44,901 39,492 5,409 14 

Diagnostics 17,068 16,345 723 4 

Vitamins and Fine Chemicals 7,261 7,494 –233 –3 

Others 429 386 43 11 

Roche Group 69,659 63,717 5,942 9 

Headcount by region at year end 

Europe 32,551 31,848 703 2 

– Switzerland 8,569 8,266 303 4 

North America 17,988 17,359 629 4 

Latin America 5,816 5,655 161 3 

Asia 11,550 7,133 4,417 62 

– Japan 6,381 2,076 4,305 207 

Africa, Australia, Oceania 1,754 1,722 32 2 

Total 69,659 63,717 5,942 9 

Adding value through performance. 

The performance-based compensation 

system introduced four years ago is 

being progressively extended, with 

financial incentives for managers 

linked more closely to their contributions 

to increasing the company’s 

value. One component is a valueoriented 

performance management 

system introduced in 2002. It will 

be developed further in 2003. 

In the Pharmaceuticals Division 

human resources activities in 2002 

were focused on establishing a sustainable 

leadership and performance 

culture. This is being supported by 

an expanded global human resources 

function within the division. From 

2003 on talent identification and 

leadership development will be based 

on global standards and expanded. 

The roll-out of our executive development 

programme in collaboration 

with London Business School continued 

in 2002, and activities to enhance 

leadership competencies will remain a 

high priority in 2003. The division has 

made considerable progress towards 

developing compensation and incentive 

programmes to reward outstanding 

achievements. 

A key human resources focus in the 

Diagnostics Division last year was the 

formulation of leadership principles 

for divisional managers based on 

Roche’s corporate leadership philosophy. 

These will be implemented in 

2003. Part of the remuneration of 

managers eligible for variable compensation 

packages will be related even 

more closely to goal achievement and 

leadership performance. 

Among Roche’s global human 

resources initiatives in 2002 were an 

intensified talent development and 

junior leadership process and the 

launch of an assessment and develop- 

Human Resources 49

ment centre for managers at advanced 

stages of their careers. These are complemented 

by global learning and 

development programmes for individuals 

and teams to support successful 

implementation of Roche’s business 

strategy. 

DSM to acquire Vitamins and Fine 

Chemicals Division. In February 

2003 Roche signed a contract to sell 

its Vitamins and Fine Chemicals Division 

to the Netherlands-based DSM 

group. The transaction is still subject 

to approval by antitrust authorities, 

and we expect to close the sale in the 

first half of 2003. DSM has agreed to 

honour the current terms and conditions 

of employment of the division’s 

employees and to provide post-retirement 

benefits and health coverage 

at current levels or higher. Ongoing 

restructuring programmes in the 

division will be completed as planned. 

50 Human Resources

Safety and 

Environmental Protection 

Sustainability. Safety and environmental 

protection are crucial issues for 

Roche, as continuous and demonstrable 

advances in these areas can make a 

genuine and measurable contribution 

to sustainable development. Roche 

firmly believes that sustainable business 

practices are the key to success for 

a forward-looking, innovative company. 

For several decades we have been 

steadily reducing emissions into 

the air, water and soil. In recent years 

we have achieved this mainly by 

improving existing manufacturing 

processes or replacing them with 

fundamentally new ones that have 

the additional advantage of reducing 

energy consumption and waste 

volumes. 

Roche systematically implements its 

own corporate health, safety and 

environmental protection standards, 

the Business Charter for Sustainable 

Development developed by the International 

Chamber of Commerce and 

the guidelines formulated in the chemical 

industry's worldwide Responsible 

Care programme. In particular, we 

subscribe to the precautionary principle 

and the principle of eco-efficiency. 

Accordingly, we remain committed to 

increasing the eco-efficiency of our 

manufacturing operations by reducing 

We regard our efforts on behalf of 

safety and environmental protection, 

eco-efficiency and sustainability not 

merely as an obligation we have to 

society but as part and parcel of our 

corporate activities. 

Hans Künzi, Head of Corporate Safety and Environmental Protection 

energy consumption and associated 

CO 2 emissions and implementing 

process optimisations. 

In 2002 our contributions to sustainable 

development again gained us a 

number of honours, including an 

award by the San Francisco Bay Area 

Business Environmental Network 

for Roche Palo Alto in California 

(USA) for its energy reduction and 

Safety and Environmental Protection 51

2002 2001 

Investment 198 168 

Operating costs 380 386 

Total expenditure 578 554 

environmental programmes, and yet 

another Clean Industry Award for our 

facility in Cuernavaca, Mexico. In 

addition, several Roche facilities gained 

ISO 14001 certification. 

Health, safety and environmental 

protection expenditure in 2002 came 

to 578 million Swiss francs, or 1.9% 

of sales. The increase is due primarily 

to new environmental protection 

equipment and new production facilities 

with integrated S&E controls. 

Accidents and incidents. As in 

previous years, there were no major 

incidents at Group facilities in 2002, 

and the number of incidents again 

declined from the year-earlier level. 

Both the severity and frequency of 

accidents declined significantly in 

comparison with 2001. These positive 

results are due to our uncompromising 

commitment to training and development 

of S&E officers and other 

employees. In 2002 training focused 

on risk management, risk analysis, 

incident management and aspects of 

occupational medicine. 

A total of 41 S&E audits were conducted 

in 23 countries. The visits once 

again confirmed that high safety, 

health and environmental protection 

standards are maintained at Group 

facilities. 

Environmental protection. Groupwide 

energy conservation efforts continued 

successfully in the year under 

review, supported by a variety of campaigns. 

Energy consumption was 

reduced by a substantial 4%. 

In addition, a special campaign was 

launched to reduce CO 2 emissions. In 

accordance with agreements reached at 

the environmental conferences in Rio, 

Kyoto and Johannesburg, Roche 

intends to decrease its emissions of 

greenhouse gases further and thus 

make an active contribution to reducing 

climate change. In 2002 the campaign 

resulted in a decrease in CO 2 

emissions of 3.4%. 

A further Group goal is the elimination 

of halogenated hydrocarbon compounds 

in cooling systems and fire 

extinguishers. By steadily replacing 

halogenated hydrocarbons with other 

agents and alternative technical solutions, 

Roche is working to help protect 

the ozone layer and reduce the greenhouse 

effect. In 2002 these efforts led 

to a further reduction of 1% in the 

total inventory of halogenated hydrocarbons 

at Roche facilities. 

Emissions of volatile organic compounds 

(VOC) at Roche plants have 

been reduced by 60% overall in the 

past ten years. In 2002 VOC emissions 

were cut by 12% in comparison with 

2001. 

Environmental stewardship. Roche is 

one of the few Swiss firms that has 

continuously participated in international 

programmes for the safe management 

of chemicals (OECD, ICCA, 

CEFIC). The aim of these programmes 

is to evaluate the environmental 

impact and improve our knowledge of 

substances used worldwide in large 

quantities. Roche is also a major contributor 

to the international chemical 

industry’s Long Range Research Initiative, 

which is investigating the impact 

of trace amounts of chemicals on 

humans, animals and the environment 

and supports national research projects 

with similar objectives. 

It is with some concern that Roche, as 

a member of various national and 

international bodies, has been following 

the EU’s deliberations on a ‘Strategy 

for a Future Chemicals Policy’. In 

February 2001 the European Commission 

published a white paper containing 

proposals for new European legislation 

on chemicals. Initial drafts of 

what will be legally binding regulations 

and directives are expected by 

spring 2003. The proposed new registration 

procedure, broad interpretation 

of the precautionary principle 

and additional bureaucratic hurdles 

would seriously jeopardise Europe’s 

attractiveness as a centre for the 

chemical and pharmaceutical industry. 

52 Safety and Environmental Protection

Social Involvement 

The many faces of good corporate 

citizenship. As a global company, 

Roche contributes daily to improving 

the quality of life of people around 

the world. We are directly involved in 

community service projects, make 

donations to charitable causes and 

work in partnership with a wide range 

of non-profit organisations. At Roche 

good corporate citizenship extends 

from environmental protection and 

promoting public health awareness 

and education to providing humanitarian 

aid. 

We look for innovative ways to 

improve healthcare delivery in developing 

countries. Because of the close 

alignment between our diagnostics 

and therapeutics businesses, we are 

able to contribute to the effective use 

of these countries’ very limited 

resources. 

The ‘Train of Hope’ assures access 

to basic medical care. Relieving the 

heavy burden of disease in developing 

countries requires sweeping improve- 

Innovation is central to Roche’s 

pharmaceutical and diagnostic 

research. But we are also breaking 

new ground to resolve healthcare 

challenges in the developing world 

which have so far seemed insurmountable. 


Social Involvement 53

The Phelophepa Health Train – facts and figures 

When the Health Train began operating in 1993, it consisted of three coaches. 

Today it boasts 16 coaches, weighs 600 tonnes and is fully equipped to provide 

general medical services and dental, eye and psychiatric care. 

Phelophepa spends 36 weeks a year travelling the country. A permanent staff of 

14 work with about 40 students preparing for careers in a variety of medical and 

health-related fields; in return for 14-days of volunteer service the students gain 

valuable practical experience. More than 40,000 people are treated on the train 

every year. So far the Health Train has brought basic medical services to over one 

million people in remote parts of South Africa. 

At each of the train’s 36 annual stops around 20 members of the local community 

come aboard for a five-day course that provides basic information on subjects such 

as first aid, hygiene, infectious diseases, sound nutrition and family health. This 

method of helping people to help themselves has brought about a significant and 

lasting improvement in the health of people living in the regions visited by the train. 

Phelophepa is thus contributing to sustainable development in rural South Africa. 

ments in infrastructure, or even creating 

an infrastructure where none 

exists. For a start, this means addressing 

basic needs for sound nutrition 

and clean water. And it also involves 

providing access to good primary care, 

raising awareness of health problems 

and creating the institutional and 

other resources needed to provide specialist 

treatment. Nobody can meet 

these challenges alone. But when a 

broad coalition of partners works 

together, significant progress is possible. 

South Africa’s Phelophepa project 

is an impressive example of just how 

much can be achieved. 

‘Phelophepa’ – which, translated literally, 

means ‘good, clean medical care’ – 

is the name of a mobile clinic on rails. 

Made possible by an alliance of healthcare 

and transport companies, government 

agencies and universities, the 

project delivers basic medical services 

to large numbers of people in remote 

rural areas of South Africa. Roche has 

been supporting the ‘Train of Hope’, as 

local people call it, since 1994 and is 

one of its leading sponsors. At a ceremony 

in May 2002 Roche was honoured 

with an award, presented by a 

South African cabinet minister, for 

its contribution to the health train. 

In 2001 the coach housing the train’s 

health clinic was officially renamed the 

‘Roche Health Clinic’ in recognition of 

Roche’s long-standing and continuing 

support. Roche has assumed full financial 

responsibility for this clinic and 

provides all funding for maintenance, 

salaries, medical equipment, consumables 

and training materials. Since 

2002 Roche has also been contributing 

to initial and in-service training 

activities to help the clinic’s staff stay 

abreast of new advances in primary 

care and provide the best possible 

services. 

Building a united front against HIV. 

Partnerships between international 

organisations such as UNAIDS, 

national governments, relief organisations 

and industry have a critical role 

to play in combating HIV/AIDS in 

the Third World. As a founder member 

of the Accelerating Access Initiative, 

which has brought together five 

UN agencies and five research-based 

pharmaceutical companies, Roche is 

supporting this effort. 

Important steps have been taken 

recently to ensure broader access to 

treatments for HIV/AIDS. Governments 

have become more actively 

involved in the fight against AIDS 

while at the same time recognising 

obligations imposed by international 

trade and patent laws. Pharmaceutical 

companies, for their part, have made 

major concessions on drug pricing. 

Roche’s position on the matter is clear: 

54 Social Involvement

‘We do not intend to make a profit on 

AIDS drugs in Africa.’ Moreover, we 

will refrain from submitting patent 

applications or asserting existing 

patent rights for anti-HIV products in 

the 50 Least Developed Countries and 

the 13 countries in sub-Saharan Africa 

not classified as ‘Least Developed’. 

In developing countries, and particularly 

in sub-Saharan Africa, we supply 

major drugs such as Invirase and Viracept 

on terms even more favourable 

than those offered by manufacturers of 

generics. In the case of Viracept, we 

were able to reduce prices even more 

sharply in 2002 thanks to improvements 

in the manufacturing process 

for this important therapeutic agent. 

In addition, Roche Diagnostics is supplying 

highly sensitive PCR tests for 

diagnosing HIV and monitoring 

antiretroviral therapy at massively 

reduced prices. 

CARE, a pilot project initiated in early 

2001 in conjunction with PharmAccess 

International to facilitate access to 

HIV treatment in Kenya, Uganda, Côte 

d’Ivoire and Senegal, is now successfully 

underway. Infrastructure and distribution 

problems caused an initial 

delay of almost one year in getting the 

project off the ground. Roche funds 

this pilot project, in addition to supporting 

it with medicines, diagnostic 

kits, education programmes and scientific 

and medical expertise. There are 

plans to expand the initiative in future 

with the help of donor funding. CARE 

is also serving as a model for other 

organisations’ HIV projects in Africa. 

These are important measures in the 

fight against HIV/AIDS although low 

prices alone cannot solve the problem. 

Affordability is only one of many 

barriers to healthcare in developing 

nations. Roche therefore also supports 

projects that promote prevention 

and help to improve infrastructure. 

Social Involvement 55

Finance 

2002 has been a year of great change for the Roche Group. Significant steps 

have been taken towards the strategic objective of creating a unique healthcare 

company focused on the two high-tech pillars Pharmaceuticals and Diagnostics. 

The Vitamins and Fine Chemicals Division is no longer considered a core activity 

and is consequently being divested to the Dutch Group DSM. In October 2002 

the alliance with Chugai was completed, improving Roche’s presence in the 

world’s second largest pharmaceuticals market by a quantum leap. 

While the underlying core businesses Pharmaceuticals and Diagnostics continue 

to achieve improved operating results and strong cash generation, these positive 

developments have been overshadowed by three factors: an impairment charge 

caused by the divestiture of the Vitamins and Fine Chemicals business, significant 

litigation expenses and the impact of setting a new basis for the management 

of the equity portfolio. For many years the active management of Roche’s 

liquid funds with a long-term investor’s perspective has made a major contribution 

to net income. Since the downturn of world equity markets in 2001 

Roche has incurred substantial unrealised losses on its financial assets. These 

unrealised losses have been consistently reported in Roche’s balance sheet. 

By proactively revising its accounting policies in line with expected developments 

in IFRS, Roche has created renewed financial flexibility: the related one-time 

impairment opens the way to manage all our liquid assets with the objective 

of generating financial income, reducing debt or investing for the strategic 

development of our two core businesses. 

The impact of these three factors results in a reported net loss of 4.0 billion 

Swiss francs. Going forward Roche will be solely focused on its two successful, 

profitable and cash-generating core businesses, which during 2002 generated 

a net income of 3.8 billion Swiss francs. 

56 Finance

Financial Review 

Figures reported Figures reported 

in the financial statements on an adjusted basis a) 


Sales 29,725 29,163 +2 26,545 25,761 +3 

EBITDA b) 6,032 6,438 –6 7,721 7,211 +7 


Net income (4,026) 3,697 – 3,808 4,562 –17 

a) The adjusted figures, which are used in the internal management of the Roche Group, represent the results of 

the Group’s underlying on-going operations. They exclude special items and include only the continuing businesses. 

See pages 69–71 for a full description and reconciliation. 

b) EBITDA: Earnings before interest and other financial income, tax, depreciation and amortisation, including impairment. 

This corresponds to operating profit before depreciation and amortisation, including impairment. 

The core pharmaceuticals and diagnostics businesses delivered good results for 2002, as is 

shown in the adjusted results. Pharmaceuticals delivered particularly strong results in the oncology 

and transplantation areas and in addition generic competition to Roaccutane/Accutane in 

the United States came later than expected. The 2002 results also include three months worth of 

results from Chugai. Diagnostics once again showed continued growth in all business areas, 

especially diabetes care. 

The financial impacts of the repositioning of the Roche Group as well as certain litigation matters 

have had a huge impact on the reported results. Litigation costs for the vitamin case and Genentech 

legal cases totalled 2.5 billion Swiss francs. The book value of the net assets of the Vitamins and Fine 

Chemicals Division has been written-down by 1.65 billion Swiss francs based on the sales price 

agreed with DSM, although this is partly offset by a book gain of 0.6 billion Swiss francs on the part 

disposal of Nippon Roche. The single largest impact has been in respect of the financial assets. 

Here the falls in world markets over the last two years, and particularly in the last six months of 2002, 

resulted in net unrealised losses of over 5 billion Swiss francs on the Group’s equity portfolio. Consistent 

with the on-going restructuring of the Group’s financing and treasury operations, the Group 

has decided to proactively revise its accounting policy in line with US healthcare peers and expected 

developments in IFRS to give a more appropriate presentation in the financial statements. Following 

this accounting policy revision, the major part of previously unrealised losses that had been deferred 

in equity were written-off. This resulted in a one-time expense of 5.2 billion Swiss francs. 

During 2002 we have made positive and sometimes 

painful progress towards repositioning the Roche 

Group. We are exiting non-core activities and are 

now fully focused on our successful pharmaceuticals 

and diagnostics businesses. Roche Finance is now 

providing a solid platform for value creation and an 

entrepreneurial development of our Group. 

Erich Hunziker, Chief Financial Officer 

Financial Review 57

Roche Group repositioning 


Chugai 

The alliance with Chugai has been completed during 2002, and the Group is now well positioned 

to move forward with its strategic objectives in Japan. The final purchase consideration in the 

acquisition accounting was 2.7 billion Swiss francs, although the overall consolidated net cash 

outflow was only 0.5 billion Swiss francs as the cash contributions made to Chugai remain on the 

Group’s consolidated balance sheet. The annual on-going effects of the acquisition accounting 

include 80 million Swiss francs of amortisation and 10 million Swiss francs of depreciation. 

The acquisition accounting also resulted in a one-time net gain of 586 million Swiss francs from 

effectively selling 49.9% of Nippon Roche to the minority shareholders of Chugai and a fair value 

write-up of 136 million Swiss francs on inventories held by Chugai at the date of acquisition. This 

will be written-off over the inventory turn of 4.8 months from October 2002, resulting in additional 

expenses of 87 million Swiss francs in 2002 and 49 million Swiss francs in the first half of 2003. 

Pharmaceuticals Division restructuring 

The fundamental restructuring programme announced on 30 May 2001 has been largely completed. 

Additional costs during 2002 were 154 million Swiss francs. No future costs are 

anticipated. The restructuring has lead to a more optimal cost structure and more focussed sales 

spend. 

Divestment of Vitamins and Fine Chemicals business 

The sale of the Vitamins and Fine Chemicals business has now been completed, subject to regulatory 

approval, and is expected to close by the first half of 2003. Based on the signed agreement 

with DSM, an impairment of the net assets of the division totalling 1,650 million Swiss francs 

has been recorded. Reduced profitability in the business since the initial announcement of the 

preliminary agreement with DSM and the reductions in the market valuations of businesses 

worldwide have led to the agreed sales price of the Vitamins and Fine Chemicals business being 

significantly lower than its previous book value. This reduction drives the impairment charge. 

As part of the sale agreement, the liabilities in respect of the vitamin case remain with the Roche 

Group. Additional expenses were recorded in 2002 of 1,770 million Swiss francs, which represents 

the resolution of all major litigation currently outstanding from US customers and an estimate of 

the remaining likely litigation costs worldwide. 

Genentech legal cases 

Following a court judgement, the Group’s US subsidiary Genentech recorded a provision of 

778 million Swiss francs. The main litigation concerned relates to an alleged breach of a 1976 

agreement between Genentech and the City of Hope Medical Center. Genentech is appealing 

the judgement. However, as was already announced in the Group’s half-year results, a full 

provision has been recorded in the financial statements. 

58 Financial Review

Treasury and Financing 

During 2002 the Group took further steps to restructure its treasury and financing operations. 

The strategic objective is to move from high risk taking to having financial investments in line 

with the Group’s healthcare peers. At the same time, the Group is evaluating options to restructure 

its debt financing with the aim of further reducing debt levels, simplifying the funding 

structure and better aligning funding levels with operating needs. 

Developments in world markets have reduced the fair value of the Group’s equity portfolio and 

have resulted in large unrealised losses deferred in equity. Consistent with the strategic objectives, 

Roche decided to proactively revise its accounting policy for available-for-sale financial 

assets. In future any investments that have a market value of more than 25% below their original 

cost for a sustained six-month period will be considered as impaired and the loss will automatically 

be recorded in the income statement rather than being deferred in equity. The one-time 

impact of this revision of the accounting policy is to recognise unrealised losses of 5.2 billion Swiss 

francs as at 31 December 2002 as an impairment charge. In effect these amounts are reclassified 

from fair value reserves in equity to retained earnings via the income statement. There is no 

impact on the balance sheet value of the financial assets, as these have already been recorded 

at market value since 1 January 2001. 

Impact on net income in 2002 

Chugai transaction 

– Net gain from acquisition accounting 586 

– Inventory fair value adjustment write-off (87) 

Pharmaceuticals Division restructuring (154) 


– Discontinuing operation (including tax) 131 

– Impairment of net assets (1,650) 

– Vitamin case (1,770) 

Major legal cases (778) 

Impairment of financial assets (5,192) 

Income taxes 864 

Minority interests 216 

Total impact (7,834) 

Financial Review 59

Operating results 


Sales: Double-digit growth in oncology, transplantation and in Diagnostics 

% change 

% change (local 

2002 2001 (CHF) currencies) 

Pharmaceuticals 19,306 18,861 +2 +9 

of which 

Total Prescription 17,754 17,200 +3 +10 

– Roche prescription a) b) 12,877 13,334 –3 +2 

– Genentech prescription 3,251 2,866 +13 +23 

– Japan prescription c) 1,626 1,000 +63 +82 

OTC 1,552 1,661 –7 –2 

Diagnostics 7,239 6,900 +5 +11 

Sales (adjusted basis) 26,545 25,761 +3 +9 

Vitamins and Fine Chemicals 3,391 3,540 –4 +1 

Reclassification a) (211) (138) 

Total sales 29,725 29,163 +2 +8 

a) Pharmaceuticals Division sales are adjusted to include the reclassification of sales to the Vitamins and Fine Chemicals 

Division. 

b) Excludes Nippon Roche, which is classified as part of Japan prescription segment. 

c) Consists of Chugai from 1 October 2002 and Nippon Roche from 1 January 2001 until 30 September 2002. 

A strong performance of the oncology and transplantation franchises in the prescription business, 

a further double-digit growth in Diagnostics sales and the consolidation of Chugai from 1 October 

2002 increased adjusted Group sales by 9% in local currencies to 26,545 million Swiss francs. 

Chugai contributed slightly less than 3 percentage points to the Group’s growth and 4 percentage 

points to the growth of Pharmaceuticals and of the total prescription business. This significant 

sales increase was achieved in spite of the adverse impacts of generics on Roaccutane/Accutane, 

in particular in the second half of 2002. 

Sales in Pharmaceuticals accounted for 73% of the Group’s core businesses and Diagnostics 27%. 

Geographically, North America contributed 38%, Europe 37%, Japan 8% and the rest of the world 

17% of total Group sales on an adjusted basis. 

60 Financial Review

Operating profit: 

Double-digit increase and margin improvement in Group, Pharmaceuticals and Diagnostics 

% change 

% change (local 

2002 2001 (CHF) currencies) 

Sales 26,545 25,761 +3 +9 

Cost of sales (6,108) (6,011) +2 +6 

Gross profit 20,437 19,750 +3 +10 

Marketing and distribution (8,127) (8,023) +1 +8 

Research and development (4,132) (3,771) +10 +15 

Administration (1,193) (1,118) +7 +12 

Amortisation of intangible assets (1,502) (1,533) –2 +5 

Impairment of long-term assets (4) (15) –73 –73 

Other operating income (expense), net (514) (852) –40 –36 

Operating profit (adjusted basis) 4,965 4,438 +12 +22 

Adjustment items (see pages 69–71) (3,630) (1,191) – – 

Total operating profit 1,335 3,247 –59 –44 

Operating profit increased by 22% in local currencies (12% in Swiss francs) to almost 5 billion 

Swiss francs on an adjusted basis, which excludes the Vitamins and Fine Chemicals business and 

other special items in both 2002 and 2001. The increase was primarily driven by the sales growth, 

an improved cost structure as a result of the Pharmaceuticals Division restructuring and gains of 

approximately 250 million Swiss francs from continuing product portfolio and asset realignments. 

Pharmaceuticals and Diagnostics both increased their operating profit margin to 21.1% and 15.6% 

respectively. The Group operating profit margin was 18.7% of sales, an increase of 1.5 percentage 

points over the previous year. 

Gross profit: Increase of 10% (3% in Swiss francs) to 20.4 billion Swiss francs, with the gross 

profit margin improved by 0.3 percentage points to 77.0%. This reflects particularly strong growth 

in high-margin Pharmaceuticals and Diagnostics products and the effects of continuing productivity 

improvements. 

Marketing and distribution: Increase of 8% (1% in Swiss francs) to 8.1 billion Swiss francs, 

which was under-proportional to sales growth. Cost increases for the Pegasys and Fuzeon 

product launches in 2003 were partially offset by a more focused spend on growth areas resulting 

from the restructuring. Marketing and distribution as a percentage of sales fell by 0.5 percentage 

points. 

