Roche Improves Pharmaceuticals Growth and Builds on Diagnostics Leadership; Humer Announces Plans to Sharpen Focus on Healthcare.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 28, 2002

Roche Chairman and CEO Franz Humer and members of the international healthcare company's U.S. management team briefed reporters in New York today on 2001 business results and plans for the future.

Reporting on Roche Group global performance, Humer cited improvements in sales and operating results for both the pharmaceuticals and diagnostics businesses, while he said the vitamins unit experienced a decline in operating profit, despite productivity increases. He reported that Roche Group sales increased 8 percent over 2001 and said he expects overall sales growth for 2002 to be in the mid- to high-single-digit range.

Humer announced that the company is considering strategic options for its Vitamins and Fine Chemicals Division, long a core business of the Roche Group. He said that going forward, pharmaceuticals and diagnostics will form the company's core and Roche will focus more sharply on these key healthcare growth areas.

Elaborating on the decision, Humer said: "The process of renewal now under way in all three divisions has equipped them well for future growth. However, it has become increasingly clear over the last several years that the healthcare and vitamin industries are developing in very different directions. In-depth discussions and analysis among our senior management team have led to the conclusion that Roche needs to focus on healthcare to strengthen this core business."

The revolution in genetics, genomics, proteomics and other advanced technologies is ushering in an age of dramatic development in diagnostics and therapeutics, Humer said. Roche is uniquely equipped for leadership in this environment, because of its strengths in both of these closely related fields, he added. "At the same time," he said, "Roche must seek options that will enable the vitamin business to thrive in its very specialized industry. Going forward we will seek the best ways to achieve both goals."

2001 Global Highlights

Appointment of New Chief Financial Officer: In August, Erich Hunziker joined Roche as chief financial officer. Hunziker has pledged to continue Roche's increased focus on improving the transparency and comparability of the Group's financial performance. This effort will ensure that Roche financial results can be tracked from quarter to quarter and year to year, and their transparency will be at least on par with the practices of most of the other major U.S. healthcare companies.

Roche Strengthens Leadership in Global Diagnostics Market: The Diagnostics Division expanded its leading share of the world market, reinforcing its position as the global leader in in vitro diagnostics. Each of the division's five businesses grew faster than the market, enabling Roche to maintain its leadership position in the United States and worldwide. With the opportunities opened up by the sequencing of the human genome expected to radically transform the industry, Roche is creating new business models to ensure that it will be able to offer its customers the benefits of these exciting developments. Roche is putting substantial resources into strengthening its lead in molecular diagnostics for diagnosis of infectious diseases, screening of blood and blood products and cancer testing.

Roche Becomes World Leader in Oncology: In 2001, Roche became the global market leader in oncology, one of the most important therapeutic areas for the company and the healthcare industry. Roche is the only company offering three innovative new anticancer medicines, Herceptin(R) (generic), Xeloda(R) (capecitabine) and Mabthera(R)/Rituxan (generic), which have been shown in clinical trials to improve patient survival. Oncology sales now represent approximately one-fourth of total prescription drug sales.

Alliance with Chugai Makes Roche Major Player in Japan: Late last year, Roche announced its intention to acquire a majority interest in Japan's Chugai Pharmaceutical Co., an alliance that will make Roche a leading player in the world's second largest pharmaceuticals market. Under the agreement, Roche will merge its Japanese subsidiary with Chugai, and will acquire a 50.1 percent interest in the new business, increasing Roche's share of the Japanese market from 1 percent to 4 percent. The new company will rank fifth in pharmaceutical sales in Japan. Roche expects the transaction to be closed by the end of 2002.

Promising Drug Pipeline: Roche is focusing its research on seven major therapeutic areas as it pursues more effective treatments for conditions including AIDS, cancer, Alzheimer's disease, diabetes and stroke. Roche's pharmaceuticals pipeline comprises a total of 46 new molecular entities, counting opt-in rights to new compounds. Including work on supplementary indications, Roche is pursuing more than 70 development projects.