Research and development: Increase of 15% (10% in Swiss francs) to 4.1 billion Swiss francs to 

support the strong research and development pipelines of the core businesses and intensified 

in-licensing arrangements. Research and development costs as a percentage of sales on Group 

level reached 15.6% in 2002, an increase of 1 percentage point over 2001. For Pharmaceuticals, 

which accounts for more than 80% of the Group’s research and development expenses, they 

increased from 16.5% to 17.9%. 

Administration: Increase of 12% (7% in Swiss francs) to 1.2 billion Swiss francs, mainly due to 

the integration of Chugai and other corporate projects. 

Financial Review 61

Amortisation of intangible assets: Increase of 5% (decrease of 2% in Swiss francs) to 1.5 billion 

Swiss francs. In local currencies the amortisation charge increased by 5% mainly due to the 

acquisition of Chugai on 1 October 2002. The fall in Swiss francs is mainly driven by foreign 

exchange movements as a significant part of the Group’s intangible assets are denominated in 

US dollars, euros and Japanese Yen. Roche’s amortisation charge, currently almost 6% of sales, 

continues to be significantly higher than the industry average. Following the implementation 

of recent changes companies using United States Generally Accepted Accounting Principles 

(US GAAP) are no longer required to amortise goodwill and instead must carry out a regular 

impairment review. Roche is continuing to amortise goodwill, including that held by Genentech, 

as required by International Financial Reporting Standards (IFRS), with a goodwill amortisation 

expense of 501 million Swiss francs. 

Other operating income (expense), net: Decrease of 36% (40% in Swiss francs) to net 

expense of 514 million Swiss francs, after 852 million Swiss francs in 2001. This reduction in the 

net expense is mainly driven by gains of approximately 250 million Swiss francs from continuing 

product portfolio and asset realignments, in particular by the gain from the disposal of Neupogen 

of 217 million Swiss francs in the second half of 2002. 

Divisional EBITDA Operating 

2002 

sales to as % Operating profit as % 

third parties EBITDA of sales profit of sales 

Pharmaceuticals 19,306 5,982 31.0 4,082 21.1 

of which 

Total prescription 17,754 5,694 32.1 3.838 21.6 

– Roche prescription 12,877 4,201 32.6 3,222 25.0 

– Genentech prescription 3,251 1,204 37.0 382 11.8 

– Japan prescription 1,626 289 17.8 234 14.4 

OTC 1,552 288 18.6 244 15.7 

Diagnostics 7,239 1,984 27.4 1,131 15.6 

Other – (245) – (248) – 

Group total (adjusted basis) 26,545 7,721 29.1 4,965 18.7 

Adjustment items (see pages 69–71) 3,180 (1,689) – (3,630) – 

Group total 29,725 6,032 20.3 1,335 4.5 

2001 

Pharmaceuticals 18,861 5,603 29.7 3,674 19.5 

of which 

Total prescription 17,200 5,256 30.6 3,389 19.7 

– Roche prescription 13,334 4,098 30.7 3,146 23.6 

– Genentech prescription 2,866 966 33.7 71 2.5 

– Japan prescription 1,000 192 19.2 172 17.2 

OTC 1,661 347 20.9 285 17.2 

Diagnostics 6,900 1,833 26.6 993 14.4 

Other – (225) – (229) – 

Group total (adjusted basis) 25,761 7,211 28.0 4,438 17.2 

Adjustment items (see pages 69–71) 3,402 (773) – (1,191) – 

Group total 29,163 6,438 22.1 3,247 11.1 

The adjusted figures, which are used in the internal management of the Roche Group, represent the results of the Group’s 

underlying on-going operations. They exclude special items and include only the continuing businesses. See pages 69–71 

for a full description and reconciliation. 

62 Financial Review

Pharmaceuticals: Operating profit and EBITDA margins improved further 

Operating profit increased by 11% to 4.1 billion Swiss francs, representing 21.1% of sales in 2002 

after 19.5% in 2001. EBITDA totalled 6.0 billion Swiss francs, up by 7%, and the EBITDA margin 

increased from 29.7% to 31.0%. This strong result is driven by the prescription business while the 

OTC results weakened compared to the previous year. 

Total prescription sales increased by 10% in local currencies primarily driven by the strong 

performance of the oncology franchise and other key products such as CellCept and NeoRecormon, 

partly offset by the impact of generics on Roaccutane/Accutane. The consolidation of Chugai 

from 1 October 2002 contributed 4 percentage points to the growth of the prescription business. 

Marketing and distribution costs increased in line with sales. Increased costs for the launch of 

new products such as Pegasys and Fuzeon were partially offset by a more focused spend on 

growth areas resulting from the Pharmaceuticals Division restructuring. The research and development 

pipeline was complemented by a number of in-licensing deals, which increased R&D 

costs substantially due to upfront and milestone payments. The result also includes the gain on 

the disposal of Neupogen of 217 million Swiss francs. 

Due to the acquisition of Chugai and in order to improve comparability, the Japan prescription 

business is now reported separately. It consists of the Nippon Roche prescription business until 

30 September 2002 and Chugai from 1 October 2002. Consequently the Roche prescription 

business as shown in this report excludes the business in Japan for both years. The profitability 

of the Roche prescription business was improved further and the operating profit margin is now 

at 25.0%. The Genentech prescription business achieved another very strong sales and profit 

growth. The EBITDA margin of 37.0% represents Genentech’s strong contribution to the Group’s 

operating cash generation. The 2002 operating profit of Genentech includes 603 million Swiss 

francs of amortisation mainly arising from the acquisition of Genentech by Roche. The Japan 

prescription business grew by 63% as a result of the acquisition of Chugai. The operating profit 

margin decreased to 14.4% due to the strength of the Swiss franc relative to the Japanese yen, 

higher launch costs for new products and the recurring acquisition accounting charges. On an 

annualised basis these acquisition accounting impacts amount to approximately 90 million Swiss 

francs. 

OTC sales fell by 2% in local currencies. The main factors were weak sales of Aleve and the economic 

difficulties in Latin America. Operating profit decreased by 14% to 244 million Swiss francs, 

primarily due to the decline in sales, start-up costs for a new production facility, the absence of 

second half 2001 gains on product disposals as part of the ongoing product portfolio streamlining 

and intensified marketing efforts for product roll-outs in the second half of 2002. The operating 

profit margin was 15.7% compared to 17.2% in 2001. 

Diagnostics: another strong result 

The sales development again significantly outperformed the market with an overall growth rate 

of 11% in local currencies. Sales growth in the high margin business areas Molecular Diagnostics 

and Diabetes Care was particularly strong. Operating profit increased by 14% to 1,131 million 

Swiss francs and EBITDA by 8% to 1,984 million Swiss francs. Profitability again improved with the 

operating profit margin up by 1.2 percentage points to 15.6% and the EBITDA margin up by 

0.8 percentage points to 27.4%. Increased operating costs, in particular for research and development 

and licensing activities, were more than offset by the strong sales growth. 

Other 

The result of ‘Other’ consists of the costs of Corporate Headquarters. In 2002, costs increased 

compared to 2001 mainly due to the launch of corporate initiatives. 

Financial Review 63

Financial income (expense), net 


Impairment of financial assets 

The impairment charge of 5,192 million Swiss francs has a very major impact on the Group’s 

results. This charge arises from the accumulated effects on the Group’s equity portfolio of the 

falls in world markets over the last two years, and especially in the last six months. The Group’s 

revised accounting policy means that further significant falls would automatically be recognised 

as expenses, and not accumulate as deferrals in equity. 

Underlying net financial income 

Net financial income on an adjusted basis decreased by 52% to 736 million Swiss francs. This 

excludes net financial expenses of 73 million Swiss francs attributable to the Vitamins and Fine 

Chemicals business. The most significant item is a further gain of 1,032 million Swiss francs on 

disposal of LabCorp shares. Gains on equity derivatives include a further 167 million Swiss francs 

in respect of locking in part of the LabCorp gains using derivatives. 

Excluding LabCorp, adjusted financial income is a net expense of 463 million Swiss francs, which 

is broadly as expected. Net income from equity investments excluding LabCorp was 314 million 

Swiss francs. The difficult market environment has limited the possibilities to realise other gains. 

Interest income was 487 million Swiss francs, a decrease of 26% relative to the prior year caused 

by falls in interest rates. Interest expense fell by 10% to 1,355 million Swiss francs. The fall in 

interest rates had less impact here, as the amortisation rates on the discount on debt instruments 

are fixed. A full breakdown of net financial income is given in Note 12 to the financial statements. 


Income taxes 

The major events in 2002 have uneven tax impacts, which result in a tax expense of 839 million 

Swiss francs on a pre-tax loss of 3,194 million Swiss francs. These impacts are shown in the table 

in Note 13. The most significant is the impairment of financial assets, which causes a pre-tax 

loss of 5.2 billion Swiss francs with little tax impact, as most of the investments are held in low-tax 

jurisdictions. 

On an adjusted basis the effective tax rate has increased to 29% from 23% in 2001. This is mainly 

due to operating income making up an increasingly higher proportion of pre-tax income than has 

previously been the case. Also the increasingly positive impact of Genentech and Chugai on 

pre-tax profits results in an increasing tax rate. Consequently, although adjusted pre-tax income 

in 2002 is 4% lower than in 2001, the tax expense is 21% higher. 

Associated companies and minority interests 


In the reported results, part of the costs of the Genentech legal cases is attributable to the 

minorities. The underlying expense from minority interest continues to increase, as the overall 

contribution of Genentech to net income increases. In the comparative results, income from associated 

companies consists mainly of the income from LabCorp for the period prior to June 2001, 

during which time it was accounted for as an associated company. The remaining associated 

companies, notably Basilea Pharmaceutica, are currently generating a net expense. 

64 Financial Review

Net income 


On a reported basis the various major events in 2002 result in a net loss of 4,026 million Swiss 

francs. On an adjusted basis net income is 17% lower at 3,808 million Swiss francs, with the 12% 

increase in operating profit being offset by lower financial income and a proportionately higher 

tax charge. 

Cash flows and net liquidity 


Cash flow statement 


Cash generated from business operations 8,618 7,938 

Other operating cash flows (6,277) (1,655) 

Operating activities before income taxes 2,341 6,283 

Income taxes paid (all activities) (1,359) (1,195) 

Operating activities 982 5,088 

Financing activities (3,941) (824) 

Investing activities 3,538 (3,700) 

Net effect of currency translation on cash (285) 10 

Increase (decrease) in cash 294 574 

The Group’s operations continued to show strong growing operating cash generation of 8.6 billion 

Swiss francs, driven by continued growth in EBITDA. The operating cash surplus was largely 

absorbed by payments totalling 4.3 billion Swiss francs in respect of major legal cases. These 

payments were as follows: 

– Vitamin case – EU fine (778 million Swiss francs) 

– Vitamin case – various settlement payments made to direct and indirect vitamins customers in 

the United States and elsewhere (2,488 million Swiss francs) 

– Igen litigation – payment of 1,018 million Swiss francs into a collateral deposit account pending 

the resolution of the litigation. 

Other operating cash flows have increased due to the additional contribution of 530 million Swiss 

francs paid into one of the Group’s US pension plans. The increase in taxes paid reflects settlement 

of the increased tax expenses noted during 2001, and includes taxes paid on the LabCorp 

gains. 

The most significant financing cash flows were the payment of the dividend to shareholders 

(1.1 billion Swiss francs) and the repayment on its due date of the 100 billion yen ‘Samurai’ bonds 

with a cash outflow of 1.3 billion Swiss francs. The outflows also include 1.1 billion Swiss francs 

cash paid by Genentech to repurchase their own shares from third parties. 

Investing cash flows include the impacts of the Chugai and Antisoma alliances as well as 1.3 billion 

Swiss franc proceeds from the sale of LabCorp shares in March and July. Capital expenditure 

was slightly increased and there were no other major acquisitions or divestments. Funds for 

the major cash outflows described above were taken from the Group’s marketable securities 

portfolio, which accounts for the remainder of the inflow during the year. 

The demerger of the Vitamins and Fine Chemicals Division will not be completed until the first 

half of 2003, and therefore the division’s cash flows are still included in the above figures. 

Financial Review 65

Balance sheet in millions of CHF 2002 2001 % change 

Net liquidity 

31 December 31 December 


Cash and marketable securities 15,825 24,548 

Financial long-term assets 3,672 2,924 

Derivative financial instruments, net 223 8 

Own equity instruments 3,230 2,128 

Financial assets 22,950 29,608 

Long-term debt (14,167) (17,109) 

Short-term debt (8,183) (6,621) 

Total debt (22,350) (23,730) 

Net liquidity 600 5,878 

Net liquidity has decreased by 5.3 billion Swiss francs to give 600 million Swiss francs. Significant 

outflows were as follows: 

– The vitamin case payments – 3.3 billion Swiss francs 

– The dividend payment – 1.1 billion Swiss francs 

– Falls in fair value of marketable securities – 3.2 billion Swiss francs. 

The large outflows were partly off-set by cash generated from operations, where EBITDA totalled 

6.0 billion Swiss francs. Three of the Group’s debt instruments, the ‘LYONs II’, ‘Helveticus’ and 

‘Bullet’ bonds, totalling 3.3 billion Swiss francs, are now classified as repayable within one year. 

The sale of LabCorp shares has no effect on net liquidity, as in simple terms, it is a transfer 

from marketable securities to cash. Similarly the repayment of the ‘Samurai’ bonds is, in effect, 

a reduction of both short-term debt and cash by 1.3 billion Swiss francs. 

For 2003, certain major items are foreseeable, including the proceeds from the demerger of the 

Vitamins and Fine Chemicals Division, settlement of remaining vitamin case provisions and the 

proposed dividend payment. The repayment of the ‘LYONs II’, ‘Helveticus’ and ‘Bullet’ debt instruments 

will reduce cash, but will not affect net liquidity as debt is also reduced. 

Long-term assets 33,143 36,411 –9 

Current assets 30,852 38,875 –21 

Total assets 63,995 75,286 –15 

Equity 20,810 28,973 –28 

Minority interests 4,963 4,894 +1 

Non-current liabilities 22,850 26,486 –14 

Current liabilities 15,372 14,933 +3 

Total equity, minority interests and liabilities 63,995 75,286 –15 

66 Financial Review

Foreign currency translation effects: The fall in the value of the US dollar relative to the Swiss 

franc had a significant impact on certain balance sheet headings, particularly intangible assets, 

long-term debt and minority interests, which all have a relatively high proportion of US dollar 

denominated items. The effects from the movements in the euro and Japanese yen relative to 

the Swiss franc had a less significant impact. 

Chugai: The completion of the alliance with Chugai on 1 October 2002 has a significant impact 

on the balance sheet. Net acquired assets, including fair value adjustments, were 3.6 billion Swiss 

francs, of which 1.4 billion Swiss francs is attributable to minorities. The part disposal of Nippon 

Roche further increased minority interests by 149 million Swiss francs. 

Provisions and litigation: The vitamin case related payments totalled 3.3 billion Swiss francs, 

which reduces current liabilities. This was partly offset by the 1.8 billion Swiss franc increase in 

the provision booked in the second half of 2002. All remaining provisions in respect of the vitamin 

case are now classified as short-term. The Igen litigation related payment of 1,018 million Swiss 

francs into a collateral deposit account reduces current assets and increases long-term assets. 

The provision for Genentech legal cases of 778 million Swiss francs is included in non-current liabilities. 

Long-term assets are increased and current assets decreased by 874 million Swiss francs 

following the reclassification of certain of Genentech’s investments as long-term (see Note 9). 

Equity and financing: The repayment of the ‘Samurai’ bonds reduced current liabilities by 

1.3 billion Swiss francs. The ‘LYONs II’, ‘Helveticus’ and ‘Bullet’ bonds, with a book value of 3.3 billion 

Swiss francs, are now shown as current liabilities. The payment of the dividend reduced 

equity by 1.1 billion Swiss francs and the net loss for the period further decreases equity. The sale 

of the LabCorp shares means that the unrealised gain that had been held within equity was 

taken out of equity and recognised in the income statement. The impairment on financial assets 

has no overall impact on total equity, in effect it has been transferred from the fair value reserves 

to retained earnings via the income statement. The Group’s obligation to repurchase own equity 

instruments in connection with the ‘Sumo’ and ‘LYONs V’ has been reclassified from equity to 

long-term debt at its discounted value of 2.4 billion Swiss francs. The effects of currency translation 

reduced net assets and equity by 1.7 billion Swiss francs. 

Other movements: Property, plant and equipment and intangible assets decreased by 3.7 billion 

Swiss francs, due to the 1,650 million Swiss franc impairment charge for the Vitamins and Fine 

Chemicals Division, and due to depreciation and amortisation and the fall in the US dollar. Minority 

interests were stable as the increase in respect of Chugai largely offsets the decreases resulting 

from the share repurchases by Genentech and the fall in the US dollar. 

Strong financial condition: The Group remains solidly financed, however recent events have 

had a significant impact, with equity (including minority interests) representing 40% of total 

assets compared to 45% at the end of 2001. In spite of this, 76% of total assets are still financed 

long-term. Net liquidity has reduced by 5.3 billion Swiss francs during 2002. 

Financial Review 67

Subsequent events 

On 10 February 2003 Roche and Disetronic announced plans under which the Group would 

acquire the Infusion Systems division of Disetronic. Disetronic is a world leader in the research 

and development of insulin pumps for the treatment of diabetes. The proposed acquisition is 

subject to approval from the competition authorities and by Disetronic’s shareholders. The total 

net cost of the acquisition is expected to be approximately 1.2 billion Swiss francs. 

Foreign exchange rates 

Exchange rates against the Swiss franc were: 

31 December Average 31 December Average 31 December 

2002 2002 2001 2001 2000 

1 USD 1.39 1.56 1.68 1.69 1.64 

1 EUR 1.45 1.47 1.48 1.51 1.52 

1 GBP 2.23 2.34 2.43 2.43 2.45 

100 JPY 1.17 1.24 1.28 1.39 1.43 

CHF/USD exchange rate 

1.68 


1.48 

1.39 

1.85 

1.80 

1.75 

1.70 

1.65 

1.60 

1.55 

1.50 

1.45 

1.40 

1.35 

1.30 

J F M A M J J A S O N D 

68 Financial Review

The adjusted basis 

The concept of the adjusted basis: management’s view of the Group’s on-going operations 

presented on a consistent and comparable basis 

The consolidated results of the Roche Group are significantly influenced by various special items 

and also by changes in International Financial Reporting Standards over the years. To improve 

the visibility of the underlying business the adjusted results are also presented. These adjusted 

results, which are used in the internal management of the business, represent the results of 

the Group’s underlying on-going operations. The principles used to compile the adjusted results 

are applied on a consistent basis. The major concepts are as follows: 

The adjusted results include: 

– Gains or losses on continuing product portfolio and asset realignments 

– Sales and income from newly acquired products 

– Impacts on sales and income of patent expiry, withdrawal or disposal of existing products 

– Impairments of long-term assets (other than as part of a major restructuring) 

– Costs of normal ongoing restructuring 

– Gains or losses on sales of marketable securities 

The adjusted results exclude: 

– Gains or losses arising on disposal of fully consolidated subsidiaries or associated companies 

– Discontinuing operations, such as the sale or spin-off of a whole business 

– One-time costs of major restructuring and fundamental reorganisations 

– Charges for exceptional legal cases 

– Transition effects of changes and revisions to accounting policies 

Specific items excluded from the adjusted results in 2002 and 2001 

The 2002 adjusted results exclude: 

– The gain on the part disposal of Nippon Roche and non-recurring charges relating to the 

Chugai transaction 

– The results of the Vitamins and Fine Chemicals Division, including the impairment of net assets 

and additional charges relating to the vitamin case 

– The non-recurring costs of the Pharmaceuticals Division restructuring 

– Additional charges in respect of major legal cases 

– The impairment of financial assets 

The 2001 adjusted results exclude: 

– The results of the Vitamins and Fine Chemicals Division, including the impairment of net assets 

and additional charges relating to the vitamin case 

– The non-recurring costs of the Pharmaceuticals Division restructuring 

Financial Review 69

Figures reported Figures reported 

in the financial statements 

on an adjusted basis 


Sales 29,725 29,163 +2 26,545 25,761 +3 

Cost of sales (8,432) (8,339) +1 (6,108) (6,011) +2 

Gross profit 21,293 20,824 +2 20,437 19,750 +3 

Marketing and distribution (8,538) (8,452) +1 (8,127) (8,023) +1 

Research and development (4,257) (3,893) +9 (4,132) (3,771) +10 

Administration (1,295) (1,219) +6 (1,193) (1,118) +7 

Amortisation of intangible assets (1,520) (1,553) –2 (1,502) (1,533) –2 

Impairment of long-term assets (13) (18) –28 (4) (15) –73 

Chugai transaction 586 – – – – – 


restructuring (154) (777) –80 – – – 


Division 

– Impairment of net assets (1,650) – – – – – 

– Vitamin case (1,770) (760) +133 – – – 

Major legal cases (778) – – – – – 

Other operating income (expense), 

net (569) (905) –37 (514) (852) –40 


Financial income (expense), net 663 1,515 –56 736 1,523 –52 

Impairment of financial assets (5,192) – – – – – 

Profit before taxes (3,194) 4,762 – 5,701 5,961 –4 

Income taxes (839) (1,038) –19 (1,674) (1,386) +21 

Profit after taxes (4,033) 3,724 – 4,027 4,575 –12 

Income applicable to minority 

interests 41 (34) – (182) (38) +379 

Share of result of associated 

companies (34) 7 – (37) 25 – 

Net income (4,026) 3,697 – 3,808 4,562 –17 

Diluted earnings per share and 

non-voting equity security (CHF) (4.80) 4.37 – 4.49 5.38 –17 

70 Financial Review


Reconciliation of reported figures to adjusted basis 

Reference numbers indicate corresponding Notes to the Consolidated Financial Statements. 

Year ended 31 December 2002 

Sales to 

Operating 

third parties EBITDA profit Net income 

As reported in the consolidated 

financial statements 29,725 6,032 1,335 (4,026) 

Gains or losses on fully consolidated subsidiaries 

or associated companies 

Net gain on part disposal of Nippon Roche and 

reduction in total consideration paid for Chugai 6 – (586) (586) (586) 

Impact of fair value adjustement to 

Chugai inventories 6 – 87 87 87 

Discontinuing operations 

Results of Vitamins and Fine Chemicals Division 8 (3,391) (462) (223) (131) 

Reclassification of inter-company sales 

to Vitamins and Fine Chemicals Division 

as sales to third parties 8 211 – – – 

Impairment of net assets of Vitamins 

and Fine Chemicals Division 8 – – 1,650 1,650 

Additional charges in respect of the 

vitamin case 8 – 1,770 1,770 1,770 

Major restructuring 

Non-recurring costs of Pharmaceuticals Division 7 – 102 154 154 

Legal cases 

Additional charges in respect of 

Genentech legal cases 9 – 778 778 778 

Transition effects of changes and revisions 

to accounting policies 

Impairment of financial assets 12 – – – 5,192 

Income taxes – – – (864) 

Income applicable to minority interests – – – (216) 

Results on an adjusted basis 26,545 7,721 4,965 3,808 

Year ended 31 December 2001 

Sales to 

Operating 

third parties EBITDA profit Net income 

As reported in the consolidated 

financial statements 29,163 6,438 3,247 3,697 

Discontinuing operations 

Results of Vitamins and Fine Chemicals Division 8 (3,540) (577) (346) (237) 

Reclassification of inter-company sales to Vitamins 

and Fine Chemicals Division as sales to third parties 8 138 – – – 

Additional charges in respect of the vitamin case 8 – 760 760 760 

Major restructuring 

Non-recurring costs of Pharmaceuticals Division 7 – 590 777 777 

Income taxes – – – (435) 

Results on an adjusted basis 25,761 7,211 4,438 4,562 

Financial Review 71

Consolidated Financial Statements 


Consolidated income statement 


Year 

ended 31 December 


Sales 4 29,725 29,163 

Cost of sales (8,432) (8,339) 

Gross profit 21,293 20,824 

Marketing and distribution (8,538) (8,452) 

Research and development 4 (4,257) (3,893) 

Administration (1,295) (1,219) 

Amortisation of intangible assets 15 (1,520) (1,553) 

Impairment of long-term assets 14, 15 (13) (18) 

Chugai transaction 6 586 – 

Pharmaceuticals Division restructuring 7 (154) (777) 


– Impairment of net assets 8 (1,650) – 

– Vitamin case 8 (1,770) (760) 

Major legal cases 9 (778) – 

Other operating income (expense), net 11 (569) (905) 

Operating profit 4 1,335 3,247 

Financial income (expense), net 12 663 1,515 

Impairment of financial assets 12 (5,192) – 

Profit before taxes (3,194) 4,762 

Income taxes 13 (839) (1,038) 

Profit after taxes (4,033) 3,724 

Income applicable to minority interests 28 41 (34) 

Share of result of associated companies 16 (34) 7 

Net income (4,026) 3,697 

Basic earnings per share and non-voting equity security (CHF) 26 (4.80) 4.40 

Diluted earnings per share and non-voting equity security (CHF) 26 (4.80) 4.37 

Number of shares and all per share information in 2001 is restated for the 100 for 1 share split that took place on 4 May 2001 

(see Note 25). 

72 Consolidated Financial Statements

Consolidated balance sheet 


31 

December 


Long-term assets 

Property, plant and equipment 14 13,434 15,052 

Intangible assets 15 12,850 14,943 

Investments in associated companies 16 122 186 

Financial long-term assets 17 3,672 2,924 

Deferred income tax assets 13 784 1,410 

Other long-term assets 18 2,281 1,896 

Total long-term assets 33,143 36,411 

Current assets 

Inventories 19 5,724 5,780 

Accounts receivable 20 6,517 5,779 

Current income tax assets 13 1,028 244 

Other current assets 21 1,758 2,524 

Marketable securities 22 12,395 21,412 

Cash and cash equivalents 3,430 3,136 

Total current assets 30,852 38,875 

Total assets 63,995 75,286 

Equity 

Share capital 25 160 160 

Non-voting equity securities (Genussscheine) 25 p.m. p.m. 

Own equity instruments 25 (5,853) (3,460) 

Retained earnings 29,145 34,272 

Fair value and other reserves 27 (2,642) (1,999) 

Total equity 20,810 28,973 

Minority interests 28 4,963 4,894 

Non-current liabilities 

Long-term debt 29 14,167 17,109 

Deferred income tax liabilities 13 3,551 4,162 

Liabilities for post-employment benefits 10 2,926 2,610 

Provisions 31 1,702 2,115 

Other non-current liabilities 504 490 

Total non-current liabilities 22,850 26,486 

Current liabilities 

Short-term debt 29 8,183 6,621 

Current income tax liabilities 13 849 716 

Provisions 31 1,158 1,852 

Accounts payable 23 1,787 1,710 

Accrued and other current liabilities 24 3,395 4,034 

Total current liabilities 15,372 14,933 

Total equity, minority interests and liabilities 63,995 75,286 

p.m. = pro memoria. Non-voting equity securities have no nominal value (see Note 25). 

Consolidated Financial Statements 73

Consolidated statement of changes in equity 


Year 



Share capital 25 

Balance at 1 January and at 31 December 160 160 

Non-voting equity securities (Genussscheine) 25 

Balance at 1 January and at 31 December p.m. p.m. 

Own equity instruments 25 

Balance at 1 January (3,460) (4,166) 

Movements during the year 39 706 

Employee share option plan 10 (19) – 

Reclassification of obligation to repurchase own equity 

instruments 25 (2,413) – 

Balance at 31 December (5,853) (3,460) 

Retained earnings 

Balance at 1 January 34,272 31,556 

Net income (4,026) 3,697 

Dividends paid 25 (1,101) (981) 

Balance at 31 December 29,145 34,272 

Fair value and other reserves 27 

Balance at 1 January (1,999) 440 

Increase (decrease) in fair value (3,242) (1,066) 

(Income) expense recognised in the income statement 3,791 (666) 

Deferred income taxes and minority interests 560 (347) 

Equity component of new convertible debt – 86 

Currency translation gains (losses) (1,752) (446) 

Balance at 31 December (2,642) (1,999) 

Total equity at 31 December 20,810 28,973 

p.m. = pro memoria. Non-voting equity securities have no nominal value (see Note 25). 

74 Consolidated Financial Statements

Consolidated cash flow statement 


Year 



Cash flows from operating activities 

Cash generated from operations 33 8,618 7,938 

(Increase) decrease in working capital (322) (131) 

Costs of Pharmaceuticals Division restructuring paid 7 (156) (239) 

Costs of vitamin case paid 8 (3,266) (330) 

Igen litigation: payment into collateral deposit account 9 (1,018) – 

Payments made for defined benefit post-employment plans 10 (779) (293) 

Other operating cash flows (736) (662) 

Cash flows from operating activities, before income taxes paid 2,341 6,283 

Income taxes paid (1,359) (1,195) 

Total cash flows from operating activities 982 5,088 

Cash flows from financing activities 

Proceeds from issue of long-term debt 33 274 2,110 

Repayment of long-term debt 33 (1,700) (2,808) 

Transactions in own equity instruments 25 39 706 

Increase (decrease) in short-term borrowings 230 867 

Interest and dividends paid 33 (1,794) (1,900) 

Genentech stock repurchases 5 (1,079) (67) 

Other financing cash flows 89 268 

Total cash flows from (used in) financing activities (3,941) (824) 

Cash provided by operating and financing activities (2,959) 4,264 

Cash flows from investing activities 

Purchase of property, plant and equipment, and intangible assets 14, 15 (2,139) (2,140) 

Disposal of property, plant and equipment, and intangible assets 14, 15 283 209 

Acquisition of subsidiaries, associated companies and products 33 (492) (175) 

Divestments of subsidiaries, associated companies and products 33 217 – 

Proceeds from sale of LabCorp shares 12 1,246 1,420 

Interest and dividends received 33 505 833 

Sales (purchases) of marketable securities, net and other investing cash flows 3,918 (3,847) 

Total cash flows from (used in) investing activities 3,538 (3,700) 

Net effect of currency translation on cash (285) 10 

Increase (decrease) in cash and cash equivalents 294 574 

Cash and cash equivalents at beginning of year 3,136 2,562 

Cash and cash equivalents at end of year 3,430 3,136 

Consolidated Financial Statements 75

Notes to the Consolidated 

Financial Statements 


1. Summary of significant accounting policies 

Basis of preparation of the consolidated financial statements 

The consolidated financial statements of the Roche Group have been prepared in accordance 

with International Financial Reporting Standards, including standards and interpretations issued 

by the International Accounting Standards Board. They have been prepared using the historical 

cost convention except that as disclosed in the accounting policies below certain items, including 

derivatives and available-for-sale investments, are shown at fair value. They were approved 

for issue by the Board of Directors on 24 February 2003. 

The preparation of the consolidated financial statements requires management to make estimates 

and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, 

and the disclosure of contingent liabilities at the date of the financial statements. If in the future 

such estimates and assumptions, which are based on management’s best judgement at the 

date of the financial statements, deviate from the actual circumstances, the original estimates and 

assumptions will be modified as appropriate in the year in which the circumstances change. 

Where necessary, the comparatives have been reclassified or extended from the previously 

reported results to take into account presentational changes. 

Consolidation policy 

These financial statements are the consolidated financial statements of Roche Holding Ltd, 

a company registered in Switzerland, and its subsidiaries (hereafter ‘the Group’). 

The subsidiaries are those companies controlled, directly or indirectly, by Roche Holding Ltd, 

where control is defined as the power to govern the financial and operating policies of an enterprise 

so as to obtain benefits from its activities. This control is normally evidenced when Roche 

Holding Ltd owns, either directly or indirectly, more than 50% of the voting rights of a company’s 

share capital. Companies acquired during the year are consolidated from the date on which 

operating control is transferred to the Group, and subsidiaries to be divested are included up to 

the date of divestment. Companies acquired to be resold are not consolidated but are classified 

as assets held for sale and carried at fair value. Assets identified for divestment in the following 

year are reclassified as assets held for sale within other current assets. These assets normally 

consist mainly of inventories, property, plant and equipment, and other long-term assets. 

Investments in associated companies are accounted for by the equity method. These are companies 

over which the Group exercises significant influence, but which it does not control. This 

is normally evidenced when the Group owns 20% or more of the voting rights of the company. 

Interests in joint ventures are reported using the line-by-line proportionate consolidation method. 

76 Notes to the Consolidated Financial Statements

Foreign currency translation 

Most Group companies use their local currency as their measurement currency. Certain Group 

companies use other currencies (namely US dollars, Swiss francs or euros) as their measurement 

currencies where this most usefully represents the results and financial positions of these companies, 

given local economic conditions and circumstances. Local transactions in other currencies 

are initially reported using the exchange rate at the date of the transaction. Gains and losses 

from the settlement of such transactions, as well as gains and losses on monetary assets and 

liabilities denominated in other currencies are included in income, except when they are deferred 

into equity as qualifying cash flow hedges. 

Upon consolidation, assets and liabilities of Group companies using measurement currencies 

other than Swiss francs (foreign entities) are translated into Swiss francs using year-end rates of 

exchange. Sales, costs, expenses, net income and cash flows are translated at the average rates 

of exchange for the year. Translation differences due to the changes in exchange rates between 

the beginning and the end of the year and the difference between net income translated at the 

average and year-end exchange rates are taken directly to equity. On the divestment of a foreign 

entity, the identified cumulative currency translation differences relating to that foreign entity 

are recognised in income as part of the gain or loss on divestment. 

Revenues and cost of sales 

Sales represent amounts received and receivable for goods supplied and services rendered 

to customers after deducting trade discounts and volume rebates and excluding sales and value 

added taxes. Cash discounts are recorded as marketing and distribution expenses. Revenues 

from the sale of products are recognised upon transfer to the customer of significant risks and 

rewards, usually upon shipment. Royalty income is recognised on an accrual basis in accordance 

with the economic substance of the agreement. Other revenues are recorded as earned or as 

the services are performed. Cost of sales includes the corresponding direct production costs and 

related production overhead of goods manufactured and services rendered. 


Research costs are charged against income as incurred, with the exception of buildings and 

major items of equipment, which are capitalised and depreciated. Development costs are 

capitalised as intangible assets when it is probable that future economic benefits will flow to 

the Group. Such intangible assets are amortised on a straight-line basis over the period of the 

expected benefit, and are reviewed for impairment at each balance sheet date. Other development 

costs are charged against income as incurred since the criteria for their recognition as 

an asset are not met. 

Notes to the Consolidated Financial Statements 77

In-licensing, milestone and other up-front receipts and payments 

Certain Group companies, notably Genentech, receive from third-parties up-front, milestone and 

other similar non-refundable payments relating to the sale or licensing of products or technology. 

Revenue associated with performance milestones is recognised based on achievement of the 

milestones, as defined in the respective agreements. Revenue from non-refundable up-front 

payments and licence fees is initially reported as deferred income and is recognised in income 

as earned over the period of the development collaboration or the manufacturing obligation. 

Payments made by Group companies to third parties and associated companies for such items 

are charged against income as research and development costs unless it is probable that future 

economic benefits will flow to the Group, which is normally evidenced by regulatory approval. In 

this case they are capitalised as development costs and amortised as described above. In practice 

this means that most in-licensing and milestone payments for pharmaceutical products are 

expensed as incurred, as in most cases they have not yet gained regulatory approval. Receipts 

and payments between consolidated subsidiaries, such as between Genentech and other Roche 

Group subsidiaries, are eliminated on consolidation. 

Employee benefits 

Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses, and 

non-monetary benefits are accrued in the year in which the associated services are rendered by 

employees of the Group. Where the Group provides long-term employee benefits, the cost is 

accrued to match the rendering of the services by the employees concerned. 

The Group operates a number of defined benefit and defined contribution plans throughout the 

world. The cost for the year for defined benefit plans is determined using the projected unit credit 

method. This reflects service rendered by employees to the dates of valuation and incorporates 

actuarial assumptions primarily regarding discount rates used in determining the present value of 

benefits, projected rates of remuneration growth, and long-term expected rates of return for 

plan assets. Discount rates are based on the market yields of high-quality corporate bonds in the 

country concerned. Differences between assumptions and actual experiences, and effects of 

changes in actuarial assumptions are allocated over the estimated average remaining working 

lives of employees, where these differences exceed a defined corridor. Past service costs are 

allocated over the average period until the benefits become vested. Pension assets and liabilities 

in different defined benefit schemes are not offset unless the Group has a legally enforceable 

right to use the surplus in one plan to settle obligations in the other plan. Pension assets are only 

recognised to the extent that the Group is able to derive future economic benefits in the way of 

refunds from the plan or reductions of future contributions. 

The Group’s contributions to the defined contribution plans are charged to the income statement 

in the year to which they relate. 

Taxation 

Income taxes include all taxes based upon the taxable profits of the Group, including withholding 

taxes payable on the distribution of retained earnings within the Group. Other taxes not based 

on income, such as property and capital taxes, are included within operating expenses or financial 

expenses according to their nature. 

Provision for income taxes, mainly withholding taxes, which could arise on the remittance of 

retained earnings, principally relating to subsidiaries, is only made where there is a current intention 

to remit such earnings. 


Deferred income tax is provided, using the liability method, on temporary differences between the 

tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred 

income tax assets relating to the carry-forward of unused tax losses are recognised to the extent 

that it is probable that future taxable profit will be available against which the unused tax losses 

can be utilised. 

Current and deferred income tax assets and liabilities are offset when the income taxes are 

levied by the same taxation authority and when there is a legally enforceable right to offset them. 

Deferred income taxes are determined based on the currently enacted tax rates applicable in 

each tax jurisdiction where the Group operates. 

Property, plant and equipment 

Property, plant and equipment are initially recorded at cost of purchase or construction and are 

depreciated on a straight-line basis, except for land, which is not depreciated. Estimated useful 

lives of major classes of depreciable assets are as follows: 

Buildings and land improvements 

Machinery and equipment 

Office equipment 

Motor vehicles 

40 years 

5–15 years 

3 years 

5 years 

Investment grants or similar assistance for projects are initially recorded as deferred income 

(in other non-current liabilities) and are subsequently recognised as income over the useful lives 

of the related assets. Repairs and maintenance costs are recognised as expenses as incurred. 

Borrowing costs are not capitalised. Assets acquired under finance leases are depreciated over 

their estimated useful lives. Payments made under operating leases are charged against income 

on a straight-line basis over the period of the lease. 

Intangible assets and Business combinations 

Goodwill is recorded as an intangible asset and is the surplus of the cost of acquisition over the 

fair value of identifiable net assets acquired. Any goodwill and fair value adjustments are treated 

as assets and liabilities of the acquired company and are recorded in the local currency of that 

company. 

Patents, licences, trademarks and other intangible assets are initially recorded at fair value. 

Where these assets have been acquired through a business combination, this will be the fair 

value allocated in the acquisition accounting. Where these have been acquired other than 

through a business combination, the initial fair value will be cost. 

All intangible assets are amortised over their useful lives on a straight-line basis. Estimated useful 

lives of major classes of intangible assets are as follows: 

Goodwill 

Patents, licences, trademarks 

and other intangible assets 

5–20 years 

Lower of legal duration and 

economic useful life, up to a maximum of 20 years 


Impairment of long-term assets 

When the recoverable amount of an asset, being the higher of its net selling price and its value 

in use, is less than its carrying amount, then the carrying amount is reduced to its recoverable 

value. This reduction is reported in the income statement as an impairment loss. Value in use is 

calculated using estimated cash flows, generally over a five-year period, with extrapolating 

projections for subsequent years. These are discounted using an appropriate long-term pre-tax 

interest rate. When an impairment arises the useful life of the asset in question is reviewed and, 

if necessary, the future depreciation/amortisation charge is accelerated. 

Inventories 

Inventories are stated at the lower of cost or net realisable value. Cost is determined by the firstin 

first-out method. 

Cash and cash equivalents 

Cash and cash equivalents comprises cash on hand and time, call and current balances with 

banks and similar institutions, which are readily convertible to known amounts of cash and which 

are subject to insignificant risk of changes in value. This definition is also used for the cash flow 

statement. 

Own equity instruments 

The Group’s holdings in its own equity instruments are recorded as a deduction from equity. The 

original cost of acquisition, consideration received for subsequent resale of these equity instruments 

and other movements are reported as changes in equity. These instruments have been 

acquired primarily to meet the obligations that may arise in respect of certain of the Group’s debt 

instruments. 

As at 31 December 2002 the Group revised its accounting policy for the classification of obligations 

to repurchase own equity instruments. These are now shown as a liability and are measured 

at their present value, which is the final obligation discounted using an appropriate long-term 

pre-tax interest rate. This discount will in future be amortised over the duration of the obligation, 

and will be recognised as part of interest expense in the income statement. 

Debt instruments 

Debt instruments are initially reported at cost, which is the proceeds received, net of transaction 

costs. Subsequently they are reported at amortised cost using the effective interest method. To 

the extent that debt instruments are hedged under qualifying fair value hedges, the hedged item 

is recorded at fair value. Any discount between the net proceeds received and the principal value 

due on redemption is amortised over the duration of the debt instrument, and is recognised as 

part of interest expense in the income statement. 

On issue of convertible debt instruments, the cost of the liability portion is initially calculated 

using the market interest rate for an equivalent non-convertible instrument. The remainder of 

the net proceeds is allocated to the equity conversion option, which is reported in equity, and to 

deferred income tax liabilities. Where the equity conversion option is on shares of a consolidated 

subsidiary, the portion of net proceeds attributable to that option is recorded within minority 

interest. The liability element is subsequently reported at amortised cost. Amortisation of the debt 

discount and release of the deferred tax liabilities are recognised in the income statement over 

the duration of the debt instrument. The value of the equity conversion option is not changed in 

future periods. 

The limited conversion preferred stock is in substance a financial liability rather than an equity 

instrument, and therefore it is classified as long-term debt in the balance sheet and the related 

dividend payments are treated as interest expense. 


Provisions 

Provisions are recognised where a legal or constructive obligation has been incurred which will 

probably lead to an outflow of resources that can be reasonably estimated. Provisions are 

recorded for the estimated ultimate liability that is expected to arise, taking into account foreign 

currency effects and the time value of money. A contingent liability is disclosed where the 

existence of the obligation will only be confirmed by future events, or where the amount of the 

obligation cannot be measured with reasonable reliability. 

Fair values 

Fair value is the amount for which a financial asset, liability or instrument could be exchanged 

between knowledgeable and willing parties in an arm’s length transaction. It is determined by 

reference to quoted market prices adjusted for estimated transaction costs that would be 

incurred in an actual transaction, or by the use of established estimation techniques such as 

option pricing models and estimated discounted values of cash flows. The fair values at the 

balance sheet date are approximately in line with their reported carrying values unless specifically 

mentioned in the Notes to the Consolidated Financial Statements. 

Financial assets 

Financial assets, principally investments, including marketable securities, are classified as either 

‘Held-for-trading’, ‘Available-for-sale’, ‘Held-to-maturity’ or ‘Originated by the Group’. Held-fortrading 

financial assets are acquired principally to generate profit from short-term fluctuations 

in price. Held-to-maturity financial assets are securities with a fixed maturity that the Group has 

the intent and ability to hold until maturity. Financial assets originated by the Group are loans 

and other long-term financial assets created by the Group or acquired from the issuer in a primary 

market. All other financial assets are considered as available-for-sale. 

All financial assets are initially recorded at cost, including transaction costs. All purchases and 

sales are recognised on the settlement date. Held-for-trading financial assets are subsequently 

carried at fair value, with all changes in fair value recorded as financial income (expense) in the 

period in which they arise. Held-to-maturity financial assets are subsequently carried at amortised 

cost using the effective interest rate method. Available-for-sale financial assets are subsequently 

carried at fair value, with all unrealised changes in fair value recorded in equity. When the 

available-for-sale financial assets are sold, impaired or otherwise disposed of, the cumulative 

gains and losses previously recognised in equity are included in financial income (expense) for 

the current period. Financial assets originated by the Group are subsequently carried at amortised 

cost. 

Financial assets are assessed for possible impairment at each balance sheet date. An impairment 

charge is recorded where there is objective evidence of impairment, such as where the issuer is 

in bankruptcy, default or other significant financial difficulty. 

As at 31 December 2002 the Group revised its accounting policy for impairment of financial 

assets. In addition to the above impairment triggers, any available-for-sale financial assets that 

have a market value of more than 25% below their original cost for a sustained six-month period 

will be considered as impaired. Any falls in the market price of less than 25% of original cost 

or for less than a sustained six-month period are not by themselves considered as objective 

evidence of impairment, and such movements in fair value are recorded in equity until there 

is objective evidence of impairment or until the asset is sold or otherwise disposed of. 


Derivatives 

All derivative financial instruments are initially recorded at cost, including transaction costs. 

Derivatives are subsequently carried at fair value. Apart from those derivatives designated as 

qualifying cash flow hedging instruments (see below), all changes in fair value are recorded as 

financial income (expense) in the period in which they arise. 

Hedging 

For the purposes of hedge accounting, hedging relationships may be of three types. Fair value 

hedges are hedges of particular risks that may change the fair value of a recognised asset or 

liability. Cash flow hedges are hedges of particular risks that may change the amount or timing 

of future cash flows. Hedges of net investment in a foreign entity are hedges of particular risks 

that may change the carrying value of the net assets of a foreign entity. 

To qualify for hedge accounting the hedging relationship must meet several strict conditions 

on documentation, probability of occurrence, hedge effectiveness and reliability of measurement. 

If these conditions are not met, then the relationship does not qualify for hedge accounting. 

In this case the hedging instrument and the hedged item are reported independently as if there 

were no hedging relationship. In particular any derivatives are reported at fair value, with 

changes in fair value included in financial income (expense). 

For qualifying fair value hedges, the hedging instrument is recorded at fair value and the hedged 

item is recorded at its previous carrying value, adjusted for any changes in fair value that are 

attributable to the hedged risk. Any changes in the fair values are reported in financial income 

(expense). 

For qualifying cash flow hedges, the hedging instrument is recorded at fair value. The portion of 

any change in fair value that is an effective hedge is included in equity, and any remaining ineffective 

portion is reported in financial income (expense). If the hedging relationship is the hedge 

of a firm commitment or highly probable forecasted transaction, the cumulative changes of fair 

value of the hedging instrument that have been recorded in equity are included in the initial carrying 

value of the asset or liability at the time it is recognised. For all other qualifying cash flow 

hedges, the cumulative changes of fair value of the hedging instrument that have been recorded 

in equity are included in financial income (expense) at the time when the forecasted transaction 

affects net income. 

For qualifying hedges of net investment in a foreign entity, the hedging instrument is recorded at 

fair value. The portion of any change in fair value that is an effective hedge is included in equity. 

Any remaining ineffective portion is recorded in financial income (expense) where the hedging 

instrument is a derivative and in equity in other cases. If the entity is disposed of, then the cumulative 

changes of fair value of the hedging instrument that have been recorded in equity are 

included in financial income (expense) at the time of the disposal. 

International Financial Reporting Standards 

There were no revised or new standards or interpretations that became effective from 1 January 

2002 that had a significant effect on the Group’s financial statements. 


Changes effective 1 January 2001 

Several revised or new standards and interpretations became effective from 1 January 2001. 

The principal item affecting the Group was the Standard on ‘Financial instruments: recognition 

and measurement’. Implementing these changes resulted in an increase in equity of 382 million 

Swiss francs effective 1 January 2001, which has been included in the comparative opening 

balances in these consolidated financial statements. These changes are fully described in the 

2001 consolidated financial statements. 

Future developments in International Financial Reporting Standards 

International Financial Reporting Standards will continue to develop over the coming years. 

The International Accounting Standards Board has published several exposure drafts, however 

at the time of publication of these financial statements no new standards had been adopted 

that would need to be applied in 2003. 

2. Financial risk management 

Financial risk management within the Group is governed by policies and guidelines approved by 

senior management. These policies and guidelines cover foreign exchange risk, interest rate risk, 

market risk, credit risk and liquidity risk. Group policies and guidelines also cover areas such as 

cash management, investment of excess funds and the raising of short- and long-term debt. 

Group companies report details of the financial instruments outstanding and financial liquidity to 

Group Treasury on at least a monthly basis. During 2001 a new post of Financial Risk Manager 

was created to oversee compliance with the Group’s financial risk management policies and 

guidelines and policies. 

The Group, in accordance with its risk management guidelines, continues to monitor these risks, 

and when deemed appropriate, certain of the above risks are significantly altered through the use 

of financial instruments, such as derivatives. Group management believes that, in order to create 

the optimum value for the Group, it is not desirable to eliminate or mitigate all possible market 

fluctuations. 

Foreign exchange risk 

The Group operates across the world and is exposed to movements in foreign currencies affecting 

its net income and financial position, as expressed in Swiss francs. The Group continues to 

monitor its currency exposures, and when appropriate, enters into transactions with the aim of 

preserving the value of assets, commitments and anticipated transactions. The Group uses 

forward contracts and foreign currency options to optimise certain anticipated foreign exchange 

revenues, cash flows and financing transactions. 

Transaction exposure arises because the amount of local currency paid or received for transactions 

denominated in foreign currencies may vary due to changes in exchange rates. For many 

Group companies income will be primarily in the local currency. A significant amount of expenditure, 

especially for purchase of goods for resale and interest on and repayment of loans will be in 

foreign currencies. Similarly, transaction exposure arises on net balances of monetary assets held 

in foreign currencies. Group companies manage this exposure at a local level, if necessary by 

means of financial instruments such as options and forward contracts. In addition, Group Treasury 

monitors total worldwide exposure with the help of comprehensive data received on a monthly 

basis. 


Translation exposure arises from the consolidation of the foreign currency denominated financial 

statements of the Group’s foreign subsidiaries. The effect on the Group’s consolidated equity 

is shown as a currency translation movement. The Group hedges significant net investments in 

foreign currencies by taking foreign currency loans or issuing foreign currency denominated debt 

instruments. Major translation exposures are monitored on a regular basis. 

A significant part of the Group’s cash outflows for research, development, production and administration 

is denominated in Swiss francs, while a much smaller proportion of the Group’s cash 

inflows are Swiss franc denominated. As a result, an increase in the value of the Swiss franc relative 

to other currencies has an adverse impact on consolidated net income. Similarly, a relative 

fall in the value of the Swiss franc has a favourable effect on results published in Swiss francs. 

Interest rate risk 

Interest rate risk arises from movements in interest rates which could have adverse effects on 

the Group’s net income or financial position. Changes in interest rates cause variations in interest 

income and expenses on interest-bearing assets and liabilities. In addition, they can affect the 

market value of certain financial assets, liabilities and instruments as described in the following 

section on market risk. The interest rates on the Group’s major debt instruments are fixed, 

as described in Note 29, which reduces the Group’s exposure to changes in interest rates. Group 

companies manage their short-term interest rate risk at a local level, if necessary using financial 

instruments such as interest rate forward contracts, swaps and options. 

Market risk 

Changes in the market value of certain financial assets, liabilities and instruments can affect the 

net income or financial position of the Group. Long-term investments are held for strategic purposes 

and marketable securities are held for fund management purposes. The risk of loss in value 

is reduced by reviews prior to investing, concentration of investments and continuous monitoring 

of the performance of investments and changes in their risk configuration. Investments in equity 

and fixed income instruments are entered into on the basis of approved guidelines with regard to 

liquidity and credit rating. 