Improved Outlook for Pharmaceuticals: In 2002 the growth and profitability of the Pharmaceuticals Division will depend largely on the extent to which sales of the Roche acne drug Accutane are eroded by generic competition after its patent expires in the United States. However, the Roche Pharmaceuticals Division will continue to expand its oncology business and anticipates double-digit sales of its leading anti-cancer drugs, Herceptin, Mabthera/Rituxan and Xeloda. Roche also anticipates further growth from Xenical and CellCept. Sales could also be affected by generic competition to Accutane and Demadex, but boosted by the FDA approval of Pegasys and T-20 in the second half of 2002. Helped by a strong product portfolio, the roll-out of new products and the integration of the Japanese drug company Chugai, Roche's pharmaceuticals business will be well positioned for a return to market-level sales growth in 2003. Roche anticipates mid-single-digit pharmaceutical sales growth, with stable operating margins. Over the next three years the company expects the Pharmaceuticals Division's operating margin to move up toward 25 percent.

2001 Roche Highlights in the United States

Pharmaceuticals

George Abercrombie, president and CEO of Roche North American Pharmaceuticals Operations, said that 2001 was a year of transition and progress at the company after it faced a host of challenges coming out of 2000. "After forming a strong management team soon after my appointment as CEO in January, we restructured and right-sized the organization, streamlining it and reducing costs, while retaining a competitive level of support of our brands," Abercrombie stated. "These efforts helped us deliver on our financial commitments by getting our expenses in line with our revenues. During 2001, profitability improved despite flat U.S. sales."

Listing what he cited as the key strengths of the Roche U.S. Pharmaceuticals Division, Abercrombie noted "a high-caliber work force, a portfolio of successful products, most of which are No. 1 or No. 2 in their categories, the ability to launch products and take them to top market positions, the growth potential in our current portfolio, and a strong research pipeline."

Growth in Oncology Drugs

Roche became the world's leading supplier of oncology drugs in 2001, and the company's U.S. prescription drug unit made a key contribution with its successful marketing of Xeloda, a novel tumor-selective breast cancer treatment. During the year, Xeloda received U.S. approvals for additional indications as the only oral chemotherapy to show survival for metastatic colorectal cancer and in combination with Taxotere for the treatment of metastatic breast cancer. Xeloda is now the fastest-growing agent in metastatic breast cancer treatment and has a 30 percent share in the breast and colorectal cancer markets.

Roche's Kytril(R) (granisetron hydrochloride), a potent anti-emetic used to control nausea and vomiting in patients undergoing cancer chemotherapy, was launched by the Roche U.S. sales and marketing team following its acquisition from GlaxoSmithKline. Last year the company filed a marketing application with the Food and Drug Administration (FDA) for the use of the drug in post-operative nausea and vomiting.

The Roche oncology franchise in the United States also includes sales of the innovative biotechnology products Herceptin(R) (generic) and Mabthera(R)/Rituxan (generic) from Genentech. These novel drugs have made major contributions to the dramatic increases in Roche sales of oncology medicines in America and around the world.

U.S. Product Performance Overview (products ranked in order of U.S. sales)

Rocephin(R) (ceftriaxone) is the leading injectable antibiotic with a 35 percent market share and remains the drug of choice for treating bacterial infections in hospitals. With continued growth in demand, Roche is maintaining marketing support for Rocephin.

Accutane(R) (isotretinoin), the No. 1-ranked product for severe recalcitrant nodular acne that has not been responsive to other therapies, experienced a 12 percent drop in sales during 2001 as it came under increased public and regulatory scrutiny concerning reports of mood disorders and other psychiatric events, which Roche is discussing in cooperation with the FDA. The product went off patent in early February 2002, and Roche expects that generic competitors will enter the market later this year. When that occurs, the company expects to see sales erode, but the rate of decline will depend on several factors including the number of generic entrants, their price, and the willingness of physicians and patients to switch from the pioneer brand. Generic competitors will have to work with the FDA to replicate the stringent safety programs Roche put in place for Accutane users.