Credit risk 

Credit risk arises from the possibility that the counter-party to a transaction may be unable or 

unwilling to meet their obligations causing a financial loss to the Group. Trade receivables are 

subject to a policy of active risk management focussing on the assessment of country risk, credit 

availability, ongoing credit evaluation and account monitoring procedures. There are no significant 

concentrations within trade receivables of counter-party credit risk, due to the Group’s large 

number of customers and their wide geographical spread. Country risk limits and exposures are 

continuously monitored. The exposure of other financial assets to credit risk is controlled by setting 

a policy for limiting credit exposure to high-quality counter-parties, on-going reviews of 

credit ratings, and limiting individual aggregate credit exposure accordingly. 


Liquidity risk 

Group companies need to have sufficient availability of cash to meet their obligations. Individual 

companies are responsible for their own cash management, including the short-term investment 

of cash surpluses and the raising of loans to cover cash deficits, subject to guidance by the 

Group and, in certain cases, to approval at Group level. The Group maintains sufficient reserves 

of cash and readily realisable marketable securities to meet its liquidity requirements at all times. 

In addition, the strong international creditworthiness of the Group allows it to make efficient use 

of international capital markets for financing purposes. 

3. Group organisation 

An overview of the subsidiaries and associated companies is included on pages 136–137. 

Changes in Group organisation – 2002 

Chugai: The Chugai alliance is discussed in Note 6. 

Vitamins and Fine Chemicals Division: The demerger of the Vitamins and Fine Chemicals 

Division is discussed in Note 8. 

Antisoma: The investment in Antisoma, which is treated as an associated company, is discussed 

in Note 16. 

Changes in Group organisation – 2001 

Amira: On 6 November 2001, the Group acquired 100% of the share capital of Amira Medical, 

Inc. (Amira). Amira is a company active in diabetes monitoring based in the United States. 

Net consideration paid was 159 million Swiss francs. This was allocated as follows: 


Net assets acquired 

Goodwill 15 3 

Intangible assets 15 202 

Deferred income taxes 13 (20) 

Provisions 31 (18) 

Other net assets (liabilities) (8) 

Total 159 


4. Segment information 


Divisional information 

Roche Genentech Japan 

prescription prescription prescription OTC 

2002 2001 2002 2001 2002 2001 2002 2001 

Segment revenues 

Segment revenue/divisional sales 13,017 13,313 3,434 2,995 1,646 1,032 1,556 1,664 

Less inter-divisional sales (351) (117) (183) (129) (20) (32) (4) (3) 

Divisional sales to third parties 12,666 13,196 3,251 2,866 1,626 1,000 1,552 1,661 

Segment results/operating profit 3,068 2,382 (396) 71 733 172 244 272 

Segment assets and liabilities 

Divisional assets 12,687 14,213 7,056 8,786 4,057 918 897 1,084 

Other segment assets 1,401 1,158 – – – – 23 8 

Segment assets 14,088 15,371 7,056 8,786 4,057 918 920 1,092 

Non-segment assets 

Total assets 

Divisional liabilities (392) (349) (58) (37) (122) (37) (69) (103) 

Other segment liabilities (1,722) (2,046) (753) (2) (381) (50) (14) (14) 

Segment liabilities (2,114) (2,395) (811) (39) (503) (87) (83) (117) 

Non-segment liabilities 

Total liabilities 

Other segment information 

Capital expenditure 514 702 518 382 2,290 29 6 8 

Depreciation 578 574 219 222 29 19 5 5 

Amortisation 401 374 603 663 25 1 39 56 

Impairment of long-term assets 52 191 – 11 – – – – 

Research and development costs 2,221 2,096 964 883 233 112 33 28 

Major legal cases and vitamin case – – 778 – – – – – 

Share of result of associated companies (31) (12) – – – – – – 

Investments in associated companies 61 89 – – – – – – 

Number of employees 32,076 31,274 5,252 4,950 5,797 1,545 1,776 1,723 

The Group has three divisions: Pharmaceuticals, Diagnostics and Vitamins and Fine Chemicals. The disclosure on the Pharmaceuticals Division 

includes four reportable segments: Roche prescription, Genentech prescription, Japan prescription and OTC. 

• The ‘Japan prescription’ business segment includes the results of the newly merged Chugai company (which includes the former Nippon Roche 

business) from 1 October 2002, and also includes the results of Nippon Roche for the periods until 30 September 2002. Nippon Roche’s results for 

2001 have been reclassified from the segment ‘Roche prescription’ to the segment ‘Japan prescription’ (see Note 6). The results of Chugai’s OTC 

business are included in the ‘Japan prescription’ business segment. 

• The Vitamins and Fine Chemicals Division is in the process of being demerged and is considered a non-core business (see Note 8). 

• The segment ‘Others’ consists of the costs of Corporate Headquarters and other costs that cannot be reasonably attributed to the other reported 

segments. 


Total Core Vitamines and 

Pharmaceuticals Diagnostics Others businesses Fine Chemicals Group 

2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 

19,653 19,004 7,244 6,902 – – 26,897 25,906 3,481 3,624 30,378 29,530 

(558) (281) (5) (2) – – (563) (283) (90) (84) (653) (367) 

19,095 18,723 7,239 6,900 – – 26,334 25,623 3,391 3,540 29,725 29,163 

3,649 2,897 1,131 993 (248) (229) 4,532 3,661 (3,197) (414) 1,335 3,247 

24,697 25,001 11,182 12,048 104 87 35,983 37,136 2,762 4,579 38,745 41,715 

1,424 1,166 104 61 – – 1,528 1,227 233 104 1,761 1,331 

26,121 26,167 11,286 12,109 104 87 37,511 38,363 2,995 4,683 40,506 43,046 

23,489 32,240 

63,995 75,286 

(641) (526) (289) (301) (4) (5) (934) (832) (156) (167) (1,090) (999) 

(2,870) (2,112) (1,604) (1,579) (132) – (4,606) (3,691) (1,180) (2,712) (5,786) (6,403) 

(3,511) (2,638) (1,893) (1,880) (136) (5) (5,540) (4,523) (1,336) (2,879) (6,876) (7,402) 

(31,346) (34,017) 

(38,222) (41,419) 

3,328 1,121 678 916 33 38 4,039 2,075 301 287 4,340 2,362 

831 820 415 402 3 3 1,249 1,225 212 208 1,461 1,433 

1,068 1,094 434 439 – – 1,502 1,533 18 20 1,520 1,553 

52 202 4 – – – 56 202 1,659 3 1,715 205 

3,451 3,119 676 627 5 25 4,132 3,771 125 122 4,257 3,893 

778 – – – – – 778 – 1,770 760 2,548 760 

(31) (12) – 44 (6) (7) (37) 25 3 (18) (34) 7 

61 89 – 1 61 80 122 170 – 16 122 186 

44,901 39,492 17,068 16,345 429 386 62,398 56,223 7,261 7,494 69,659 63,717 

• Transfer prices for inter-divisional sales are set on an arm’s length basis. 

• Divisional assets consist primarily of property, plant and equipment, goodwill and intangible assets, receivables and inventories. Divisional liabilities 

consist of trade accounts payable. Other segment assets and liabilities consist of assets and liabilities which can be reasonably attributed to 

the reported business segments. These include pension assets and liabilities and provisions. 

• Non-segment assets and liabilities mainly include current and deferred income tax balances, and financial assets and liabilities, principally cash, 

marketable securities, investments in associated companies, other investments and debt. 

• Capital expenditure comprises additions to intangible assets (including goodwill) and additions to property, plant and equipment, including those 

arising from acquisitions. 


Geographical information 

Sales to third parties 

2002 (by destination) Segment assets Capital expenditure 

Switzerland 532 5,272 339 

European Union 9,067 11,872 607 

Rest of Europe 1,439 494 79 

Europe 11,038 17,638 1,025 

North America 11,297 16,194 797 

Latin America 2,393 1,493 115 

Japan 2,243 4,229 2,310 

Rest of Asia 1,805 679 65 

Asia 4,048 4,908 2,375 

Africa, Australia and Oceania 949 273 28 

Segment total 29,725 40,506 4,340 

Non-segment assets – 23,489 – 

Consolidated total 29,725 63,995 4,340 

2001 

Switzerland 513 4,749 319 

European Union 9,000 14,557 632 

Rest of Europe 1,282 489 51 

Europe 10,795 19,795 1,002 

North America 11,264 18,381 1,067 

Latin America 2,827 2,199 138 

Japan 1,589 1,398 60 

Rest of Asia 1,829 927 67 

Asia 3,418 2,325 127 

Africa, Australia and Oceania 859 346 28 

Segment total 29,163 43,046 2,362 

Non-segment assets – 32,240 – 

Consolidated total 29,163 75,286 2,362 

• Segment assets include property, plant and equipment, goodwill and intangible assets, receivables, inventories, trade 

accounts payable and other assets which can be reasonably attributed to the reported geographical segments. 

• Non-segment assets mainly include current and deferred income tax balances, and financial assets, principally cash, 

marketable securities, investments in associated companies and other investments. 

• Capital expenditure comprises additions to intangible assets (including goodwill) and additions to property, plant and 

equipment, including those arising from acquisitions. 

5. Genentech 

Effective 7 September 1990 the Group acquired a majority interest of approximately 60% of 

Genentech, Inc., a biotechnology company in the United States. On 13 June 1999 the Group exercised 

its option to acquire the remaining shares of Genentech on 30 June 1999, at which point 

Genentech became a 100% owned subsidiary of the Group. On 23 July 1999, 26 October 1999 and 

29 March 2000 the Group completed public offerings of Genentech’s Common Stock, as a result 


of which the Group’s majority interest was 60%. Genentech issues additional shares of common 

stock in connection with its equity compensation plans, and also may issue additional shares for 

other purposes. The affiliation agreement between the Group and Genentech provides, amongst 

other things, that Genentech establish a stock repurchase programme to maintain the Group’s 

percentage ownership interest in Genentech. At 31 December 2002 the Group’s interest in 

Genentech was 59.8% (2001: 58.0%). 

The common stock of Genentech is publicly traded and is listed on the New York Stock Exchange, 

under the symbol DNA. Genentech is incorporated in Delaware, and its principal executive offices 

are in South San Francisco, California. Its market capitalisation as at 31 December 2002 was 

17.0 billion US dollars (23.6 billion Swiss francs). Genentech prepares financial statements in 

conformity with accounting principles generally accepted in the United States (US GAAP). These 

are filed on a quarterly basis with the US Securities and Exchange Commission. Due to certain 

consolidation entries and differences in the requirements of International Financial Reporting 

Standards (IFRS) and US GAAP, there are differences between Genentech’s stand-alone results 

on a US GAAP basis and the results of Genentech as consolidated by the Roche Group in 

accordance with IFRS. These are reconciled in the table below: 


USD CHF USD CHF 

millions millions millions millions 

Net income (US GAAP basis) 64 150 

Add back non-operating items (US GAAP basis) 

– change in (US GAAP) accounting policies – 6 

– income taxes (34) 127 

– net financial income (102) (126) 

Add (deduct) IFRS vs US GAAP differences 

and consolidation entries 

– amortisation of goodwill (capitalised IPR&D) (57) (57) 

– amortisation of goodwill (other goodwill) (156) – 

– other differences and consolidation entries (14) (58) 

Add back US GAAP litigation charges 544 – 

245 382 42 71 

Deduct litigation charges (IFRS basis) (778) – 

Segment result/operating profit (IFRS basis) (396) 71 

Add (deduct) non-operating items (IFRS basis) 

– financial income (expense), net 45 177 

– income taxes 79 (162) 

Net income (IFRS basis) (272) 86 

Minority interest percentage (average during year) 41% 42% 

Income applicable to minority interest (IFRS basis) 111 (36) 

Operating profit (IFRS basis) excluding litigation charges 382 71 

Net income (IFRS basis) excluding litigation charges 

and impairment of financial assets 257 86 

Income applicable to minority interest (IFRS basis) 

excluding litigation charges and impairment 

of financial assets (105) (36) 


Differences between IFRS and US GAAP 

Following the acquisition by the Group of 100% interest in Genentech on 30 June 1999, the analysis 

carried out for the acquisition accounting identified a total of 1,253 million US dollars that was 

attributable to in-process research and development (IPR&D). In Genentech’s US GAAP financial 

statements these items have been recorded in 1999 as either an adjustment to equity or as a 

one-time expense. Under IFRS these items cannot be classified as separate assets at the date of 

acquisition and therefore form part of goodwill. Therefore in the years subsequent to 1999 there 

is a goodwill amortisation expense in respect of this IPR&D in the Group’s results under IFRS. 

Genentech adopted US accounting standards FAS 141 and FAS 142 effective 1 January 2002, 

under which goodwill is no longer amortised, but is subject to an impairment test at least annually. 

Under IFRS goodwill continues to be amortised, while also being subject to testing for impairment. 

Genentech stock repurchases and stock options 

On 31 October 2001 Genentech’s Board of Directors authorised a stock repurchase programme 

to repurchase up to 625 million US dollars of Genentech’s common stock. On 15 August 2002 

Genentech’s Board authorised an extension to repurchase up to an additional 375 million of common 

stock. During 2002 Genentech has repurchased 693 million US dollars (1,079 million Swiss 

francs) of their own common stock. In 2001 common stock worth 40 million US dollars (67 million 

Swiss francs) was repurchased, which includes 34 million US dollars (57 million Swiss francs) 

that was repurchased prior to 31 October 2001. 

Genentech has a stock option plan adopted in 1999 and amended in 2000. The plan allows for 

the granting of various stock options, stock awards and stock appreciation rights to employees, 

directors and consultants of Genentech. 

Movements in the number of options held by Genentech employees are as follows: 


Outstanding at 1 January 46,639,970 40,944,862 

Issued 12,655,875 10,740,689 

Exercised (1,672,772) (2,899,135) 

Cancellations (2,203,658) (2,146,446) 

Outstanding at end of period 55,419,415 46,639,970 

– of which exercisable 30,322,658 21,454,862 

Options issued during the year had an average exercise price of USD 28.98 (2001: 42.58). 

Options exercised during the year were exercised at an average price of USD 23.43 (2001: 24.69). 

The cash inflow from Genentech’ stock option and employee stock plans was 74 million US dollars, 

or 116 million Swiss francs (2001: 107 million US dollars, or 180 million Swiss francs). Using 

the Black-Scholes option valuation model, the fair value of options issued in 2002 was 159 million 

US dollars, or 247 million Swiss francs (2001: 258 million US dollars, or 435 million Swiss francs). 

The net accounting effect of stock repurchases and stock options is recorded to minority interests 


Other matters 

As discussed in Note 9, the Group has recorded a provision of 518 million US dollars (778 million 

Swiss francs) in respect of certain litigation matters, including litigation involving the City of Hope. 

On 19 January 2000 the Group issued ‘LYONs IV’ zero coupon US dollar notes that are exchangeable 

into Genentech shares. If all of these notes were converted the Group’s percentage ownership 

in Genentech would decrease by approximately 2.5%. See also Note 29. 


6. Chugai 

On 10 December 2001, Roche and Chugai announced that they would enter into an alliance to 

create a leading research-driven Japanese pharmaceutical company, which would be formed by 

the merger of Chugai (excluding Gen-Probe) and Roche’s Japanese pharmaceuticals subsidiary, 

Nippon Roche. Under the terms of the alliance, both Chugai and Nippon Roche were independently 

valued. Roche agreed to make additional cash contributions in order to bring Roche’s 

participation to 50.1% of the agreed combined value. The alliance was approved by the shareholders 

of Chugai at their Annual General Meeting on 27 June 2002. 

The newly merged company, known as Chugai, is a fully consolidated subsidiary of the Group. 

Roche is the majority shareholder with 50.1% ownership and there is a 49.9% minority interest. 

Chugai is domiciled in Tokyo and listed on the Tokyo Stock Exchange. The market capitalisation 

at 31 December 2002 was 622.2 billion Japanese yen (7.3 billion Swiss francs). 

Transaction process 

In late-September 2002, Roche acquired through a public tender offer approximately 10% (30 million 

shares) of Chugai’s outstanding shares at the price of JPY 2,800 per share. The total cash 

outflow from the Group as a result of this tender offer was 84.0 billion Japanese yen (1,027 million 

Swiss francs). Immediately after the tender offer, Roche subscribed to an issue by Chugai of 

21.1 million new shares at a price of JPY 1,780 per share, which resulted in a cash contribution 

to Chugai of 37.6 billion Japanese yen (459 million Swiss francs). On 16 September 2002, before 

closing the tender offer by Roche, Chugai completed the spin-off of its 100% shareholdings 

in Gen-Probe, its California-based diagnostics subsidiary, to its registered shareholders as of 

31 July 2002. 

On 1 October 2002, Chugai merged with Nippon Roche. Prior to the merger Nippon Roche issued 

convertible bonds to the Roche Group (Roche CB), the obligation to which succeeded to Chugai. 

On 1 October Roche acquired additional shares of Chugai by the conversion of such bonds in proportion 

to the shares issued by Chugai from the conversion of the convertible bonds previously 

issued by Chugai to third parties (Chugai CB), such that Roche’s ownership reached 50.1%. This 

resulted in a cash contribution of 37.7 billion Japanese yen (460 million Swiss francs). On an 

on-going basis Roche will convert the remaining Roche CB into Chugai shares corresponding to 

the conversion of the remaining Chugai CB such that Roche maintains a 50.1% ownership in 

Chugai. 

Purchase consideration 

The closing of the transaction was on 1 October 2002. The transaction is accounted for using the 

purchase method of accounting. The consideration paid by Roche for 50.1% of Chugai consists of 

firstly the public tender offer, secondly the 49.9% of the subscription to new Chugai shares and conversion 

of the Roche CB that relates to minority shareholders and thirdly the 49.9% of the net assets 

of Nippon Roche that are now attributable to minority shareholders. As Nippon Roche was not a 

public company, the 49.9% of the net assets of Nippon Roche were valued with reference to the fair 

value of the Chugai shares acquired in exchange. This allocation is shown in the table below. 

JPY billions CHF millions 

Public tender offer 84.0 1,027 

Subscription (49.9% of 37.6 billion JPY) 18.7 229 

Convertible bonds (49.9% of 37.7 billion JPY) 18.8 230 

Implied value of 49.9% of Nippon Roche 101.1 1,236 

Transaction costs 1.7 21 

Purchase consideration for 50.1% of Chugai 224.3 2,743 


Acquisition accounting 

The market value of the Chugai shares acquired was 182.9 billion Japanese yen (2,237 million 

Swiss francs), which corresponds to 50.1% of the market capitalisation of Chugai prior to the 

transaction. The purchase consideration of 224.3 billion Japanese yen (2,743 million Swiss francs) 

therefore represents a surplus of 41.4 billion Japanese yen (506 million Swiss francs) over the 

market value of the Chugai shares acquired. This surplus was written-off, so that the recorded net 

assets of Chugai do not exceed the market capitalisation. As a result of the transaction a gain of 

89.3 billion Japanese yen (1,092 million Swiss francs) arises on the part disposal of Nippon 

Roche. Accordingly net income of 47.9 billion Yen (586 million Swiss francs) was recognised in 

the income statement for these two amounts. 

The acquired net assets of Chugai are shown in the table below. The amount allocated to goodwill 

includes 10.2 billion Japanese yen (125 million Swiss francs) that is attributable to in-process 

research and development. Under International Financial Reporting Standards these items cannot 

be classified as separate assets at the date of acquisition and therefore form part of goodwill. 

Net assets acquired JPY billions CHF millions a) 

Property, plant and equipment 14 88.9 1,087 

Goodwill 15 13.0 159 

Intangible assets 15 77.4 947 

Inventories 19 35.7 437 

Deferred income taxes 13 (17.4) (213) 

Liabilities for post-employment benefits 10 (28.7) (351) 

Provisions 31 (1.0) (12) 

Other net assets (liabilities) 126.3 1,545 

Minority interests 28 (111.3) (1,362) 

Total 182.9 2,237 

a) Translated at 30 September 2002 exchange rate of 100 JPY = 1.223 CHF. 

Ongoing impacts of purchase accounting 

From 1 October 2002, Chugai’s results are included in the Group’s consolidated financial statements. 

‘Japan prescription’ is shown as a separate business segment in the segment information. 

The ‘Japan prescription’ business segment includes the results of the newly merged Chugai 

company (which includes the former Nippon Roche business) from 1 October 2002, and also 

includes the results of Nippon Roche for the periods until 30 September 2002. For comparability, 

Nippon Roche’s results for 2001 have been reclassified from the segment ‘Roche prescription’ 

to the segment ‘Japan prescription’. The results of Chugai’s OTC business are included in the ‘Japan 

prescription’ business segment. Segment information is given in Note 4. 

The fair value adjustments arising from the acquisition accounting have the following impacts on 

the Group’s financial statements: 

2002 (4th quarter) 2003 2004 onwards 

JPY CHF JPY CHF JPY CHF 

billions millions billions millions a) billions millions a) 

Write-off of fair value adjustments to inventories (7.0) (87) (4.2) (49) – – 

Depreciation of property, plant and equipment (0.2) (3) (0.8) (10) (0.8) (10) 

Amortisation of acquired intangible assets (1.5) (18) (6.0) (70) (6.0) (70) 

Amortisation of goodwill (0.2) (3) (0.9) (10) (0.9) (10) 

Impact on operating profit (8.9) (111) (11.9) (139) (7.7) (90) 

Deferred income taxes 3.6 46 4.6 53 2.8 33 

Impact on net income (5.3) (65) (7.3) (86) (4.9) (57) 

a) Translated at 31 December 2002 exchange rate of 100 JPY = 1.169 CHF. 


The fair value adjustments to inventories will be fully written-off, in line with the inventory 

turnover, by the end of the first quarter of 2003. Goodwill and acquired intangible assets are 

amortised on a straight-line basis over 15 years and between 10 and 18 years respectively. 

7. Pharmaceuticals Division restructuring 


On 30 May 2001 the Group announced the ‘Re-shaping for Future Growth’ initiative, a restructuring 

of its Pharmaceuticals Division, with the objective of improving the long-term profitability of 

the division by increasing sales and reducing the division’s cost structure. Activity during the year 

is shown in the table below. No significant additional costs are expected in 2003. 


Restructuring expenses 

Impairment of property, plant and equipment 14 52 187 

Employee costs 83 543 

Other closure costs 19 62 

Curtailment gain on post-employment plans 10 – (15) 

Total restructuring expenses 154 777 

Restructuring provision 

At 1 January 366 – 

Additional provisions created 104 605 

Unused amounts reversed (2) – 

Amounts utilised (156) (239) 

Currency translation effects and other (10) – 

At 31 December 302 366 

8. Vitamins and Fine Chemicals Division 


In early 2002 the Group announced plans to demerge the Vitamins and Fine Chemicals Division. 

On 3 September 2002, the Group announced that it had reached an agreement, subject to the 

execution of a final definitive purchase agreement and the necessary regulatory approvals, to sell 

its global Vitamins and Fine Chemicals business to the Dutch company DSM. A final purchase 

agreement was signed on 10 February 2003 and the sale is expected to close in the first half of 

2003. The expected transaction price is 1.95 billion euros, which will consist of 1.85 billion euros 

in cash, and 2.24 million shares in DSM with a value of approximately 100 million euros. At 

31 December 2002 exchange rates, 1.95 billion euros is equivalent to 2.8 billion Swiss francs. 

The Vitamins and Fine Chemicals Division is now treated as a discontinuing operation, however 

until the sale is closed it will continue to be included in the consolidated figures. The sales, 

results, assets, liabilities and net cash flows of the division as part of the Roche Group are shown 

as discontinuing operations in the following table: 


Statement of income 

Continuing operations Discontinuing operations Group 

2002 2001 2002 2001 2002 2001 

Sales to third parties 26,334 25,623 3,391 3,540 29,725 29,163 

Expenses (23,572) (22,722) (3,168) (3,194) (26,740) (25,916) 

Impairment of net assets – – (1,650) – (1.650) – 

Operating profit 2,762 2,901 (1,427) 346 1,335 3,247 

Financial income (expense), net 736 1,523 (73) (8) 663 1,515 

Impairment of financial assets (5,192) – – – (5,192) – 

Profit before taxes (1,694) 4,424 (1,500) 338 (3,194) 4,762 

Income taxes (610) (951) (229) (87) (839) (1,038) 

Profit after taxes (2,304) 3,473 (1,729) 251 (4,033) 3,724 

Minority interests 34 (38) 7 4 41 (34) 

Share of result 

of associated companies (37) 25 3 (18) (34) 7 

Net income (2,307) 3,460 (1,719) 237 (4,026) 3,697 

Balance sheet at 31 December 

Property, plant and equipment 12,218 12,213 1,216 2,839 13,434 15,052 

Intangible assets 12,850 14,891 – 52 12,850 14,943 

Other long-term assets 6,610 6,232 249 184 6,859 6,416 

Current assets 29,065 36,900 1,787 1,975 30,852 38,875 

Total assets 60,743 70,236 3,252 5,050 63,995 75,286 

Long-term debt (14,077) (17,004) (90) (105) (14,167) (17,109) 

Other non-current liabilities (8,070) (8,712) (613) (665) (8,683) (9,377) 

Current liabilities (14,562) (14,109) (810) (824) (15,372) (14,933) 

Total liabilities (36,709) (39,825) (1,513) (1,594) (38,222) (41,419) 

Net assets 24,034 30,411 1,739 3,456 25,773 33,867 

Statement of cash flows 

Operating activities 559 4,639 423 449 982 5,088 

Financing activities (3,808) (606) (133) (218) (3,941) (824) 

Investing activities 3,839 (3,417) (301) (283) 3,538 (3,700) 

Net effect of currency translation 

on cash (279) 10 (6) – (285) 10 

Increase (decrease) in cash 311 626 (17) (52) 294 574 

Impairment of net assets 

Based on the final agreement, Group management estimates that the current carrying value of 

the net assets of the Vitamins and Fine Chemicals business is in excess of the expected net 

proceeds from the sale. Accordingly, an impairment of 1,650 million Swiss francs has been recorded 

against the assets of the Vitamins and Fine Chemicals Division. In addition, tax expenses of 

200 million Swiss francs have been recorded, based upon the preliminary estimate of the tax 

liability that will arise on disposal. 

As the sale will not close until the first half of 2003, the final amount of the gain or loss on 

the disposal of the net assets of Vitamins and Fine Chemicals business, including the tax effects, 

may be different from the amounts currently recorded. 


Vitamin case 

Following the settlement agreement with the US Department of Justice on 20 May 1999 regarding 

pricing practices in the vitamin market and the overall settlement agreement to a class action 

suit brought by the US buyers of bulk vitamins, the Group recorded provisions in respect of the 

vitamin case in 1999. These provisions were the Group’s best estimate at that time of the total 

liability that may arise, taking into account currency movements and the time value of money. 

Provisions for legal fees were recorded separately. At 31 December 2001, based on the development 

of the litigation and recent settlement negotiations, the Group recorded additional provisions of 


At 31 December 2002 the Group reassessed the adequacy of its remaining provisions for the 

vitamin case. Based on the development of the litigation and recent settlement negotiations, 

mainly in the United States with direct customers who had previously opted out of the class 

action settlement, the Group has recorded additional provisions of 1,770 million Swiss francs. 

Total payments during the year were 3,266 million Swiss francs (2001: 330 million Swiss francs). 

Payments made in 2002 include fines imposed by the European Union totalling 525 million euros 

(778 million Swiss francs) and settlements with direct and indirect customers in the United States 

totalling 1,707 million US dollars (2,455 million Swiss francs). 

The Group is seeking to resolve the remaining outstanding issues, however the timing and the 

final amounts involved are uncertain. The provisions recorded are based on current litigation and 

recent settlement agreements. As the litigation and negotiations progress, it is possible that the 

ultimate liability may be different from the amount of provisions currently recorded. 

On 17 January 2003 the District of Columbia Circuit Court of Appeals ruled that non-US plaintiffs 

may bring claims in US courts under US anti-trust laws for alleged damages suffered from 

transactions outside the United States in connection with the vitamin case. The defendants, 

including Roche, will appeal against this decision. No provisions have been recorded in respect 

of this litigation as the eventual outcome is uncertain at this stage. 

As part of the demerger process, the liabilities in respect of the vitamin case will remain with 

the Roche Group. Roche and DSM have signed an Indemnity and Co-operation Agreement under 

which Roche may provide DSM with certain indemnities and guarantees in connection with the 

vitamin case. 

9. Major legal cases 

Developments during the year for major legal cases are discussed below, including their impact 

on the Group’s results, possible future development and contingent liabilities, if any. Total 

expenses during the year were 778 million Swiss francs in respect of Genentech legal cases. 

Igen litigation 

On 15 February 2002 the United States District Court of Maryland entered judgement in the civil 

litigation between Roche Diagnostics GmbH, Germany (RDG) and Igen International, Inc. (Igen) 

over claims related to the licensing of Igen’s electrochemiluminescence (ECL) to RDG. The court 

concluded that several breaches of the licence agreement were material so that Igen has the right 

to terminate the licence agreement, and awarded Igen 105.4 million US dollars in compensatory 

damages and 400 million US dollars in punitive damages. RDG has appealed against this judgement 

and a final resolution is not expected until the second half of 2003. An existing order of the 

court bars any licence termination until all appeal proceedings are completed. While any appeal is 

in progress, RDG will continue to provide its customers with the products and services and will 

continue all planned innovations based on the ECL technology. 


RDG and previously Boehringer Mannheim have been in litigation since 1997 over these matters. 

When acquiring Boehringer Mannheim, RDG assessed the Igen litigation and the adequacy of the 

provision already recorded by Boehringer Mannheim. RDG has reassessed the adequacy of these 

provisions and has concluded that, based on currently available information, it is not appropriate 

to record additional provisions at this point. The total amount of the provisions is the liability that 

RDG expects to pay, adjusted for foreign currency translation effects and the time value of 

money. As litigation is in process it is possible that the final obligation may be different from this. 

The total amount of the provisions is not disclosed as this may prejudice the RDG position in 

current litigation, however the provisions are significantly less than the amounts awarded by the 

court. 

In March 2002 Roche Diagnostics GmbH (RDG) paid 606 million US dollars (1,018 million Swiss 

francs) into a collateral deposit account in respect of the Igen litigation. This is reported as 

restricted cash within financial long-term assets (see Note 17). No additional provisions have 

been recorded during the year. 

Genentech legal cases 

The Group has recorded a provision of 518 million US dollars (778 million Swiss francs) in respect 

of certain litigation matters, including litigation involving the City of Hope. 

On 10 June 2002 Genentech announced that a Los Angeles County Superior Court jury voted to 

award City of Hope Medical Center approximately 300 million US dollars in compensatory damages 

based on a finding of a breach of a 1976 agreement between Genentech and the City of 

Hope. On 24 June 2002 the jury voted to award City of Hope 200 million US dollars in punitive 

damages in the same case. On 13 September 2002 Genentech filed a notice of appeal of the jury 

verdict and damages awards with the California Court of Appeal. The appeals process will take 

from one to four years depending on the scope of the review. A full provision has been recorded 

for these awards. During the appeals process interest accrues on the total amount of the 

damages at a simple annual rate of 10%. Following the judgment interest of 26 million US dollars 

(40 million Swiss francs) was recorded as the time cost of provisions, within interest expenses 

(see Note 12). On 3 October 2002 Genentech entered into an arrangement with third party 

insurance companies to post a surety bond of 600 million US dollars in connection with this 

judgement. As part of this arrangement Genentech pledged 630 million US dollars in cash 

and investments to secure this bond. These amounts, which are equivalent to 874 million Swiss 

francs, are reported as restricted cash within financial long-term assets (see Note 17). 

In addition, Genentech is party to a patent infringement suit filed by Chiron Corporation on 

7 June 2000 in the US District Court in the Eastern District of California (Sacramento) in respect 

of Herceptin. On 25 June 2002 the court issued several decisions regarding summary judgement 

motions that had been filed. The jury trial of this suit began on 6 August 2002. Following the first 

phase of the trial, based on the findings by the jury, the Court entered judgement in favour of 

Genentech. On 20 November 2002 Chiron filed notice of appeal with the US Court of Appeals for 

the Federal Circuit. On 4 December 2002 Genentech filed notice of cross-appeal with the same 

court. On 12 August 2002 the United States Patent and Trademark Office declared an interference 

between the Chiron patent involved in this lawsuit and a patent application exclusively licensed 

to Genentech from the University of Pennsylvania relating to anti-HER2 antibodies. In declaring 

the interference, the Patent Office has determined that there is substantial question as to whether 

the inventors of the Chiron patent were the first to invent the technology involved and are entitled 

to the patent. In connection with a second patent infringement lawsuit filed on 13 March 2001 

against Genentech by Chiron, discovery in this case is currently stayed. 


10. Employee benefits in millions of CHF 2002 2001 

In connection with a patent infringement lawsuit filed against Genentech by GlaxoSmithKline 

(Glaxo) on 14 September 2000, in September 2002 Genentech and Glaxo agreed to a settlement 

pursuant to which Genentech and Glaxo dismissed with prejudice all the claims and/or counterclaims 

made by each of them in this lawsuit (and in a previous patent infringement lawsuit filed 

against Genentech by Glaxo on 28 May 1999, involving other patents). The settlement resolves 

and ends all the patent infringement claims that Glaxo made against Genentech. 

Genentech is party to other litigation, as described in Genentech’s annual report and quarterly 

SEC filings, however these other matters are not as far advanced as the matters referred to above. 

Wages and salaries 6,055 6,026 

Social security costs 717 719 

Post-employment benefits: defined benefit plans 279 264 

Post-employment benefits: defined contribution plans 146 99 

Other employee benefits 331 308 

Total employees’ remuneration 7,528 7,416 

The charges for employee benefits are included in the relevant expenditure line by function. The 

number of employees at the year-end was 69,659 (2001: 63,717). Other employee benefits consist 

mainly of life insurance schemes and certain other insurance schemes providing medical and 

dental cover. 

Post-employment benefits 

Most employees are covered by retirement benefit plans sponsored by Group companies. The 

nature of such plans varies according to legal regulations, fiscal requirements and economic conditions 

of the countries in which the employees are employed. Other post-employment benefits 

consist mostly of post-retirement healthcare and life insurance schemes, principally in the United 

States. Plans are usually funded by payments from the Group and by employees to trusts independent 

of the Group’s finances. Where a plan is unfunded, a liability for the whole obligation is 

recorded in the Group’s balance sheet. 

The amounts recognised in arriving at operating profit for post-employment defined benefit plans 

are as follows: 


Current service cost 314 362 

Interest cost 627 685 

Expected return on plan assets (688) (761) 

Net actuarial (gains) losses recognised 22 (12) 

Past service cost 4 5 

(Gains) losses on curtailment – (15) 

Total included in employees’ remuneration 279 264 

The actual return on plan assets was a negative return of 1,022 million Swiss francs (2001: negative 

return of 1,334 million Swiss francs). 

In September 2002 the Group paid an additional contribution of 340 million US dollars (530 million 

Swiss francs) into a post-employment defined benefit plan of one of its US subsidiaries, due 

to falls in the market value of this plan’s assets during 2002. This payment is included in ‘contributions 

paid’ in the table below and is accounted for as part of the recognised surplus on funded 

pension plans (see also Note 18) in the Group’s consolidated financial statements in 2002. Thereafter 

it will be included in the actuarial calculation of the Group’s pension expenses and balances. 


The movements in the net asset (liability) recognised in the balance sheet for post-employment 

defined benefit plans are as follows: 


At beginning of year (1,279) (1,849) 

Chugai 6 (351) – 

Total expenses included in employees’ remuneration (as above) (279) (264) 

Contributions paid 679 177 

Benefits paid (unfunded plans) 100 116 

Reclassification from prepaid employee benefits – 558 

Currency translation effects and other (35) (17) 

At end of year (as below) (1,165) (1,279) 

Amounts recognised in the balance sheet for post-employment defined benefit plans are as 

follows: 


Funded plans 

Actuarial present value of funded obligations 

due to past and present employees (9,337) (9,649) 

Plan assets held in trusts at fair value 8,751 10,033 

Plan assets in excess (deficit) of actuarial present value of funded obligations (586) 384 

Unrecognised actuarial (gains) losses 1,807 731 

Unrecognised past service costs 33 46 

Net recognised asset (liability) for funded obligations due to past 

and present employees 1,254 1,161 

Unfunded plans 

Recognised (liability) for actuarial present value 

of unfunded obligations (2,419) (2,440) 

Total recognised asset (liability) for funded and unfunded obligations 

due to past and present employees (1,165) (1,279) 

Reported as 

Surplus recognised as part of other long-term assets 18 1,761 1,331 

Deficit recognised as part of liabilities for post-employment benefits (2,926) (2,610) 

Total net asset (liability) recognised (1,165) (1,279) 

The above amounts include non-pension post-employment benefit schemes, principally medical 

plans as follows: 


Actuarial present value of obligations due to past and present employees (806) (737) 

Plan assets held in trusts at fair value 387 530 

Plan assets in excess of actuarial present value of funded obligations (419) (207) 

– less unrecognised actuarial (gains) losses 206 (50) 

Net recognised asset (liability) (213) (257) 

Amounts recognised in the balance sheet for post-employment defined benefit plans are predominantly 

non-current and are reported as long-term assets and non-current liabilities. 

Included within the fair value of the assets of the funded plans are 900,000 (2001: 650,000) of the 

Group’s non-voting equity securities with a fair value of 87 million Swiss francs (2001: 77 million 

Swiss francs). 


The Group operates defined benefit schemes in many countries and the actuarial assumptions 

vary based upon local economic and social conditions. The range of assumptions used in 

the actuarial valuations of the most significant defined benefit plans, which are in countries 

with stable currencies and interest rates, is as follows: 

Discount rates 2 to 7% (2001: 3 to 8%) 

Projected rates of remuneration growth 2 to 9% (2001: 2 to 9%) 

Expected rates of return on plan assets 2 to 9% (2001: 3 to 10%) 

Healthcare cost trend rate 4 to 12% (2001: 5 to 10%) 

Stock Appreciation Rights 

Some employees of certain US subsidiaries of the Group receive Stock Appreciation Rights 

(SARs) as part of their compensation. The SARs may be exercised after a vesting period of two 

to three years for a cash payment, based upon the amount that the market price of the Group’s 

American Depositary Shares (ADSs) at the point of exercise exceeds the strike price (grant 

price at issuance). The Group accrues for the expected cash outflow from the outstanding SARs. 

As at 31 December 2002 no accrual was required. 

Equity compensation benefits 

During 2002 the Group has launched three equity compensation plans, as described below. 

The Genentech stock option plan is discussed in Note 5. 

Roche Option Plan: The Group offers non-voting equity security options to certain directors and 

management. The exercise price is the market price of the non-voting equity securities at the date 

of issue. The options, which are non-tradable, have a seven-year duration and vest on a phased 

basis over three years. The Group covers such obligations by purchasing non-voting equity securities, 

or derivatives thereon. The cost of these instruments is reported in own equity instruments, 

within equity on the balance sheet. When the options are exercised the cash received is credited 

to own equity instruments. There are no impacts on the income statement, other than employer 

social insurance costs and the administrative costs of the plan. The previous option compensation 

plan, whereby the Group purchased options directly from third party financial institutions and 

granted them to certain employees, is closed; existing option grants under the old plan continue 

but no further such options are being granted. 

Movements in the number of options held by employees are as follows: 


Outstanding at 1 January – – 

Issued 562,259 – 

Exercised – – 

Cancellations – – 

Outstanding at 31 December 562,259 – 

Details of options granted during the period are as follows: 


Issue date 26 February 2002 – 

Expiry date 26 February 2009 – 

Exercise price in CHF 115.50 – 

Proceeds if all options are exercised in millions of CHF 65 – 

Using the Black-Scholes option valuation model, the fair value of options issued in 2002 was 



11. Other operating income (expense), net in millions of CHF 2002 2001 

Roche Performance Share Plan: The Group offers future non-voting equity security grants to 

certain directors and key senior management. The amount of non-voting equity securities granted 

depends upon the individual’s salary level and the achievement of performance targets linked to 

total shareholders’ return relative to the Group’s peers during the three-year period from the date 

of the grant. If the targets are not met, then no grants are made. The grants vest after three years. 

The cost of the plan is accrued over the vesting period of each grant, based on the final cash 

outflow estimated at each balance sheet date. During the year the cost of the plan was 15 million 

Swiss francs, which was reported within the relevant operating expense categories. The Group 

covers such obligations by purchasing non-voting equity securities, or derivatives thereon. The 

cost of purchasing these instruments is reported in own equity instruments, within equity on the 

balance sheet. 

Roche Connect: This programme enables all employees worldwide, except for those in the 

United States and certain other countries, to make regular deductions from their salaries to 

purchase non-voting equity securities. It is administered by independent third parties. The Group 

makes a contribution to the programme, which allows the employees to purchase non-voting 

equity securities at a discount (usually 20%). The administrator purchases the necessary nonvoting 

equity securities directly from the market. 28,843 non-voting equity securities were held at 

31 December 2002. The programme has been operational since 1 October 2002. During the year 

the cost of the plan was 1 million Swiss francs, which was reported within the relevant operating 

expense categories. 

Royalty income 733 660 

Gain on disposal of Neupogen 217 – 

Other operating income 663 513 

Total other operating income 1,613 1,173 

Royalty expense (1,032) (918) 

Other operating expense (1,150) (1,160) 

Total other operating expense (2,182) (2,078) 

Total other operating income (expense), net (569) (905) 

On 1 October 2002 the Group completed the sale to Amgen of the assets and business related 

to Neupogen in the European Union, Switzerland and Norway. The cash received was 217 million 

Swiss francs. 


12. Financial income (expense), net in millions of CHF 2002 2001 

Gains on sale of equity securities 305 918 

(Losses) on sale of equity securities (46) (216) 

Gains on LabCorp transactions 1,199 1,160 

Dividend income 76 161 

Gains (losses) on equity derivatives, net (21) 274 

Write-downs and impairments of equity securities – (10) 

Net income from equity securities 1,513 2,287 

Interest income 405 646 

Gains on sale of debt securities 165 61 

(Losses) on sale of debt securities (48) (55) 

Write-downs and impairments of long-term loans (35) (33) 

Net interest income and income from debt securities 487 619 

Interest expense (621) (851) 

Amortisation of discount on debt instruments (468) (501) 

Gains (losses) on interest rate derivatives, net (114) (57) 

Time cost of provisions 31 (152) (97) 

Net interest expense (1,355) (1,506) 

Foreign exchange gains (losses), net (138) 261 

Gains (losses) on foreign currency derivatives, net 95 (257) 

Net foreign exchange gains (losses) (43) 4 

Net other financial income (expense), net 61 111 

Total financial income (expense), net 663 1,515 

On 6 June 2001 the Group sold 6,000,000 shares of LabCorp, resulting in a pre-tax gain after 

incidental costs of 1,160 million Swiss francs which was recorded as part of financial income 

(expense), net. The net pre-tax cash inflow was 1,420 million Swiss francs. As of the date of this 

sale the Group’s remaining investment in LabCorp was accounted for as available-for-sale 

marketable securities. In March and July 2002 the Group sold its remaining shares of LabCorp. 

These transactions resulted in a pre-tax gain after incidental costs of 1,032 million Swiss francs. 

These amounts were recorded as part of financial income (expense), net. The net pre-tax cash 

inflow was 1,246 million Swiss francs. In addition, the Group realised a gain of 167 million Swiss 

francs on equity derivatives that were entered into in connection with the disposal of LabCorp 

shares. As at 31 December 2002 the Group has no remaining ownership interest in LabCorp and 

no outstanding derivative positions in LabCorp equities. 

Impairment of financial assets 

As at 31 December 2002 the Group revised its accounting policy for impairment of financial 

assets. In addition to the existing impairment triggers (as described in Note 1), any available-forsale 

financial assets that have a market value of more than 25% below their original cost for a 

sustained six month period will be considered as impaired. Any falls in the market price of less 

than 25% of original cost or for less than a sustained six-month period are not by themselves 

considered as objective evidence of impairment, and such movements in fair value are recorded 

in equity until there is objective evidence of impairment or until the asset is sold or otherwise 

disposed of. 


As a result of this revision in accounting policy, the Group recorded an impairment charge of 

5,192 million Swiss francs effective 31 December 2002. 

13. Income taxes 


Income tax expenses 

The amounts charged in the income statement are as follows: 


Current income taxes 446 1,335 

Deferred income taxes 393 (297) 

Total charge for income taxes 839 1,038 

Since the Group operates across the world, it is subject to income taxes in many different tax jurisdictions. 

The Group calculates its average expected tax rate as a weighted average of the tax rates 

in the tax jurisdictions in which the Group operates. This rate increased during 2002 as operating 

income now makes up a considerably higher proportion of pre-tax income than has been the case 

in previous years. This leads to an increase in the Group’s effective tax rate, as operating income 

typically occurs in jurisdictions with higher tax rates when compared to financial income. Within the 

Group’s average expected tax rate, the increasing significance of Genentech and Chugai accounts 

for 1% of the increase in the rate. Deferred tax assets were not recorded for the local statutory 

losses incurred in Argentina during 2002, as it is not clear when these may be utilised against 

future local taxable income. 

The Group’s effective tax rate can be reconciled to the Group’s average expected tax rate as 

follows: 


Group’s average expected tax rate 24% 22% 

Tax effect of 

– Argentina +1% – 

– Amortisation of goodwill 15 +3% +2% 

– Gain from sale of LabCorp shares 12 +1% +2% 

– non-taxable income/non-deductible expenses +1% – 

– other differences –1% –3% 

Core businesses’ effective tax rate 29% 23% 

Tax effect of 

– Pharmaceuticals Division restructuring 7 – – 

– Major legal cases 9 –2% – 

– Discontinuing operation: Vitamins and Fine Chemicals Division 8 – – 

– Vitamin case 8 –4% –1% 

– Chugai transaction: part disposal of Nippon Roche 6 –4% – 

– Chugai transaction: write-off of fair value adjustments to inventories 6 –1% – 

– Vitamins and Fine Chemicals Division: impairment of net assets 8 +26% – 

– Impairment of financial assets 12 –70% – 

Group’s effective tax rate –26% 22% 

The impairment of net assets of the Vitamins and Fine Chemicals Division and the impairment 

of financial assets have a very significant impact on the effective tax rate for 2002, as they have 

a large impact on profit before tax whilst having a relatively minor impact on the tax charge. 


Income tax assets and liabilities 

Amounts recognised in the balance sheet for income taxes are as follows: 


Current income taxes 

Current income tax assets 1,028 244 

Current income tax liabilities (849) (716) 

Net current income tax asset (liability) in the balance sheet 179 (472) 

Deferred income taxes 

Deferred income tax assets 784 1,410 

Deferred income tax liabilities (3,551) (4,162) 

Net deferred income tax asset (liability) in the balance sheet (2,767) (2,752) 

The increase of the current income tax assets is related to payments in the vitamin case and 

Swiss withholding taxes which have subsequently been reimbursed in 2003. Deferred income tax 

assets are recognised for tax loss carry forwards only to the extent that realisation of the related 

tax benefit is probable. The Group has unrecognised tax losses of 205 million Swiss francs. 

Deferred income tax liabilities have not been established for the withholding tax and other taxes 

that would be payable on the unremitted earnings of certain foreign subsidiaries, as such 

amounts are currently regarded as permanently reinvested. These unremitted earnings totalled 

21.3 billion Swiss francs at 31 December 2002 (2001: 27.1 billion Swiss francs). 

The deferred income tax assets and liabilities and the deferred income tax charges (credits) are 

attributable to the following items: 

Property, plant and 

Other 


equipment, and Restructuring temporary 

intangible assets provisions differences Total 

Net deferred income tax asset (liability) 

at beginning of year (3,260) 170 338 (2,752) 

(Charged) credited to the income statement 70 (21) (442) (393) 

(Charged) credited to equity 27 – – 500 500 

Chugai 6 (420) – 207 (213) 

Currency translation effects and other 267 (14) (162) 91 


at end of year (3,343) 135 441 (2,767) 

2001 


at beginning of year (3,342) 146 560 (2,636) 

On issue of debt instruments 29 – – (46) (46) 

(Charged) credited to the income statement 90 21 186 297 

(Charged) credited to equity 27 – – (367) (367) 

Changes in Group organisation 3 (22) – 5 (17) 

Currency translation effects and other 14 3 – 17 


at end of year (3,260) 170 338 (2,752) 


Buildings 

and land Machinery 

improve- and Construction 2002 2001 

Land ments equipment in progress Total Total 

Net book value 

At beginning of year 744 5,905 6,787 1,616 15,052 13,785 

Chugai 6 231 110 532 214 1,087 – 

Other changes in Group organisation 3 – – – – – 5 

Genentech synthetic leases – – – – – 1,113 

Additions 1 148 769 1,126 2,044 1,931 

Disposals (26) (65) (109) (39) (239) (211) 

Transfers 5 322 728 (1,055) – – 

Depreciation charge – (257) (1,204) – (1,461) (1,433) 


restructuring – impairment charge 7 – – (52) – (52) (187) 


– impairment of net assets 8 – (474) (1,026) – (1,500) – 

Other impairment charges – – (4) – (4) (8) 

Currency translation effects and other (21) (325) (850) (297) (1,493) 57 

At end of year 934 5,364 5,571 1,565 13,434 15,052 

At 31 December 

Cost 934 8,978 14,469 1,565 25,946 26,146 

Accumulated depreciation – (3,614) (8,898) – (12,512) (11,094) 

Net book value 934 5,364 5,571 1,565 13,434 15,052 

The Group’s subsidiary Genentech has synthetic leases on certain of its facilities in California, 

which under the Group’s accounting policy are consolidated. As discussed in the 2001 financial 

statements, these were recorded effective 1 January 2001, and at this date property, plant and 

equipment increased by 1,113 million Swiss francs, with a similar increase in long-term debt 

(see Note 29). Excluding the Genentech synthetic leases, at 31 December 2002 the capitalised 

cost of machinery and equipment under finance leases amounts to 341 million Swiss francs 

(2001: 581 million Swiss francs) and the net book value of these assets amounts to 198 million 

Swiss francs (2001: 221 million Swiss francs). 

Operating lease commitments 

At 31 December the future minimum annual payments under non-cancellable operating leases, 

including the Genentech synthetic leases, were as follows: 


Within one year 118 100 

Between one and five years 205 140 

Thereafter 13 12 

Total minimum annual payments 336 252 

Total rental expense in 2002 for all operating leases, including the Genentech synthetic leases, 

was 239 million Swiss francs (2001: 299 million Swiss francs). 

The Group has capital commitments for the purchase or construction of property, plant and 

equipment totalling 1.1 billion Swiss francs (2001: 1.8 billion Swiss francs). 