CellCept(R) (mycophenolate mofetil) became the leading product in transplantation and its sales increased by 24 percent in 2001. It now has 30 percent of the immunosuppressant market. To keep sales growing, Roche's strategy is to expand into the liver transplant market, displacing older drugs, and also to continue pursuing new uses.

Xenical(R) (orlistat) is the largest-selling prescription weight-loss product in the U.S. and worldwide. However, the product's sales were slightly down in 2001 due to the continuing challenge of providing the education necessary to ensure that obesity is treated as a serious medical condition, as well as the unrealistic expectations of patients. Other obstacles to Xenical's growth have been low appreciation of the health benefits of weight loss and the importance of reimbursement. Roche is now focusing on more refined market segmentation through programs such as XENICare, a weight loss support program, and "3 For 3," a novel program that provides three months of the product free after three months of paid therapy.

Xeloda(R) (capecitabine) experienced sales growth of more than 40 percent in 2001. As Roche's top-selling oncology drug in the U.S market, Xeloda has strong positions in breast and colorectal cancer.

Tamiflu(R) (oseltamivir phosphate) owns 95 percent of the neuraminidase inhibitor market and more than 60 percent of the antiviral category. A low flu season weakened sales performance once again in 2001.

New U.S. product and indication launches for 2002 include the following:

Pegasys(R) (peginterferonalfa-2a): An FDA decision may come late in the second half of 2002 for this innovative new treatment of hepatitis C infections. This potent new-generation pegylated interferon provides antiviral activity with just one dose a week.

T-20: Co-developed with Trimeris, this first-of-its kind entry in a new class of investigational HIV/AIDS agents called fusion inhibitors is currently in Phase III clinical trials. Roche expects to file for FDA approval in the second half of 2002. T-20 has fast-track designation from the FDA for the treatment of HIV-infected individuals. On Feb. 19, Roche and Trimeris announced results from two Phase II trials that T-20 in combination therapy achieves viral suppression and is well-tolerated over 48 weeks.

Bonviva(R) (ibandronate): Roche has begun a collaboration with GlaxoSmithKline to develop and market this investigational drug for osteoporosis upon approval. Late-stage testing has already been completed and shows a reduction in the risk of vertebral fractures.

Research and Development: A Pipeline of Great Promise

Roche has a highly promising pipeline of new medicines under development, both in terms of quantity and quality of projects. The company is currently pursuing 125 research projects in seven key therapeutic areas: Oncology, metabolic disorders, inflammatory diseases, genitourinary diseases, central nervous system disorders, vascular diseases and virology. With 14 new molecular entities (NMEs) reaching preclinical development in 2001, Roche has an industry leading level of R&D productivity. Phase I testing of some of these projects could begin in 2002 or 2003. An additional 15 NMEs are expected to enter preclinical development in 2002.

Roche is currently pursuing more than 70 development projects, including supplemental indications. Twelve NMEs are in early-stage (phase 0) development, six have entered phase I clinical testing, eight are in phase II, and four in phase III. Agreements with Genentech, Basilea Pharmaceutica, Pozen and Speedel for opt-in rights to additional NMEs further strengthen the Roche pipeline, as will the alliance with Chugai in Japan, where R&D will focus on oncology, bone, renal and cardiovascular diseases.

Roche's collaboration with deCODE genetics produced breakthrough findings in 2001. New targets were identified by analyzing genes linked to two common diseases - schizophrenia and peripheral arterial occlusive disease - and will form the basis of a drug and diagnostic discovery program. Also, the mapping of genes linked to obesity and clinical anxiety, as well as the first gene linked to rheumatoid arthritis, will provide genetic markers that predict an increased risk of developing these diseases. During the course of this collaboration, deCODE has achieved a dozen milestones and in January 2002, Roche announced a new alliance with deCODE focused on turning the landmark achievements of their gene discovery collaboration into novel treatments for four common diseases.