Patents, licences, 

trademarks 2002 2001 

Goodwill and other Total Total 

Net book value 

At beginning of year 6,107 8,836 14,943 15,870 

Chugai 6 159 947 1,106 – 

Other changes in Group organisation 3 7 – 7 215 

Additions – 95 95 209 

Disposals – (1) (1) (5) 

Amortisation charge (501) (1,019) (1,520) (1,553) 

Vitamins and Fine Chemicals Division – 

impairment of net assets 8 (7) (19) (26) – 

Impairment charge – (9) (9) (10) 

Currency translation effects and other (701) (1,044) (1,745) 217 

At end of year 5,064 7,786 12,850 14,943 

At 31 December 

Cost 15,061 15,916 30,977 34,859 

Accumulated amortisation (9,997) (8,130) (18,127) (19,916) 

At end of year 5,064 7,786 12,850 14,943 

16. Investments in associated companies and joint ventures 


Associated companies 

The Group has investments in associated companies as listed below. These have been accounted 

for using the equity method. 

Share of net income Balance sheet value 

2002 2001 2002 2001 

Laboratory Corporation of America Holdings (USA) – 44 – – 

Basilea Pharmaceutica (Switzerland) (31) (12) 58 89 

Other investments accounted for using the equity method (3) (25) 64 97 

Total investments accounted for using the equity method (34) 7 122 186 

Laboratory Corporation of America Holdings: The Group’s transactions in LabCorp shares are 

discussed in Note 12. As at 31 December 2002 the Group has no remaining ownership interest in 

LabCorp. 

Basilea Pharmaceutica: The Group owns a non-controlling interest of 49% in Basilea Pharmaceutica 

Ltd (Basilea). Basilea is a Swiss biotechnology company in the anti-bacterial, anti-fungal 

and dermatology fields. Basilea is a private company domiciled in Basel and has a share capital 

of 50 million Swiss francs as at 31 December 2002. 

Antisoma: On 23 December 2002 the Group acquired a 9% interest in Antisoma plc (Antisoma) 

for 9 million Swiss francs. Antisoma is a British biopharmaceutical company that develops 

products for the treatment of cancer. It is a public company domiciled in London and its shares 

are traded on the London Stock Exchange and on NASDAQ Europe. The market capitalisation 

as at 31 December 2002 was 59.6 million pounds (133 million Swiss francs). Following the acquisition 

the Group will have material transactions with Antisoma for access, development, and 

milestone payments with respect to its oncology product portfolio and accordingly Antisoma is 

reported as an associated company. 7 million Swiss francs of goodwill arose on the acquisition, 

with the balance of the acquisition price reported as an investment in associated companies. 


17. Financial long-term assets in millions of CHF 2002 2001 

Transactions between the Group and its associated companies are as follows: 


Income statement 

Income from the sale of goods or supply of services 6 53 

Expenses for the purchase of goods or supply of services (63) (1) 

Balance sheet 

Trade accounts receivable 2 2 

Joint ventures 

Bayer joint venture: The Group has a 50% stake in Bayer Roche LLC, a joint venture with the 

Bayer Group in the over-the-counter (OTC) field to market and distribute the product Aleve 

and certain other OTC products in the United States. The joint venture is a private company registered 

in Delaware, and its principal executive offices are in Morristown, New Jersey and had a 

partnership capital of 37.6 million US dollars (52.2 million Swiss francs) as at 31 December 2002. 

This joint venture is included in the financial statements using the proportionate consolidation 

method. 

Chugai-Aventis joint venture: Chugai Pharma Marketing Ltd., a wholly-owned subsidiary of 

Chugai, has a 55% stake in Chugai-Aventis S.N.C., a joint venture with Aventis Pharma S.A. 

for importation, sales of pharmaceuticals, clinical development and submission of application for 

new drugs in the EU. The joint venture is a partnership domiciled in Antony, France and had a 

share capital of 160 thousand euros (232 thousand Swiss francs) as at 31 December 2002. 

The joint venture is included in the financial statements using the proportionate consolidation 

method. 

The effect of the Group’s joint ventures on the income statement and balance sheet is as follows: 


Income statement 

Sales 222 249 

Expenses (231) (243) 

Net income after taxes (9) 6 

Balance sheet 

Long-term assets 269 350 

Current assets 145 161 

Non-current liabilities (89) (116) 

Current liabilities (181) (228) 

Net assets 144 167 

Available-for-sale investments 785 2,034 

Held-to-maturity investments 185 332 

Loans receivable 126 379 

Long-term trade receivables 99 31 

Restricted cash 2,477 148 

Total financial long-term assets 3,672 2,924 

Financial long-term assets are held for strategic purposes and therefore are classified as 

non-current. The effective interest rate of held-to-maturity investments is 1.4% (2001: 4.0%). 

Loans receivable comprise all loans to third parties with a term of over one year. 


18. Other long-term assets in millions of CHF 2002 2001 

19. Inventories in millions of CHF 2002 2001 

20. Accounts receivable in millions of CHF 2002 2001 

21. Other current assets in millions of CHF 2002 2001 

Restricted cash consists of 606 million US dollars paid into a collateral deposit account in respect of 

the Igen litigation (see Note 9), 630 million US dollars of cash and investments pledged by Genentech 

in connection with the City of Hope litigation (see Note 9), 673 million Swiss francs pledged by 

Roche Group companies as collateral in connection with the obligation to repurchase own equity 

instruments (see Note 25) and cash set aside as collateral under certain lease agreements. 

Recognised surplus on funded pension plans 10 1,761 1,331 

Prepaid employee benefits 165 219 

Other 355 346 

Total other long-term assets 2,281 1,896 

Other long-term assets consist of various assets not otherwise shown separately from which 

the Group expects to derive economic benefits in over one year. 

Raw materials and supplies 969 955 

Work in process 599 650 

Finished goods 4,349 4,542 

Less: provision for slow-moving and obsolete inventory (193) (367) 

Total inventories 5,724 5,780 

Inventories held at net realisable value have a carrying value of 14 million Swiss francs (2001: 

12 million Swiss francs). As a result of the Chugai transaction, inventories increased by 437 million 

Swiss francs, effective 1 October 2002 (see Note 6). 

Accounts receivable – trade 6,550 5,936 

Notes receivable 290 145 

Less: provision for doubtful accounts (323) (302) 

Total accounts receivable 6,517 5,779 

At 31 December 2002, accounts receivable include amounts denominated in US dollars equivalent 

to 2.4 billion Swiss francs (2001: 2.1 billion Swiss francs) and amounts denominated in euros 

equivalent to 2.3 billion Swiss francs (2001: 2.0 billion Swiss francs). 

Bad debt expense was 40 million Swiss francs (2001: 30 million Swiss francs). 

Accrued interest income 73 96 

Prepaid expenses 428 672 

Derivative financial instruments 30 485 661 

Other receivables 772 1,095 

Total other current assets 1,758 2,524 


22. Marketable securities in millions of CHF 2002 2001 

23. Accounts payable in millions of CHF 2002 2001 

24. Accrued and other current liabilities in millions of CHF 2002 2001 

Held-for-trading investments 

– bonds and debentures 674 611 

Available-for-sale current investments 

– shares 3,744 7,537 

– bonds and debentures 1,460 3,749 

– money market instruments 6,517 9,515 

Total marketable securities 12,395 21,412 

Marketable securities are held for fund management purposes and therefore are classified 

as current. Other investments held for strategic purposes are classified as non-current 


Shares: These consist primarily of readily saleable equity securities. 

Bonds and debentures: 

Average 

effective 

Contracted maturity Amount interest rate 


Within one year 1,234 2.0% 

Between one and five years 761 2.7% 

Over five years 139 4.3% 

Total bonds and debentures 2,134 2.4% 

2001 

Within one year 1,609 2.9% 

Between one and five years 1,748 4.3% 

Over five years 1,003 4.8% 

Total bonds and debentures 4,360 4.2% 

Money market instruments: These generally have fixed interest rates ranging from 0.36% 

to 6.06% (2001: 1.22% to 7.75%) depending upon the currency in which they are denominated. 

They are contracted to mature within one year of 31 December 2002. 

Accounts payable – trade 1,090 999 

Other taxes payable 314 339 

Other accounts payable 383 372 

Total accounts payable 1,787 1,710 

Deferred income 121 218 

Accrued payroll and related items 908 776 

Interest payable 158 230 

Derivative financial instruments 30 262 653 

Other accrued liabilities 1,946 2,157 

Total accrued and other current liabilities 3,395 4,034 


25. Equity 

Share capital 

At the Annual General Meeting on 3 April 2001, the shareholders approved a 100 for 1 stock split 

of the shares and non-voting equity securities of Roche Holding Ltd. The split took place on 

4 May 2001. The number of shares and non-voting equity securities in issue is now 160,000,000 

and 702,562,700, respectively. The nominal value of the shares is now 1 Swiss franc. The nonvoting 

equity securities have no nominal value. All 2001 per share information has been restated 

for the split as if it took place on 1 January 2001. 

Based on information supplied to Roche by a shareholders’ group with pooled voting rights, 

comprising Dr L. Hoffmann, Ms V. Michalski-Hoffmann, Ms M.-A. Hoffmann, Mr A. Hoffmann, 

Ms V. Oeri-Hoffmann, Dr A. Oeri, Ms S. Duschmalé-Oeri, Ms C. Oeri, Ms B. Oeri, Ms M. Oeri and 

Dr F. Gerber, that group holds 80,020,000 shares (after the above share split) as in the preceding 

year. This figure does not include any shares without pooled voting rights that are held outside 

this group by individual members of the group. There were no transactions with these individuals 

other than those in the ordinary course of business. 

Non-voting equity securities (Genussscheine) 

As of 31 December 2002, 702,562,700 non-voting equity securities had been issued. Under Swiss 

company law these non-voting equity securities have no nominal value, are not part of the share 

capital and cannot be issued against a contribution which would be shown as an asset in the 

balance sheet of Roche Holding Ltd. Each non-voting equity security confers the same rights as 

any of the shares to participate in the net profit and any remaining proceeds from liquidation 

following repayment of the nominal value of the shares and, if any, participation certificates. In 

accordance with the law and the Articles of Incorporation of Roche Holding Ltd, the company 

is entitled at all times to exchange all or some of the non-voting equity securities into shares or 

participation certificates. 

Dividends 

On 16 April 2002 the shareholders approved the distribution of a dividend of 1.30 Swiss francs per 

share and non-voting equity security (2001: 1.15 Swiss franc) in respect of the 2001 business 

year. The distribution to holders of outstanding shares and non-voting equity securities totalled 

1,101 million Swiss francs (2001: 981 million Swiss francs) and has been recorded against 

retained earnings in 2002. 

Own equity instruments 

At 31 December 2002 the number of non-voting equity securities held was 23,033,113 

(2001: 23,669,345). The net cash inflow from transactions in own equity instruments was 

39 million Swiss francs (2001: net cash inflow of 706 million Swiss francs). 

The Group holds its own equity instruments primarily to meet the obligations that may arise in 

respect of certain of the Group’s debt instruments. This may be achieved by holding physical 

non-voting equity securities or by holding forward contracts or derivative instruments such as call 

options. At 31 December 2002 the Group held forward contracts and derivative instruments 

equivalent to 17,123,740 (2001: 19,498,489) non-voting equity securities. If all of these contracts 

and instruments were exercised then a total of 40,156,853 (2001: 43,167,834) non-voting equity 

securities would be available to the Group. 


The Group has partially covered its exposure to the conversion of the ‘Sumo’ Japanese yen 

exchangeable bonds and fully covered its exposure to the ‘LYONs V’ zero coupon US dollar 

exchangeable notes. This has been achieved using written short put options and purchased long 

call options at the same strike price, which have the combined effect of a forward purchase with 

a commitment of 2,971 million Swiss francs to repurchase non-voting equity securities. This is 

reported within debt at its discounted present value of 2,413 million Swiss francs (see Note 29). 

These transactions are supported by 673 million Swiss francs of collateral recorded as restricted 

cash in financial long-term assets (see Note 17). 

26. Earnings per share and non-voting equity security 

All 2001 per share information is restated for the 100 for 1 share split that took place on 4 May 2001 


Basic earnings per share and non-voting equity security 


Net income (millions of CHF) (4,026) 3,697 

Number of shares (millions) 25 160 160 

Number of non-voting equity securities (millions) 25 703 703 

Weighted average number of own non-voting equity securities held (millions) (24) (22) 

Total (millions) 839 841 

Basic earnings per share and non-voting equity security (CHF) (4.80) 4.40 

Diluted earnings per share and non-voting equity security 

For the calculation of diluted earnings per share and non-voting equity security, the weighted 

average number of shares and non-voting equity securities outstanding is adjusted to assume 

conversion of all dilutive potential shares or non-voting equity securities. 


Net income (millions of CHF) (4,026) 3,697 

Elimination of interest expense, net of tax, of convertible debt instruments, 

where dilutive (millions of CHF) – 50 

Increase in minority share of Group net income, net of tax, 

assuming all outstanding Genentech stock options exercised (millions of CHF) – (7) 

Net income used to calculate diluted earnings per share (millions of CHF) (4,026) 3,740 

Weighted average number of shares and non-voting equity securities 

in issue (millions) 839 841 

Adjustment for assumed conversion of convertible debt instruments, 

where dilutive (millions) – 14 

Weighted average number of shares and non-voting equity 

securities in issue used to calculate dilutive earnings per share (millions) 839 855 

Diluted earnings per share and non-voting equity security (CHF) (4.80) 4.37 


28. Minority interests in millions of CHF 2002 2001 

29. Debt in millions of CHF 2002 2001 

Fair value Fair value 

reserve: reserve: 

available- qualifying Equity Currency 

for-sale cash flow conversion translation 2002 2001 

investments hedges options reserve Total Total 

At beginning of year (1,422) 8 110 (695) (1,999) 440 

Changes in fair value (3,226) (16) – – (3,242) (1,066) 

Recognised in net income 3,808 (17) – – 3,791 (666) 

Deferred income taxes 13 487 13 – – 500 (367) 

Minority interests 28 52 8 – – 60 20 

Equity component of 

new convertible debt 29 – – – – – 86 

Currency translation gains (losses) – – – (1,752) (1,752) (446) 

Total (301) (4) 110 (2,447) (2,642) (1,999) 

At beginning of year 4,894 4,667 

Chugai 6 1,362 – 

Part disposal of Nippon Roche 6 149 – 

Minority share of Group net income, net of tax (41) 34 

Net effect of movements in fair value (charged) credited to equity 27 (60) (20) 

Net effect of exercise of Genentech stock options and 

Genentech stock repurchases 5 (751) 120 

Dividend payments to minority shareholders (27) – 

Currency translation effects and other (563) 93 

At end of year 4,963 4,894 

Of which: 

Genentech 5 3,227 4,867 

Chugai 6 1,706 – 

Other 30 27 

Total minority interests 4,963 4,894 

Amounts due to banks and other financial institutions 2,607 3,290 

Debt instruments 11,586 14,111 

Capitalised lease obligations 138 164 

Genentech synthetic leases 911 1,113 

Obligation to repurchase own equity instruments 25 2,413 – 

Other borrowings 64 101 

Total debt 17,719 18,779 

Less: current portion of long-term debt (amounts due within one year) (3,552) (1,670) 

Total long-term debt 14,167 17,109 

Short-term bank loans and overdrafts 4,631 4,951 

Current portion of long-term debt 3,552 1,670 

Total short-term debt 8,183 6,621 


Repayment terms of long-term debt 


Within one year 3,552 1,670 

Between one and two years 4,477 5,091 

Between two and three years 4,173 4,159 

Between three and four years 792 3,341 

Between four and five years 1,655 990 

Thereafter 3,070 3,528 

Total long-term debt 17,719 18,779 

The ‘LYONs’ zero coupon US dollar exchangeable notes (see below) are reflected as due the first 

year that the holders of the notes can request the Group to purchase the notes. 

The fair value of the debt instruments is 12.6 billion Swiss francs (2001: 15.3 billion Swiss francs) 

and the fair value of total long-term debt is 18.7 billion Swiss francs (2001: 19.9 billion Swiss 

francs). This is calculated based upon the present value of the future cash flows on the instrument, 

discounted at a market rate of interest for instruments with similar credit status, cash 

flows and maturity periods. 

The Group’s debt is unsecured, except as noted below. The obligation arising from the Genentech 

synthetic leases is supported by restricted cash of 57 million US dollars (79 million Swiss francs). 

In addition, this obligation is secured on property, plant and equipment covered by the synthetic 

leases which has a net book value of 860 million Swiss francs as at 31 December 2002. The 

obligation to repurchase non-voting equity securities is supported by 673 million Swiss francs 

of collateral recorded as restricted cash in financial long-term assets (see Note 17). 

Amounts due to banks and other financial institutions 

Interest rates on these amounts, which are primarily denominated in US dollars and euros, 

average approximately 2.8% (2001: 3.7%). Repayment dates vary between 1 and 15 years. 

Debt instruments 

Repayment of ‘Samurai’ Japanese yen bonds: On the due date of 15 May 2002 the Group 

repaid the principal amount of 100 billion Japanese yen of the 1% Japanese yen bonds originally 

issued in 1994. The resulting cash outflow was 1,258 million Swiss francs. 

Japanese yen convertible bonds issued by Chugai: At 31 December 2002, Chugai has outstanding 

1.05% ‘Series 6 Chugai Pharmaceutical Unsecured Convertible Bonds’ with a principal 

amount of 3,482 million Japanese yen (41 million Swiss francs). The bonds were issued at face 

value in 1996 and their redemption date is 30 September 2008. Each bond of JPY 1,000,000 par 

value is convertible for 1,311 shares of Chugai. Conversion is at the option of the bondholder and 

may be made at any time up to the due date. The bonds will not be redeemable until maturity. 

Repayment of ‘Bull Spread’ US dollar bonds: On the due date of 16 May 2001 the Group 

repaid the principal amount of 1 billion US dollars of the 3.5% US dollar bonds originally issued 

in 1991. The resulting cash outflow was 1,734 million Swiss francs. 

Issue of ‘LYONs V’ US dollar exchangeable notes: On 25 July 2001 the Group issued zero 

coupon US dollar exchangeable notes due 25 July 2021 with a principal amount of 2,051 million 

US dollars. Net proceeds from the issue were 980 million US dollars (1,689 million Swiss francs). 

These have been initially allocated as 3,535 million Swiss francs of debt, 1,978 million Swiss francs 

of unamortised discount, 86 million Swiss francs of equity (in respect of the conversion option 

embedded in the bonds) and 46 million Swiss francs of deferred tax liability. 


The carrying value of the Group’s debt instruments is given in the table below. 

Effective interest rate 2002 2001 

Swiss franc bonds 

‘Bullet’ 2% due 2003, principal 1.25 billion Swiss francs 2.20% 1,249 1,247 

‘Rodeo’ 1.75% due 2008, principal 1 billion Swiss francs 2.92% 945 933 

US dollar bonds 

‘Chameleon’ 6.75% due 2009, principal 1 billion US dollars 6.85% 1,377 1,667 

Japanese yen bonds 

‘Samurai’ 1% due 2002, principal 100 billion Japanese yen – – 1,263 

Swiss franc convertible bonds 

‘Helveticus’ dividend-linked convertible bonds, due 2003, 

principal 1 billion Swiss francs 2.98% 207 215 

Zero coupon US dollar exchangeable notes 

‘LYONs II’ due 2010, principal 2.15 billion US dollars 7.12% 1,757 1,976 

‘LYONs III’ due 2012, principal 3 billion US dollars 6.48% 2,240 2,532 

‘LYONs IV’ due 2015, principal 1.506 billion US dollars 4.01% 1,259 1,462 

‘LYONs V’ due 2021, principal 2.051 billion US dollars 4.14% 1,329 1,544 

Japanese yen exchangeable bonds 

‘Sumo’ 0.25% due 2005, principal 104.6 billion Japanese yen 1.47% 1,179 1,265 

Limited conversion preferred stock 3.00% 3 7 

Japanese yen convertible bonds issued by Chugai 1.05% 41 – 

Total debt instruments 11,586 14,111 

Swiss franc convertible bonds 

‘Helveticus’: An annual payment distribution amount is paid on 31 July for each bond of 

CHF 9,530 par value in the place of a fixed rate of interest. This annual payment distribution 

amount equals two hundred times the ordinary and/or extraordinary dividend declared on one 

non-voting equity security of Roche Holding Ltd for the business year ended on 31 December 

which was nineteen months prior to 31 July for the relevant year. Each bond is exchangeable for 

one hundred non-voting equity securities of Roche Holding Ltd at any time during the life of the 

bond. In accordance with the terms of the bonds an additional cash payment of CHF 200 is made 

upon conversion of each bond. 

Zero coupon US dollar exchangeable notes 

‘LYONs II’: The notes are exchangeable for American Depositary Shares (ADSs) at an adjusted 

exchange ratio of 4.84495 exchange ADSs per USD 1,000 principal amount at maturity of the 

notes. The Group will purchase any note for cash, at the option of the holder, on 20 April 2003 for 

a purchase price per USD 1,000 principal amount of the notes of USD 617.78. In addition, the 

notes will be redeemable at the option of the Group in whole or in part at any time after 20 April 

2003 at the issue price plus accrued original issue discount (OID). 


‘LYONs III’: The notes are exchangeable for ADSs at an exchange ratio of 3.62514 exchange 

ADSs per USD 1,000 principal amount at maturity of the notes. The Group will purchase any 

note for cash, at the option of the holder, on 6 May 2004 and 6 May 2008 for a purchase price per 

USD 1,000 principal amount of the notes of USD 605.29 and USD 778.01, respectively. In addition, 

the notes will be redeemable at the option of the Group in whole or in part at any time after 

6 May 2004 at the issue price plus accrued original issue discount (OID). 

‘LYONs IV’: The notes are exchangeable for Genentech shares at an exchange ratio of 8.65316 

Genentech shares per USD 1,000 principal amount at maturity of the notes. The Group has the 

right to pay cash equal to the market value of the Genentech shares in lieu of delivering Genentech 

shares. The Group will purchase any note for cash, at the option of the holder, on 19 January 

2004 and 19 January 2010 for a purchase price per USD 1,000 principal amount of the notes of 

USD 740.49 and USD 872.35, respectively. In addition, the notes will be redeemable at the option 

of the Group in whole or in part at any time after 19 January 2004 at the issue price plus accrued 

original issue discount (OID). 

‘LYONs V’: The notes are exchangeable for ADSs at an exchange ratio of 5.33901 exchange 

ADSs per USD 1,000 principal amount at maturity of the notes. The Group will purchase any note 

for cash, at the option of the holder, on 25 January 2005, 25 July 2007 and 25 July 2011 for 

a purchase price per USD 1,000 principal amount of the notes of USD 552.79, USD 604.74 and 

USD 698.20, respectively. In addition, the notes will be redeemable at the option of the Group 

in whole or in part at any time after 25 July 2007 at the issue price plus accrued original issue 

discount (OID). 

Japanese yen exchangeable bonds 

‘Sumo’: Each bond of JPY 1,410,000 par value is exchangeable for one hundred non-voting equity 

securities of Roche Holding Ltd at an exchange ratio of 1.03292. The bonds will be redeemable at 

maturity at the issue price (96.4%) plus accrued original issue discount (OID) at 100%. 

Unamortised discount 

Included within the carrying value of debt instruments are the following unamortised discounts: 


Swiss franc bonds 57 70 

US dollar bonds 10 13 

Japanese yen bonds – 17 

Swiss franc convertible bonds – 1 

Zero coupon US dollar exchangeable notes 5,493 7,115 

Japanese yen exchangeable bonds 44 74 

Total unamortised discount 5,604 7,290 

30. Derivative financial instruments 


In appropriate circumstances the Group uses derivative financial instruments as part of its risk 

management and trading strategies. This is discussed in Note 2. Derivative financial instruments 

are carried at fair value. The methods used for determining fair value are described in Note 1. 



Foreign currency derivatives 

– forward exchange contracts and swaps 198 25 

– options 2 21 

Interest rate derivatives 

– swaps (193) (83) 

– other – 1 

Other derivatives 216 44 

Total carrying value of derivative financial instruments 223 8 

Asset (liability) recognised 

Other current assets 21 485 661 

Accrued and other current liabilities 24 (262) (653) 

Total net asset (liability) recognised 223 8 

Hedge accounting 

The Group’s accounting policy on hedge accounting, which is described in Note 1, requires that 

to qualify for hedge accounting the hedging relationship must meet several strict conditions on 

documentation, probability of occurrence, hedge effectiveness and reliability of measurement. 

As described in Note 2, the Group has financial risk management policies, which cover foreign 

exchange risk, interest rate risk, market risk, credit risk and liquidity risk. When deemed appropriate, 

certain of the above risks are altered through the use of derivatives. While many of these 

transactions can be considered as hedges in economic terms, if the required conditions are not 

met, then the relationship does not qualify for hedge accounting. In this case the hedging instrument 

and the hedged item are reported independently as if there were no hedging relationship, 

which means that any derivatives are reported at fair value, with changes in fair value included in 

financial income (expense). 

Due to the considerable administrative cost of maintaining the necessary documentation and 

tracking procedures, the Group generally limits the use of hedge accounting to certain significant 

transactions. Consequently as at 31 December 2002 the Group has no fair value hedges, cash 

flow hedges or hedges of net investment in a foreign entity that meet the strict requirements to 

qualify for hedge accounting, apart from those described below for the Group’s subsidiary, 

Genentech. These are also described in Genentech’s annual report and quarterly SEC filings. 

Genentech has equity investments in various biotechnology companies that are subject to a 

greater risk of market fluctuation than the stock market in general. To manage part of this exposure 

Genentech enters into derivative financial instruments such as zero cost collars and forward 

contracts. Genentech has non-US dollar cash flows from future royalty income and development 

expenses expected over the next one to five years. To hedge part of this transaction exposure 

Genentech enters into derivative financial instruments such as options and forward contracts. 

Genentech also has anticipated cash flows from its interest-bearing investments, which are 

exposed to changes in interest rates. To manage part of this risk Genentech enters into interest 

rate swap agreements, which effectively convert part of the expected interest income from variable 

to fixed rate. These swaps were terminated in 2002, when it was determined that the forecasted 

transaction was unlikely to occur, and a gain of 11 million US dollars (17 million Swiss 

francs) was recognised in financial income (expense). Movements on the fair value reserve for 

designated cash flow hedges are included in Note 27. 


Restructuring Other 2002 2001 

provisions provisions Total Total 

At beginning of year 596 3,371 3,967 3,995 

Chugai 6 – 12 12 – 

Other changes in Group organisation 3 – – – 18 

Pharmaceuticals Division restructuring 7 

– additional provisions created 104 – 104 605 

– unused amounts reversed (2) – (2) – 

– utilised during the year (156) – (156) (239) 

Vitamin case 8 

– additional provisions created – 1,770 1,770 760 

– utilised during the year – (3,266) (3,266) (330) 

Major legal cases 9 

– additional provisions created – 778 778 – 

– utilised during the year – – – – 

Other provisions 

– additional provisions created 88 206 294 176 

– unused amounts reversed (37) (53) (90) (296) 

– utilised during the year (54) (265) (319) (660) 

Increase in discounted amount due to passage 

of time or change in discount rate 12 – 152 152 97 

Currency translation effects and other (16) (368) (384) (159) 

At end of year 523 2,337 2,860 3,967 

Of which: 

Current portion of provisions 245 913 1,158 1,852 

Non-current portions of provisions 278 1,424 1,702 2,115 

Total provisions 523 2,337 2,860 3,967 

Restructuring provisions arise from planned programmes that materially change the scope of 

business undertaken by the Group or the manner in which business is conducted. Such provisions 

include only the costs necessarily entailed by the restructuring which are not associated with 

the on-going activities of the Group. The creation of such provisions is recorded as a charge 

against other operating income, except where they arise from the restructuring of newly acquired 

companies, in which case they are included in the acquisition accounting and hence form part 

of the goodwill. See also Note 7 regarding the Pharmaceuticals Division restructuring. 

Other provisions consist mainly of legal, environmental and similar matters. Other provisions 

include provisions in respect of the vitamin case (see Note 8) and major legal cases (see Note 9). 

32. Contingent liabilities 

The operations and earnings of the Group continue, from time to time and in varying degrees, 

to be affected by political, legislative, fiscal and regulatory developments, including those relating 

to environmental protection, in the countries in which it operates. The industries in which the 

Group is engaged are also subject to physical risks of various kinds. The nature and frequency of 

these developments and events, not all of which are covered by insurance, as well as their 

effect on future operations and earnings are not predictable. 

See also Note 8 in respect of the vitamin case and Note 9 in respect of major legal cases. 


33. Cash flow statement 


Cash flows from operating activities 

Cash flows from operating activities are those derived from the Group’s primary activities, 

as described in the divisional review. This is calculated by the indirect method, by adjusting the 

Group’s operating profit for any operating income and expenses that are not cash flows (for 

example depreciation, amortisation and impairment) in order to derive the cash generated from 

operations. This and other operating cash flows are shown in the cash flow statement. Operating 

cash flows also include income taxes paid on all activities, including, for example, the taxes 

paid on the gains from LabCorp share sales. 


Net income (4,026) 3,697 

Add back non-operating (income) expense 

– Financial income (expense), net 12 (663) (1,515) 

– Impairment of financial assets 12 5,192 – 

– Income taxes 13 839 1,038 

– Income applicable to minority interests 28 (41) 34 

– Share of result of associated companies 16 34 (7) 

Operating profit 1,335 3,247 

Depreciation of property, plant and equipment 14 1,461 1,433 

Amortisation of intangible assets 15 1,520 1,553 

Impairment of long-term assets 14, 15 13 18 

Changes in Group organisation 3 1,064 – 

Chugai transaction: write-off of fair value adjustments to inventories 6 87 – 

Charge for Pharmaceuticals Division restructuring 7 154 777 

Charge for vitamin case 8 1,770 760 

Charge for major legal cases 9 778 – 

Expense for defined benefit post-employment plans 10 279 264 

Other adjustments 157 (114) 

Cash generated from operations 8,618 7,938 

Cash flows from financing activities 

Cash flows from financing activities are primarily the proceeds from issue and repayments of the 

Group’s equity and debt instruments. They also include interest payments and dividend payments 

on these instruments. Cash flows from short-term financing, including finance leases, are also 

included. These cash flows indicate the Group’s transactions with the providers of its equity and 

debt financing. Cash flows from short-term borrowings are shown as a net movement, as these 

consist of a large number of transactions with short maturity. 

Proceeds from issue of long-term debt 2002 2001 

‘LYONs V’ zero coupon exchangeable US dollar notes due 2021 29 – 1,689 

Long-term bank loans and other borrowings 29 274 421 

Total 274 2,110 

Repayment of long-term debt 2002 2001 

Repayment of ‘Samurai’ 1% Japanese yen bonds 29 (1,258) – 

Repayment of ‘Bull Spread’ 2.75% US dollar bonds 29 – (1,734) 

Long-term bank loans and other borrowings 29 (442) (1,074) 

Total (1,700) (2,808) 


Interest and dividends paid 2002 2001 

Interest paid (693) (919) 

Dividends paid 25 (1,101) (981) 

Total (1,794) (1,900) 

Cash flows from investing activities 

Cash flows from investing activities are principally those arising from the Group’s investments 

in property, plant and equipment and intangible assets, and from the acquisition and divestment 

of subsidiaries, associated companies and businesses. Cash flows connected with the Group’s 

portfolio of marketable securities and other investments are also included as are any interest and 

dividend payments received in respect of these securities and investments. These cash flows 

indicate the Group’s net reinvestment in its operating assets and the cash flow effects of the 

changes in Group organisation, as well as the cash generated by the Group’s other investments. 

Cash flows from marketable securities, including income and capital gains and losses, are 

shown as a net movement on the Group’s portfolio, as these consist of a large number of positions 

which are not held on a long-term basis. The cash flows from LabCorp transactions (see Note 12) 

are shown as a separate line in the cash flow statement. The cash flows in respect of Chugai 

consist of cash payments by Roche to third parties less the cash held by Chugai when acquired. 

Acquisitions of subsidiaries, associated companies and products 2002 2001 

Chugai 6 (483) – 

Antisoma 16 (9) – 

Amira 3 – (159) 

Other acquisitions – (16) 

Total (492) (175) 

Divestments of subsidiaries, associated companies and products 2002 2001 

Neupogen 11 217 – 

Other divestments – – 

Total 217 – 

Interest and dividends received 2002 2001 

Interest received 428 672 

Dividends received 77 161 

Total 505 833 

34. Subsequent events 

Acquisition of Disetronic 

On 10 February 2003 Roche and Disetronic announced plans under which the Group would 

acquire Disetronic. Disetronic is a world leader in the research, development and commercialisation 

of insulin pumps and injection systems for the treatment of diabetes. It is a public company 

headquartered in Burgdorf, Switzerland. After the completion of the acquisition Disetronic’s 

Infusion Systems division will become part of Roche Diagnostics’ Diabetes Care business area. 

The Group will not acquire Disetronic Injection Systems, which will be sold to Disetronic’s founder 

and chairman and will continue to operate as an independent company. 

The Group will offer shareholders of Disetronic 670 Swiss francs in cash and two Roche nonvoting 

equity securities for each Disetronic share. The proposed acquisition is subject to approval 

from the competition authorities and by Disetronic’s shareholders. The total cost of the acquisition 

is expected to be approximately 1.6 billion Swiss francs. The expected proceeds from the 

resale of the Injection Systems division are in the order of 400 million Swiss francs. 


Report of the Group Auditors 

To the General Meeting of Roche Holding Ltd, Basel 

As auditors of the Group, we have audited the Consolidated Financial Statements of the Roche 

Group on pages 72 to 118 for the year ended 31 December 2002. 

These Consolidated Financial Statements are the responsibility of the Board of Directors of 

Roche Holding Ltd. Our responsibility is to express an opinion on these Consolidated Financial 

Statements based on our audit. We confirm that we meet the Swiss legal requirements concerning 

professional qualification and independence. 

Our audit was conducted in accordance with auditing standards promulgated by the Swiss 

profession and with the International Standards on Auditing, which require that an audit be planned 

and performed to obtain reasonable assurance about whether the Consolidated Financial 

Statements are free from material misstatement. We have examined on a test basis evidence 

supporting the amounts and disclosures in the Consolidated Financial Statements. We have 

also assessed the accounting principles used, significant estimates made and the overall 

consolidated financial statement presentation. We believe that our audit provides a reasonable 

basis for our opinion. 

In our opinion, the Consolidated Financial Statements of the Roche Group present fairly, in all 

material respects, the financial position as of 31 December 2002, and the results of operations 

and the cash flows for the year then ended in accordance with the International Financial 

Reporting Standards, and comply with Swiss law. 

We recommend that the Consolidated Financial Statements submitted to you be approved. 

PricewaterhouseCoopers AG 

William D. Kirst 

Clive A.J. Bellingham 

Basel, 24 February 2003 

Report of the Group Auditors 119

Multi-Year Overview 

Statistics, as reported 1993 1994 


Statement of income 

Sales 14,315 14,748 

EBITDA 3,278 3,635 

Operating profit 2,348 2,656 

Net income 2,478 2,860 

Research and development 2,269 2,332 


Balance sheet 

Long-term assets 9,522 13,549 

Current assets 21,404 22,684 


Equity 17,914 16,422 

Minority interests 625 861 

Non-current liabilities 7,921 10,034 

Current liabilities 4,466 8,916 

Additions to property, plant and equipment 1,407 1,355 

Personnel 

Number of employees at end of year 56,082 61,381 

Key ratios 

Net income as % of sales 17 19 

Net income as % of equity 14 17 

Research and development as % of sales 16 16 

Current ratio % 479 254 

Equity and minority interests as % of total assets 60 48 

Sales per employee in thousands of CHF 255 240 

Data on shares and non-voting equity securities 

Number of shares 1,600,000 1,600,000 

Number of non-voting equity securities (Genussscheine) 7,025,627 7,025,627 

Total shares and non-voting equity securities 8,625,627 8,625,627 

Total dividend in millions of CHF 404 474 

Earnings per share and non-voting equity security (diluted) in CHF 287 332 

Dividend per share and non-voting equity security in CHF 48 55 

Cash and warrants in addition to dividend (adjusted) in CHF – 77 a) 

Cash and warrants in addition to dividend (unadjusted) in CHF – 153 a) 

Information in this table is stated as reported. Changes in accounting policy arising from changes in International Financial Reporting 

Standards and the 100 for 1 stock split in 2001 are not applied retrospectively. 

a) If 1991 warrants held to final exercise date. 

b) In addition to the normal dividend, the shareholders approved for each share and each non-voting equity security a special RO 100 

centenary warrant worth CHF 36 on date of issue or, at the holder’s option, a cash equivalent of CHF 36. 

c) 1997 net income and related key ratios are shown after special charges of 6,308 million Swiss francs, net of tax, incurred following 

the Corange acquisition and include Corange only in respect of balance sheet data. 

120 Multi-Year Overview

1995 1996 1997 c) 1998 1999 2000 2001 2002 

14,722 15,966 18,767 24,662 27,567 28,672 29,163 29,725 

4,176 4,629 5,076 6,423 8,874 11,126 6,438 6,032 

3,057 3,420 3,590 4,350 6,421 7,131 3,247 1,335 

3,372 3,899 (2,031) 4,392 5,764 8,647 3,697 (4,026) 

2,290 2,446 2,903 3,408 3,782 3,950 3,893 4,257 

12,632 15,487 32,453 27,952 35,800 34,798 36,411 33,143 

22,932 24,289 22,323 27,927 34,631 34,737 38,875 30,852 

35,564 39,776 54,776 55,879 70,431 69,535 75,286 63,995 

17,554 20,780 18,250 21,666 26,954 27,608 28,973 20,810 

799 835 1,187 1,149 3,047 4,428 4,894 4,963 

11,554 12,727 21,181 21,416 25,574 23,642 25,772 22,850 

5,657 5,434 14,158 11,648 14,856 13,857 15,647 15,372 

1,490 1,624 1,802 1,883 2,150 2,183 1,931 2,044 

50,497 48,972 51,643 66,707 67,695 64,758 63,717 69,659 

23 24 –11 18 21 30 13 –14 

19 19 –11 20 21 31 13 –19 

16 15 15 14 14 14 13 14 

405 447 158 240 233 251 248 201 

51 54 36 41 43 46 45 40 

292 326 363 370 407 443 458 427 

1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 160,000,000 160,000,000 

7,025,627 7,025,627 7,025,627 7,025,627 7,025,627 7,025,627 702,562,700 702,562,700 

8,625,627 8,625,627 8,625,627 8,625,627 8,625,627 8,625,627 862,562,700 862,562,700 

552 647 716 750 863 e) 992 1,121 1,251 f) 

391 452 (235) 509 668 1,024 4.37 (4.80) 

64 b) 75 83 87 100 e) 115 1.30 1.45 f) 

– 36 – 190 d) – – – – 

– 36 – 190 d) – – – – 

d) If 1996 warrants held to final exercise date. 

e) Dividend 1999 does not include the special dividend relating to the spin-off of the Fragrances and Flavours Division. 

f) Dividend 2002 as proposed by the Board of Directors. 

Multi-Year Overview 121

Sales by division in millions of CHF 1998 1999 2000 2001 2002 

Pharmaceuticals 14,376 16,487 17,686 18,723 19,095 

Diagnostics 4,616 5,282 6,252 6,900 7,239 

Vitamins and Fine Chemicals 3,630 3,649 3,571 3,540 3,391 

Fragrances and Flavours 2,040 2,149 1,163 – – 

Total 24,662 27,567 28,672 29,163 29,725 


Sales by geographical area 

Switzerland 445 455 509 513 532 

European Union 8,799 9,326 9,012 9,000 9,067 

Rest of Europe 1,017 1,090 1,266 1,282 1,439 

Europe 10,261 10,871 10,787 10,795 11,038 

North America 8,698 10,130 10,636 11,264 11,297 

Latin America 2,455 2,577 2,928 2,827 2,393 

Japan 1,156 1,460 1,580 1,589 2,243 

Rest of Asia 1,297 1,649 1,814 1,829 1,805 

Asia 2,453 3,109 3,394 3,418 4,048 

Africa, Australia and Oceania 795 880 927 859 949 

Total 24,662 27,567 28,672 29,163 29,725 

122 Multi-Year Overview

Additions to property, plant and equipment by division 


1998 1999 2000 2001 2002 

Pharmaceuticals 858 963 1,132 1,051 1,047 

Diagnostics 439 568 603 558 666 

Vitamins and Fine Chemicals 442 450 372 284 298 

Fragrances and Flavours 144 165 68 – – 

Others – 4 8 38 33 

Total 1,883 2,150 2,183 1,931 2,044 


Additions to property, plant and equipment by geographical area 

Switzerland 295 335 361 272 298 

European Union 703 826 731 613 598 

Rest of Europe 28 30 31 51 79 

Europe 1,026 1,191 1,123 936 975 

North America 591 668 610 717 783 

Latin America 98 133 229 138 115 

Japan 46 59 53 45 81 

Rest of Asia 95 65 120 67 62 

Asia 141 124 173 112 143 

Africa, Australia and Oceania 27 34 48 28 28 

Total 1,883 2,150 2,183 1,931 2,044 

Multi-Year Overview 123

Roche Securities 

Share price performance 

in CHF 

Roche share (adjusted) 


300 

250 

200 

150 

100 

50 

0 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 


Non-voting equity security (Genussschein) price performance 

in CHF 

Roche non-voting equity security (adjusted) 


200 

160 

120 

80 

40 

0 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 


American Depositary Receipt (ADR) price performance 

in USD 

Roche ADR (adjusted) 

S&P 500 Index (rebased) 

140 

120 

100 

80 

60 

40 

20 

0 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 


One Roche American Depositary Receipt (ADR) is equivalent to one non-voting equity security (Genussschein). 

ADRs have been traded in the United States over-the-counter market since July 1992. 

124 Roche Securities

Number of shares and non-voting equity securities a) 1998 1999 2000 2001 2002 

Number of shares 

(nominal value 1998–2000: CHF 100, 

2001–2002: CHF 1.00) 1,600,000 1,600,000 1,600,000 160,000,000 160,000,000 

Number of non-voting equity securities 

(Genussscheine) (no nominal value) 7,025,627 7,025,627 7,025,627 702,562,700 702,562,700 

Total 8,625,627 8,625,627 8,625,627 862,562,700 862,562,700 

c) in CHF 

Data per share and non-voting equity security 

Net income 509 668 1,024 4.37 (4.80) 

Equity 2,512 3,125 3,201 33.59 24.13 

Dividend 87 100 d) 115 1.30 1.45 e) 

Stock price of share b) High 26,278 27,348 26,375 201.00 195.00 

Low 20,633 24,210 16,800 114.00 130.50 

Year-end 24,210 25,305 20,100 136.00 175.00 

Stock price of non-voting High 17,112 18,760 18,755 165.35 132.75 

equity security Low 13,085 15,489 14,900 95.10 92.00 

(Genussschein) b) Year-end 16,245 18,319 16,510 118.50 96.35 

Historic stock price (unadjusted) 

Shares Year-end 24,875 26,000 20,100 136.00 175.00 

Non-voting equity securities 

(Genussschein) Year-end 16,760 18,900 16,510 118.50 96.35 


Market capitalisation (unadjusted) 

Year-end 157,550 174,384 148,153 105,014 95,692 

Key ratios (year-end) 

Net income as % of equity 20 21 31 13 –19 

Dividend yield of shares in % 0.3 0.4 0.6 1.0 0.8 

Dividend yield of non-voting equity 

securities (Genussscheine) in % 0.5 0.5 0.7 1.1 1.5 

Price/earnings of shares (unadjusted) 49 39 20 31 –36 

Price/earnings of non-voting equity 

securities (Genussscheine) (unadjusted) 33 28 16 27 –20 

Ticker symbols 

a) Each non-voting equity security (Genussschein) confers the same rights as any of the shares to participate in the available 

earnings and any remaining proceeds from liquidation following repayment of the nominal value of the shares and 

the participation certificate capital (if any). Shares and non-voting equity securities are listed on the Swiss Exchange. 

Roche Holding Ltd has no restrictions as to ownership of its shares or non-voting equity securities. 

b) All stock price data reflect daily closing prices. Stock price figures prior to 8 June 2000 are adjusted for the effects of 

the Givaudan spin-off. The adjustment factors used are 0.97325 (shares) and 0.96925 (non-voting equity securities), 

which are the factors used by independent financial institutions. 

c) The net income per share (prior to 2000) and market capitalisation figures assume that the own equity instruments held 

are outstanding. 

d) 1999 dividend does not include the special dividend relating to the spin-off of the Fragrances and Flavours Division. 

e) 2002 dividend as proposed by the Board of Directors. 

Share Non-voting American 

equity security Depositary Receipt 

Reuters ROCZ.S ROCZg.S ROHHY.PK 

Bloomberg RO SW ROG SW ROHHY US 

SWX Swiss Exchange RO ROG – 

Roche Securities 125

Outstanding issues 

Summarised issue terms 

‘LYONs II’ 1995 to 20 April 2010 

Face value: USD 2,150,000,000 

Coupon: Zero 

Issuer: Roche Holdings, Inc. 

Keep well: Roche Holding Ltd 

Exchange right: Roche ADSs 

Roche call: Any time after 20 April 2003 

‘Helveticus’ 1995 to 31 July 2003 

Face value: CHF 1,000,650,000 

Coupon: 200 times ordinary and/or 

extra-ordinary dividend on non-voting 

equity securities (Genussscheine) 

Issuer: Roche Capital Market 

International Limited 


Conversion right: Roche non-voting equity 

Securities (Genussscheine) 

‘LYONs III’ 1997 to 6 May 2012 


Coupon: Zero 




Roche call: Any time after 6 May 2004 

Exchange terms and warrants 

The notes are exchangeable for American Depositary Shares 

(ADSs) at an adjusted exchange ratio of 4.84495 exchange 

ADSs per USD 1,000 principal amount at maturity of the notes. 

The exchange ratio was changed in accordance with the indenture 

agreement, dated 20 April 1995, with an effective date of 

4 May 2001. The Group will purchase any note for cash, at the 

option of the holder, on 20 April 2003 for a purchase price 

per USD 1,000 principal amount of the notes of USD 617.78. 

In addition, the notes will be redeemable at the option of the 

Group in whole or in part at any time after 20 April 2003 at 

the issue price plus accrued original issue discount (OID). 

Each bond of CHF 9,530 par value is exchangeable for one hundred 

non-voting equity securities of Roche Holding Ltd at any 

time during the life of the bond. In accordance with the terms of 

the bonds an additional cash payment of CHF 200 is made upon 

conversion of each bond of CHF 9,530 par value. 


(ADSs) at an exchange ratio of 3.62514 exchange ADSs per 

USD 1,000 principal amount at maturity of the notes. The exchange 

ratio was changed in accordance with the indenture agreement, 

dated 6 May 1997, with an effective date of 4 May 2001. The 

Group will purchase any note for cash, at the option of the holder 

on 6 May 2004 and 6 May 2008 for a purchase price per USD 1,000 

principal amount of the notes of USD 605.29 and USD 778.01, 

respectively. In addition, the notes will be redeemable at the 

option of the Group in whole or in part at any time after 6 May 2004 

at the issue price plus accrued original issue discount (OID). 

‘Rodeo’ 1998 to 20 March 2008 The warrants expired unexercised on 20 March 2001. 


Coupon: 1.75% 

Issuer: Roche Kapitalmarkt AG 


Attached warrants: Roche non-voting equity 

securities (Genussscheine) 

‘Bullet’ 1998 to 21 March 2003 


Coupon: 2% 

Issuer: Roche International Finance 

Corporation Limited 


126 Roche Securities

Outstanding issues 

Summarised issue terms 

‘Chameleon’ 1999 to 6 July 2009 


Coupon: 6.75% 



‘LYONs IV’ 2000 to 19 January 2015 


Coupon: Zero 



Exchange right: Genentech common stock 

Roche call: Any time after 19 January 2004 

‘Sumo’ 2000 to 25 March 2005 

Face value: JPY 104,600,000,000 

Coupon: 0.25% 



Exchange right: Roche non-voting equity 

securities (Genussscheine) 

‘LYONs V’ 2001 to 25 July 2021 


Coupon: Zero 




Roche call: Any time after 25 July 2007 

Exchange terms and warrants 

– 

The notes are exchangeable for Genentech shares at an 

exchange ratio of 8.65316 Genentech shares per USD 1,000 

principal amount at maturity of the notes. The Group has the 

right to pay cash equal to the market value of the Genentech 

shares in lieu of delivering Genentech shares. The Group 

will purchase any note for cash, at the option of the holder, 

on 19 January 2004 and 19 January 2010 for a purchase price 

per USD 1,000 principal amount of the notes of USD 740.49 

and USD 872.35, respectively. In addition, the notes will be 

redeemable at the option of the Group in whole or in part at 

any time after 19 January 2004 at the issue price plus accrued 

original issue discount (OID). 

Each bond of JPY 1,410,000 par value is exchangeable for one 

hundred non-voting equity securities of Roche Holding Ltd at 

an exchange ratio of 1.03292. The bonds will be redeemable at 

maturity at the issue price (96.4%) plus accrued original issue 

discount (OID) at 100%. 

In accordance with the terms of the bonds the exchange ratio 

was adjusted as of 8 June 2000 and 4 May 2001. 


(ADSs) at an exchange ratio of 5.33901 exchange ADSs per 

USD 1,000 principal amount at maturity of the notes. The Group 

will purchase any note for cash, at the option of the holder 

on 25 January 2005, 25 July 2007 and 25 July 2011 for a purchase 

price per USD 1,000 principal amount of the notes 

of USD 552.79, USD 604.74 and USD 698.20, respectively. 

In addition, the notes will be redeemable at the option of 

the Group in whole or in part at any time after 25 July 2007 

at the issue price plus accrued original issue discount (OID). 

Roche Securities 127

Income statement in millions of CHF 2002 2001 


Financial Statements 

Income 

Income from participations 1,536 1,384 

Interest income from loans to Group companies 58 78 

Interest and investment income 9 5 

Other income 63 156 

Total income 1,666 1,623 

Expenses 

Financial expenses – (5) 

Administration expenses (17) (17) 

Other expenses (96) (147) 

Total expenses (113) (169) 

Profit for the year before taxes 1,553 1,454 

Taxes (7) (6) 

Net profit for the year 1,546 1,448 

128 Financial Statements

Balance sheet at 31 December in millions of CHF 2002 2001 

Long-term assets 

Participations 3,835 3,835 

Loans to Group companies 1,163 1,228 

Total long-term assets 4,998 5,063 

Current assets 

Accounts receivable from Group companies 2,771 2,624 

Other accounts receivable 4 3 

Prepaid expenses and accrued income – 1 

Marketable securities 67 8 

Liquid funds 353 541 

Total current assets 3,195 3,177 


Equity 

Share capital 160 160 

Non-voting equity securities (Genussscheine) p.m. p.m. 