Genetics and Genomics: Roche R&D Leadership in Oncology; Paving the Way to Personalized Medicine

At the media briefing, Lee Babiss, Ph.D., vice president, Preclinical Research and Development, provided an overview of Roche's unique capabilities as a leader in the fields of genetics and genomics, which hold the keys to unlocking the root causes of disease. He also pointed up the importance of Roche's powerful combination of a major global pharmaceutical enterprise and the world's largest diagnostics business. To realize the revolutionary potential of this industry-leading combination of assets, Babiss said, Roche is making a significant investment in pursuing an integrated approach to healthcare innovation. The goal of this approach is a new paradigm in individualized medicine in which people will be able to have a higher degree of confidence that the treatments they receive will be more effective for them personally and cause fewer side effects. Roche is already using this approach to launch an all-out assault on the mechanisms of cancer, where the company is currently the world leader.

Roche has expanded oncology research programs to address the critical underlying mechanisms of cancer. These include controlling the cell life cycle, apoptosis (cell death) and tumor angiogenesis (blood vessel growth). This research has resulted in the development of a very strong oncology portfolio. Currently, there are 29 projects in late preclinical through Phase III stages of development. They include:

- A novel cell-cycle inhibitor (CCI), currently in Phase II trials, for
advanced breast, lung and colorectal cancers. In preclinical trials it has
shown effective, broad anticancer activity with the added benefit of convenient
oral dosing.

- Tarceva, which belongs to the new class of anticancer drugs that target the
underlying molecular changes that play critical roles in the conversion of
normal cells into cancerous cells. Phase II trials for Tarceva have yielded
promising results in patients with refractory squamous cell carcinoma of the
head and neck, non-small cell lung (NSCLC) and ovarian cancers. Tarceva is
currently in Phase III trials for NSCLC, Phase 1b and II trials in metastatic
breast cancer and Phase III pancreatic cancer.

- 2C4, which has shown pre-clinical activity in Herceptin-resistant models for
prostate and lung cancer and is currently in Phase I clinical trials.

"Our long-term strategy of getting closer to the ideal of truly individualized medicine will be realized through the development of molecular targeted cancer drugs, as well as through better tools to diagnose, predict response and monitor disease progression," Babiss said.

Diagnostics

Martin Madaus, president and chief executive officer of Indianapolis-based Roche Diagnostics Corporation, reported that the company's 2001 market performance and financial performance were extremely strong, and that despite many competitive challenges, the company expanded its position as the market leader. The division achieved double-digit growth in North America, and gains were reported for all strategically important product lines and market segments.

In the fall of 2001, one of the company's five business areas, Roche Diabetes Care, the leading supplier of diabetes monitoring systems, launched two major new products in North America: Accu-Chek Compact, which features integrated test strips and automated coding and pre-test checks of strip integrity, and Accu-Chek Active, which can perform measurements in just five seconds on a tiny blood sample. Initial market response to these products has been very positive. The company also launched its networkable Accu-Chek Inform system for hospitals.

To bolster its R&D capabilities in diagnostics, Roche acquired California-based Amira Medical last November. Amira's expertise and patent portfolio will facilitate Roche's access to the rapidly growing integrated spot monitoring market segment.

In Roche Near Patient Testing, an area that supplies products and services for doctors' offices, ambulances and intensive care units, growth occurred in the hospital point-of-care segment and in coagulation monitoring in doctors' offices. Roche rolled out the OMNI C blood gas analyzer late last year, helping to expand its leadership position in this market segment.

The Roche Centralized Diagnostics business area is a leader in integrated analytical systems for hospitals and high-volume laboratories. In 2001, Roche Diagnostics received FDA clearance for two tests that will aid physicians in diagnosing prostate cancer, an ultra-sensitive test for hepatitis B, and the new cardiovascular disease test, D-Dimer. In all, eight new immunoassays were added to the Elecsys product line in 2001, bringing the total available menu to 37 unique assays covering cardiac, thyroid, fertility, cancer, bone, anemia and infectious disease.