General legal reserve 300 300 

Free reserve 3,889 3,559 

Special reserve 2,152 2,152 

Available earnings: 

– Balance brought forward from previous year 4 7 

– Net profit for the year 1,546 1,448 

Total equity 8,051 7,626 

Non-current liabilities 

Provisions 35 45 

Total non-current liabilities 35 45 

Current liabilities 

Accounts payable to Group companies 99 562 

Other liabilities 7 1 

Accrued liabilities 1 6 

Total current liabilities 107 569 

Total liabilities 142 614 

Total equity and liabilities 8,193 8,240 

p.m. = pro memoria. Non-voting equity securities have no nominal value. 

Financial Statements 129

Notes to the Financial Statements 

General 

The financial statements of Roche Holding Ltd, Basel, are prepared in accordance with the 

provisions of Swiss company law and accepted business principles. 

Valuation methods and translation of foreign currencies 

In the balance sheet, assets and liabilities are disclosed at net realisable values. Exceptions 

to this rule are participations, which are shown at their acquisition values less appropriate 

write-downs, and marketable securities, which are shown at the lower of cost or market value. 

Unrealised foreign currency gains on balance sheet items are deferred. Expenses and income, 

as well as foreign currency transactions, are translated at exchange rates ruling at the relevant 

transaction dates. 

Details to specific items 

Income 

Taxes 

Equity 

Total income of 1,666 million Swiss francs in 2002 is 43 million Swiss francs higher than in the 

previous year mainly due to better operating income. 

The tax charge includes corporate income and capital taxes, withholding taxes and stamp duty. 

Total equity equals 98% of total assets. 

Share capital 

As in the previous year, share capital amounts to 160 million Swiss francs. 

The share capital consists of 160,000,000 bearer shares with a nominal value of 1 Swiss franc. 

There are 702,562,700 non-voting equity securities (Genussscheine) with no nominal value. 

Guarantees 

Guarantees in favour of Group companies total 65 million Swiss francs (previous year 4 million 

Swiss francs). 

At the time of preparing the balance sheet no risks arising out of these contingent liabilities were 

discernible. 

Pledged assets 

Assets with a total book value of 8 million Swiss francs (as in the previous year) have been 

pledged as security for the Company’s own commitments. 

130 Notes to the Financial Statements

Participations 

The major participations are listed on pages 136 to 137. 

Important shareholders 

All shares in the Company have been issued to bearer, and for this reason the Company does 

not keep a register of shareholders. The following figures are based on information from shareholders, 

the shareholder validation check at the Annual General Meeting of 16 April 2002 and 

on other information available to the Company. 

80,020,000 (previous year 80,020,000) shares: Shareholders’ group with pooled voting rights, 

comprising Dr L. Hoffmann, Ms V. Michalski-Hoffmann, Ms M.-A. Hoffmann, Mr A. Hoffmann, 

Ms V. Oeri-Hoffmann, Dr A. Oeri, Ms S. Duschmalé-Oeri, Ms C. Oeri, Ms B. Oeri, Ms M. Oeri 

and Dr F. Gerber. a) 

52,291,863 shares: Novartis International Ltd, Basel including Affiliates thereof. b) 

a) Information supplied by the shareholders as of 31 December 2002. This figure of 80,020,000 shares does not include 

shares without pooled voting rights held outside the group by individual members of the group. 

b) Figures as of 31 December 2002 supplied by Novartis International Ltd, Basel. 

Notes to the Financial Statements 131

Proposals to the General Meeting in CHF 2002 2001 

Appropriation of Available Earnings 

Available earnings 

Net profit for the year 1,546,310,129 1,447,761,855 

Balance brought forward from previous year 3,896,751 7,466,406 

Total available earnings 1,550,206,880 1,455,228,261 

Appropriation of available earnings 

Distribution of an ordinary dividend of CHF 1.45 gross 

per share and non-voting equity security (Genussschein) 

as against CHF 1.30 last year (1,250,715,915) (1,121,331,510) 

Transfer to free reserve (295,000,000) (330,000,000) 

Total appropriation of available earnings (1,545,715,915) (1,451,331,510) 

To be carried forward on this account 4,490,965 3,896,751 

132 Appropriation of Available Earnings

Report of the Statutory Auditors 

To the General Meeting of Roche Holding Ltd, Basel 

As statutory auditors we have audited the accounting records and the financial statements 

(income statement, balance sheet and notes, pages 128 to 131) of Roche Holding Ltd, Basel, 

for the year ended 31 December 2002. 

These financial statements are the responsibility of the Board of Directors. Our responsibility is 

to express an opinion on these financial statements based on our audit. We confirm that we meet 

the legal requirements concerning professional qualification and independence. 

Our audit was conducted in accordance with auditing standards promulgated by the Swiss 

profession, which require that an audit be planned and performed in such a manner as to obtain 

reasonable assurance about whether the financial statements are free from material misstatement. 

We have examined on a test basis evidence supporting the amounts and disclosures 

in the financial statements. We have also assessed the accounting principles used, significant 

estimates made and the overall financial statement presentation. We believe that our audit provides 

a reasonable basis for our opinion. 

In our opinion, the accounting records, the financial statements and the proposed appropriation 

of available earnings comply with Swiss law and the company’s articles of incorporation. 

We recommend that the financial statements submitted to you be approved. 

Ernst & Young Ltd 

Conrad Löffel 

Jürg Zürcher 

Basel, 24 February 2003 

Report of the Statutory Auditors 133

90° 

70° 

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150° 

180° 

Arctic Circle 

60° 

50° 

40° 

30° 

Tropic of 

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Tropic of 

Capricorn 

30° 

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Roche – 

50° 

90° 

120° 

150° 

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Circle 

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a Global Market Presence 

Sales 

Switzerland 

Manufacturing 


Services, financing 

• Toll manufacturing by third parties 

• • • • • 

• • 

• • • 

• • • • • 

• • 

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• • • • 

• • 

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• • • • 

• • 

• • 

• 

• • • 

• 

• • • • • 

• • 

•• 

• • • • 

• • • • • 

• • • • 

• • • • • 

• • 

Argentina 

Australia 

Austria 

Bangladesh 

Belgium 

Bermuda 

Brazil 

Canada 

Chile 

China 

Colombia 

Costa Rica 

Czech Republic 

Denmark 

Dominican Republic 

Ecuador 

Egypt 

El Salvador 

Finland 

France 

Germany 

Great Britain 

Greece 

Guatemala 

134 Roche – a Global Market Presence

120° 

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90° 

60° 

30° 

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Arctic Circle 

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Guernsey 

Honduras 

Hungary 

India 

Indonesia 

Ireland 

Israel 

Italy 

Japan 

Malaysia 

Mexico 

Morocco 

The Netherlands 

New Zealand 

Nicaragua 

Norway 

Pakistan 

Panama 

Peru 

Philippines 

Poland 

Portugal 

Puerto Rico 

Russia 

Singapore 

• • 

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• • 

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South Africa 

South Korea 

Spain 

Sweden 

Taiwan 

Thailand 

Turkey 

Uruguay 

USA 

Venezuela 

Vietnam 

Roche – a Global Market Presence 135

Subsidiaries and Associated Companies 

The Group holds an interest of over 90% in 

most of the companies listed below. Exceptions 

are marked either with a single dot 

•• = Group interest 50–90% 

or with a double dot 

•• = Group interest < 50%. 

The share capital is shown in millions of local 

currency. 

(–) = share capital of less than 100 local currency 

units. 

Includes changes in Group membership 

up to February 2003. 

Switzerland: F. Hoffmann-La Roche Ltd, Basel, 

150.000 CHF | Roche Ltd, Sisseln, 3.000 CHF | 

Teranol Ltd, Lalden, 2.500 CHF | Roche Pharma 

(Switzerland) Ltd, Reinach, 2.000 | Roche Diagnostics 

(Schweiz) Ltd, Rotkreuz, 1.000 CHF | 

Roche Diagnostics International Ltd, Cham, 

20.000 CHF | Roche Vitamins Europe Ltd, Birsfelden, 

1.000 CHF | Roche Instrument Center Ltd, 

Rotkreuz, 5.000 CHF | Roche Consumer Health 

Ltd, Kaiseraugst, 8.000 CHF | Roche Vitamins Ltd, 

Basel, 50.000 CHF | IMIB Institute for Medical 

Informatics and Biostatistics Ltd., Basel, 0.130 CHF | 

••Basilea Pharmaceutica Ltd, Basel, 50.000 CHF | 

Roche Finanz AG, Basel, 409.151 CHF | Roche 

Kapitalmarkt AG, Basel, 1.000 CHF | Roche Treasury 

Management Europe Ltd, Basel, 0.200 CHF | 

Roche Vitamins Holding AG, Basel, 1.000 CHF | 

Roche Holding AG, Basel, 160.000 CHF | Valorfides 

AG, Chur, 0.250 CHF | Syntex Corporation, 

Basel, 0.165 CHF | •Rabbit-Air Ltd., Zurich-Kloten, 

3.000 CHF | Pharmexbio Ltd., Zug, 0.050 CHF. 

Argentina: Productos Roche S.A. Química e 

Industrial, Buenos Aires, 3.000 ARS | Roche Vitaminas 

Argentina S.A., Buenos Aires, 1.827 ARS. 

Australia: Roche Products Pty. Limited, Dee Why, 

65.000 AUD | Roche Vitamins Australia Pty. 

Limited, French Forest, 17.500 AUD | Syntex Australia 

Limited, North Sydney, 25.100 AUD | Roche 

Diagnostics Australia Pty. Limited, Castle Hill, 

5.000 AUD. Austria: Roche Austria GmbH, 

Vienna,14.535 EUR | Roche Diagnostics GmbH, 

Vienna, 1.453 EUR. Bangladesh: Roche 

Bangladesh Ltd., Dhaka, 27.200 BDT. Belgium: N.V. 

Roche S.A., Brussels, 5.000 EUR | S.A. Citrique 

Belge N.V., Tienen, 20.000 EUR | Roche Vitamins 

N.V., Deinze-Astene, 24.790 EUR | Roche Diagnostics 

Belgium SA, Brussels, 3.750 EUR. 

Bermuda: Corange Ltd., Hamilton, 38.000 USD | 

Roche Capital Transactions Limited, Hamilton, 

0.012 USD | Roche Financial Products Limited, 

Hamilton, 0.100 USD | Roche International 

Finance (Bermuda) Ltd, Hamilton, 0.012 USD | 

Roche International Ltd., Hamilton, 0.012 USD | 

Canadian Pharmholding Ltd., Hamilton, 0.120 

USD | Corange International Ltd., Hamilton, 1.000 

USD | Roche Capital Management Ltd., Hamilton, 

1.000 USD | Roche Intertrade Ltd., Hamilton 

10.000 USD | Syntex Pharmaceuticals 

International Ltd, Hamilton, 0.020 USD | Roche 

Healthcare Limited, Hamilton, 1.000 USD. Brazil: 

Produtos Roche Químicos e Farmacêuticos S.A., 

São Paulo, 41.677 BRL | Roche Diagnostics Brasil, 

Ltda., São Paulo, 0.056 BRL | Roche Vitaminas 

Brasil, Ltda., São Paulo, 22.004 BRL. Canada: 

Hoffmann-La Roche Limited, Toronto, 8.783 CAD | 

Roche Vitamins Canada Inc., Cambridge, Ontario 

(–) | Sapac Corporation Ltd., (–) | Chempharm 

Limited, 2.000 CAD. Chile: Productos Roche Ltda., 

Santiago de Chile, 70.891 MXN | Roche Vitaminas 

Chile, S.A., Puerto Varas, 6.000 USD. China: 

Roche (Shanghai) Fine Chemicals Ltd., Shanghai, 

2.250 USD | Roche (China) Limited, Shanghai, 

30.000 USD | •Shanghai Roche Pharmaceuticals 

Limited, Shanghai, 19.500 USD | Roche Shanghai 

Vitamins Ltd., Shanghai, 35.900 USD | Roche 

Zhongya (Wuxi) Citric Acid Ltd, Wuxi, 30.000 USD | 

Roche Diagnostics (Shanghai) Limited, Shanghai, 

1.000 USD | Roche Hong Kong Limited, Hong 

Kong, 10.000 HKD | Roche Diagnostics (Hong 

Kong) Limited, Hong Kong, 10.000 HKD. 

Colombia: Productos Roche S.A., Bogotá, 

1,923.689 COP | Roche Vitaminas Colombia S.A., 

Bogotá, 2,500.000 COP. Costa Rica: Roche Servicios 

S.A., San José, 0.050 USD | Roche Vitaminas 

Costa Rica, S.A., San José, 0.050 USD | Productos 

Roche S.A., San José, 0.050 USD. Czech Republic: 

Roche s.r.o., Prague, 200.000 CZK. Denmark: 

Roche a/s, Hvidovre, 4.000 DKK | Roche Vitamins 

A/S, Hvidovre, 0.500 DKK. Dominican Republic: 

Productos Roche Dominicana S.A., Santo 

Domingo, 0.600 DOP | Roche Vitaminas Dominicana, 

S.A., Santo Domingo, 0.835 DOP. Ecuador: 

Roche Ecuador S.A., Quito, 1.097 USD | Roche 

Vitaminas Ecuador S.A., Quito, 0.350 USD. Egypt: 

Rovigypt Ltd., Giza, 4.500 EGP | Roche (Egypt) 

Ltd., Giza, 0.500 EGP. El Salvador: Productos 

Roche (El Salvador) S.A., San Salvador, 0.022 USD. 

Finland: Roche Oy, Espoo, 0.051 EUR. France: 

Hoffmann-La Roche France SAS., Neuilly-sur- 

Seine, 93.000 EUR | Roche S.A., Neuilly-sur-Seine, 

29.000 EUR | Roche Diagnostics S.A., Meylan, 

20.984 EUR | Roche Vitamines France S.A., 

Village-Neuf, 14.000 EUR | Laboratoires Roche 

Nicholas S.A., Gaillard, 2.744 EUR. Germany: 

Roche Deutschland Holding GmbH, Grenzach- 

Wyhlen, 10.000 DEM | Corange Deutschland 

Holding GmbH, Mannheim, 17.896 EUR | Consulab 

Mannheim GmbH, Mannheim, 0.511 EUR | 

Pharma Waldhof GmbH & Co. KG, Mannheim, 

0.256 EUR | Hoffmann-La Roche Aktiengesellschaft, 

Grenzach-Wyhlen, 61.355 EUR | Roche 

Consumer Health Deutschland GmbH, Eppstein, 

1.023 EUR | Roche Diagnostics GmbH, Mannheim, 

76.694 EUR | Galenus Mannheim GmbH, 

Mannheim, 1.738 EUR | Hestia Health Care 

GmbH, Mannheim, 1.534 EUR | Roche Vitamine 

GmbH, Grenzach-Wyhlen, 1.000 EUR. Great 

Britain: Roche Products Limited, Welwyn Garden 

City, 61.000 GBP | Roche Diagnostics Ltd, Lewes, 

22.600 GBP | Roche Vitamins (UK) Ltd, Welwyn 

136 Subsidiaries and Associated Companies

Garden City, 70.000 GBP | Roche Registration 

Limited, Welwyn Garden City, 0.005 GBP | Roche 

Holding (UK) Limited, Welwyn Garden City, 62.675 

GBP | ••Antisoma plc, London, (–). Greece: Roche 

(Hellas) S.A., Athens, 19.500 EUR | Roche Vitamins 

Hellas E.P.E., Athens, 1.101 EUR | Roche 

Vitamins International Marketing Centre E.P.E., 

Athens, 0.064 EUR. Guatemala: Productos Roche 

Guatemala S.A., Guatemala, 0.565 GTQ | Roche 

Vitaminas Guatemala S.A., Guatemala, 0.780 GTQ. 

Guernsey: Roche Capital Market International 

Limited, St. Peter Port, 0.500 CHF | Roche International 

Finance Corporation Limited, St. Peter 

Port, 10.000 CHF | Roche Financial Market Limited, 

St. Peter Port, Guernsey, 0.200 CHF. Honduras: Productos 

Roche (Honduras), S.A., Tegucigalpa, 0.025 

HNL | Roche Vitaminas Centroaméricana y Caribe 

S.A., Puerto Cortés, 0.800 HNL. Hungary: Roche 

(Hungary) Ltd, Budapest, 3.000 HUF | Roche Vitamins 

Hungary Ltd, Ujhartyan, 300.000 HUF. India: 

Roche Scientific Company (India) Private Limited, 

Mumbai, 1.000 INR | Roche Diagnostics India 

(Pvt) Ltd, Mumbai, 0.500 INR. Indonesia: P.T. Roche 

Indonesia, Jakarta, 1,323.000 IDR. Ireland: Roche 

Products (Ireland) Limited, Dublin, 0.013 EUR | 

Roche Ireland Limited, Clarecastle, 1.918 EUR. 

Israel: Roche Pharmaceuticals (Israel) Ltd., Tel- 

Aviv, (–). Italy: Roche S.p.A., Milan, 34.056 EUR | 

Roche Diagnostics S.p.A., Milan, 18.060 EUR | 

Istituto delle Vitamine S.p.A., Milan, 2.580 EUR. 

Japan: Chugai Pharmaceuticals Co., Ltd., Tokyo, 

68,215.374 JPY | ••Nutritec Co., Ltd., Tokyo, 

200.000 JPY | Roche Diagnostics K.K., Tokyo, 

2,500.00 JPY | Roche Vitamins Japan K.K., Tokyo, 

100.000 JPY. Malaysia: Roche Malaysia Sdn Bhd, 

Kuala Lumpur, 4.040 MYR | Roche Diagnostics 

(Malaysia) Sdn Bhd, Kuala Lumpur, 4.079 MYR | 

Roche Vitamins (Malaysia) Sdn Bhd, Kuala 

Lumpur, 0.100 MYR. Mexico: Productos Roche, 

S.A. de C.V., Mexico City, 2.180 MXN | Syntex S.A. 

de C.V., Mexico City, 80.412 MXN | Grupo Roche 

Syntex de México, S.A. de C.V., Mexico City, 3.500 

MXN | Lakeside de México, S.A. de C.V., Mexico 

City, 47.972 MXN | Roche Vitaminas México, S.A. 

de C.V., El Salto (Jalisco), 91.368 MXN. Morocco: 

•Roche S.A., Casablanca, 9.500 MAD | Roche 

Immobilière Maroc, S.A.R.L., Casablanca, 0.500 

MAD. The Netherlands: Roche Pharmholding B.V., 

Mijdrecht, 467.848 EUR | Roche Nederland B.V., 

Mijdrecht, 10.891 EUR | Roche Diagnostics 

Nederland B.V., Almere, 2.269 EUR | Roche Vitamins 

B.V., Venlo, 0.100 EUR. New Zealand: Roche 

Products (New Zealand) Limited, Auckland, 

13.500 NZD | Roche Vitamins (New Zealand) Limited, 

Auckland, 1.400 NZD | Roche Diagnostics 

New Zealand Pty. Ltd., Auckland, 3.000 NZD. 

Nicaragua: Productos Roche (Nicaragua) S.A., 

Managua, 0.900 NIO. Norway: Roche Norge A/S, 

Oslo, 11.000 NOK. Pakistan: Roche Pakistan Ltd., 

Karachi, 38.298 PKR. Panama: Productos Roche 

Interamericana S.A., Panama City, 0.100 USD | 

Productos Roche Panamá S.A., Panama City, 0.010 

PAB | Roche Vitaminas Interamérica, S.A., Panama 

City, 0.500 USD | Roche Capital Corporation, 

Panama City, (–) | Roche Financial Management, 

Inc., Panama City, 5.000 CHF | Syntex Corporation, 

Panama City, 0.100 USD. Peru: Productos Roche 

Química Farmacéutica S.A., Lima, 11.436 PEN | 

Roche Vitaminas Perú S.A., Lima, 1.725 PEN. 

Philippines: Roche (Philippines) Inc., Makati, 

100.000 PHP | Roche Vitamins Philippines, Inc., 

Manila, 10.000 PHP. Poland: Roche Polska 

Sp. z o.o., Warsaw, 2.000 PLN | Roche Diagnostics 

Polska Sp. z o.o., Warsaw, 2.000 PLN | Roche 

Witaminy Polska Sp. z o.o., Mszczonów, 1.250 

PLN. Portugal: Roche Farmacêutica Química Lda, 

Amadora, 1.090 EUR | Roche Sistemas de Diagnósticos, 

Sociedade Unipessoal, Lda., Linda-A- 

Velha, 0.565 EUR. Puerto Rico: Syntex Puerto 

Rico, Inc., Humacao, 0.010 USD. Russia: Roche 

Moscow Ltd., Moscow, 2.580 RUB. Singapore: 

Roche Singapore Pte. Ltd., Singapore, 4.000 SGD | 

Roche Diagnostics Asia Pacific Pte. Ltd., Singapore, 

3.400 SGD | Roche Vitamins Asia Pacific 

Pte. Ltd., Singapore, 2.000 SGD | Boehringer 

Mannheim (Far East) Pte. Ltd., Singapore, 3.986 

SGD. South Africa: Roche Products (Proprietary) 

Limited, Johannesburg, 5.000 ZAR | Roche Vitamins 

South Africa (Pty.) Limited, Johannesburg, 

10.000 ZAR. South Korea: Roche Korea Company 

Ltd., Seoul, 13,375.000 KRW | Roche Diagnostics 

Korea Co. Ltd., Seoul, 19,000.000 KRW | Roche 

Vitamins Korea Ltd., Seoul, 1,000.000 KRW. 

Spain: Roche Farma S.A., Madrid, 54.090 EUR | 

Roche Vitaminas S.A., Madrid, 0.261 EUR | 

Andreu Roche S.A., Madrid, 0.060 EUR | Syntex 

Roche S.A., Madrid, 0.060 EUR | Roche Diagnostics, 

S.L., Barcelona, 18.033 EUR | Boehringer 

Mannheim Roche S.A., Madrid, 0.222 EUR. Sweden: 

Roche AB, Stockholm, 20.000 SEK | Roche 

Diagnostics Scandinavia AB, Bromma, 9.000 SEK. 

Taiwan: Roche Products Ltd., Taipei, 100.000 TWD 

| Roche Diagnostics Ltd., Taipei, 80.000 TWD | 

Roche Vitamins Taiwan Limited, Taipei, 25.000 

TWD. Thailand: Roche Thailand Limited, Bangkok, 

12.000 THB | Rovithai Limited, Bangkok, 100.000 

THB | Roche Diagnostics (Thailand) Limited, 

Bangkok, 103.000 THB. Turkey: Roche Müstahzarlari 

Sanayi Anonim Şirketi, Istanbul, 

81,269,000.000 TRL | Roche Diagnostik Sistemleri 

Ticaret A.S., Istanbul, 500,000.000 TRL | Roche 

Vitaminleri Limited Şirketi, Istanbul, 6,070,200.000 

TRL. Uruguay: Roche International Ltd. (Uruguay), 

Montevideo, (–) | Sapac Corporation Ltd. (Uruguay), 

Montevideo, (–) | Roche Vitaminas Uruguay, S.A., 

Montevideo, 7.500 UYP. USA: Roche Holdings, 

Inc., Wilmington (Delaware), 1.000 USD | 

Hoffmann-La Roche Inc., Nutley (New Jersey), 

3.026 USD | Roche Laboratories Inc., Nutley 

(New Jersey), (–) | Roche Vitamins Inc., 

Parsippany (New Jersey), 0.001 USD | Roche 

Molecular Systems, Inc., Pleasanton (California), 

(–) | American Roche International Inc., Little Falls 

(New Jersey), 0.100 CAD | Roche Carolina Inc., 

Florence (South Carolina), (–) | •Genentech, Inc., 

South San Francisco (California), 5.162 USD | 

Roche Palo Alto LLC, Palo Alto (California), 

0.003 USD | Roche Colorado Corporation, Boulder 

(Colorado), 0.100 USD | •Bayer-Roche L.L.C., 

Morristown (New Jersey), 37.602 USD | Roche 

Diagnostics Corporation, Indianapolis (Indiana), 

0.001 USD. Venezuela: Productos Roche S.A., 

Caracas, 200.000 VEB | Roche Vitaminas 

Venezuela S.A., La Victoria, 497.450 VEB. Vietnam: 

Roche Vitamins Vietnam Limited, Binh Duong 

Province, 1.000 USD. 

Subsidiaries and Associated Companies 137

Cautionary statement regarding forward-looking statements 

This Annual Report contains certain forwardlooking 

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 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 general financial market 

conditions; (5) uncertainties in the discovery, development 

or marketing of new products or new uses 

of existing 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 coverage. 

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 Corporate 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 http://www.roche.com 

To order Tel. +41 (0)61 688 83 39, Fax +41 (0)61 688 43 43 

publications E-mail: basel.webmaster@roche.com 

Next Annual General Meeting: 1 April 2003 

All trademarks mentioned enjoy legal protection. 

The Roche Annual Report is published in German 

(original language) and English. 

The Roche Annual Report is issued by F. Hoffmann-La Roche Ltd, 

Basel, Corporate Communications. 

Design: Wirz Identity AG, Zurich 

Photos: Mike Frei, Zurich 

Roche Corporate Photolibrary, Basel 

Typesetting: Stauffer-Febel AG, Basel 

Lithos: Lithoteam AG, Allschwil-Basel 

Printers: Birkhäuser+GBC AG, Reinach-Basel 

Binding: Buchbinderei Grollimund AG, Reinach-Basel 

Cover: 

Vascular diseases – crystals of neprilysin 

(human neutral endopeptidase)

Diagnostics 27% 

Sales by division 1) Others 1% 

Pharmaceuticals 73% 

Asia 13% 


Sales by region 1) 


Others 3% 

Europe 37% 

Employees by division 1) Diagnostics 27% 

Pharmaceuticals 72% 

Asia 17% 



Employees by region 1) Others 3% 

Europe 45% 

1) On an adjusted basis.

7-000-577

Annual Report 2002 - Roche

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