Roche Molecular Diagnostics, the Pleasanton, Calif.-based business area devoted to applications of PCR (polymerase chain reaction) technology in clinical diagnostics, forensics and research, experienced significant growth led by demand for PCR-based products and services. PCR is a molecular biology technique capable of producing millions of copies of specific DNA sequences in a very short time, making possible the rapid diagnosis of diseases. In July 2001, Roche received U.S. regulatory clearance for the first qualitative PCR-based test for hepatitis C.

The Roche Applied Science area increased its sales of industrial biochemicals, reflecting the increasing use of biotechnology in industrial applications. Sales of the LightCycler, a system used to amplify genetic material for DNA analysis, surpassed expectations, with demand among university and industrial researchers, particularly in genetics and gene-based research, remaining strong. The capability of this system was highlighted by the development of the rapid anthrax test by Roche and the Mayo Clinic in a very short period of time. This test provides results in less than one hour, and underscores Roche's capacity for innovation and ability to react quickly to new challenges. DNA chip technology is expected to be a new growth driver, with the first products expected by the end of 2002.

The Forecast for Diagnostics in 2002

Roche Diagnostics expects to maintain double-digit growth in the United States during 2002, while increasing its profit margin. Roche anticipates that the enormous potential of the revolution in genomics and proteomics will initially benefit the diagnostics sector of the healthcare industry. Therefore, the company is putting substantial resources into strengthening its lead in molecular diagnostics, providing clinically useful assays for the detection of infectious diseases, screening blood and blood products and cancer testing. It has also created the Integrated Cancer Care Unit to pioneer commercially successful new tests within the next two to three years.

"Key success factors at Roche Diagnostics are our talented people, our innovative and vast product portfolio, and our ability to commercialize products and breakthrough technologies at a rapid pace," Madaus stated. "With the industry's broadest diagnostics portfolio, we are confident that we will maintain our market leadership in 2002 and continue to deliver strong financial results. "

Vitamins

Christoph Goppelsroeder, president of Parsippany, N.J.-based Roche Vitamins Inc., reported that the company currently enjoys a 40 percent market share in the U.S vitamin industry and is the leader in the business-to-business vitamins sector, serving the dietary supplement, cosmetics, food and animal nutrition and health fields.

"Roche grew faster than the market in the U.S. in each of these segments in last year," Goppelsroeder said. He added that the company intended to maintain its leadership position as well as increase sales in 2002 in the low single-digit range.

"Roche is not only the market leader, but the leading innovator in the industry," he noted. "In 2001, 8 percent of our sales came from new products vs. 1 percent in 1999." New products introduced included Phytase for improved phosphorous bioavailability, Lutein for eye health, Hy-D for bone health and natural vitamin E for cardiovascular health. "By partnering with our customers in these industry segments and providing them with innovative products, we will continue to grow faster than our competitors," Goppelsroeder said.

He announced that new vitamins and fine chemicals products from Roche in 2002 would include Zeaxanthin for eye health and Lycopene, a compound that recent studies have shown to be beneficial in supporting a healthy cardiovascular system and maintaining a healthy prostate. New applications will include "crystal clear," a water-soluble vitamin E for beverages, and "Stay-C" for healthy skin.

About Roche

Headquartered in Basel, Switzerland, Roche is one of the world's premier research-based healthcare groups. With leading businesses in pharmaceuticals, diagnostics and vitamins, Roche offers a uniquely broad range of products and services that span prevention, diagnosis and treatment, thus enhancing health, well-being and quality of life. In the United States, Roche employs more than 16,000 people at more than 15 sites across the country, including that of Genentech, the leading South San Francisco biotechnology company in which Roche is the majority owner.

For more information about Roche, visit the company's global website at www.roche.com. For information about the Roche pharmaceuticals business in the United States, log onto www.rocheusa.com