Roche: Defining priorities for a high tech healthcare company

Roche: Defining priorities for a high tech healthcare company Erich Hunziker, Deputy Head of the Corporate Executive Committee and CFO October 2007 1 This presentation contains certain forward-looking 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 presentation, 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, including without limitation negative results of clinical trials or research projects, unexpected side-effects of pipeline or marketed 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. Any statements regarding earnings per share growth is not a profit forecast and should not be interpreted to mean that Roche s earnings or earnings per share for this year or any subsequent period will necessarily match or exceed the historical published earnings or earnings per share of Roche. For marketed products discussed in this presentation, please see full prescribing information on our website www.roche.com All mentioned trademarks are legally protected 2 1

Performance up-date Our priorities 3 Continuing excellent growth Over CHF 3.5 billion organic sales added CHF bn 2006 2007 % change in USD YTD Sept YTD Sept CHF local growth Pharmaceuticals 23.9 27.1 13 14 17 Diagnostics 6.4 6.8 6 5 10 Roche Group 30.3 33.9 12 12 16 4 2

Strong rise in Group sales and Core EPS Sales (CHF billions) 30 25 20 15 10 5 +38 % Sales +13 % +24 % +14 % +29 % +19 % Core EPS +21 % +15 % 7 6 5 4 3 2 1 Core EPS (CHF) 0 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 0 Historical Core EPS data 2003 to 2004 restated 5 Strategic acquisitions and portfolio enhancements Committed to technology leadership Leader in Pharma Driving personalised healthcare Leader in Diagnostics THP (therapeutic antibody technology) Alnylam (RNA interference technology) Transgene (therapeutic HPV vaccine) BioVeris (electrochemiluminescence technology) 454 Life Sciences (ultra fast gene sequencing) NimbleGen (high-density DNA microarrays) 1 Ventana (tissue-based diagnostics) 1 Tanox (acquired by Genentech) Early detection Diagnosis Patient stratification Treatment Monitoring 1 Tender offer pending 2 Acquisition not yet closed/ pending regulatory approval 6 3

Ventana Acquisition Complementary Technologies Complete tissue-based diagnostics capabilities for customers Pathologist Testing on Tissue Testing after Protein / Nucleic acid Extraction IHC protein markers FISH/CISH/SISH NA markers DNA mutation RNA expression via microarray RNA expression via multiple RT-PCR or mutation detection RNA expression via multiple RT-PCR or mutation detection Protein expression via IC system AmpliChip LC480 TaqMan Elecsys Ventana technology capabilities Roche Diagnostics technology capabilities 7 Ventana Acquisition Company Overview Changing the practice of medicine in tissue-based cancer diagnosis Company facts Founded 1985, based in Tucson, Arizona 952 employees (year end 2006) 2006 Financials Revenue `06: $ US 238 m Rev. CAGR 04-06: ~20 % Operating Margin: ~19 % Leader in tissue-based diagnostics Leadership in advanced staining segment Large installed base in pathology labs Strong U.S. presence Source: Ventana Investor Presentation 8 4

Ventana Acquisition New Market Potential Histopathology; ~1 bn market, growing 10 % p.a.* Market size and growth Key growth drivers m USD 10 % CAGR 1,600 CAGR 11 % High need for test automation and standardisation 830 960 Increasing incidence of cancer Advanced / ISH/IHC Stains 11 % Targeted cancer drugs requiring companion diagnostics Primary/ Special Stains Tissue Prep 2005 A 2006* E2011* 3 % Source: Analyst reports, Roche Analysis * Analysis of the histopathology market based on Analyst forecasts 9 Growth objectives for 2007 Reconfirming improved outlook of Q1 Sales Double-digit sales growth 1 for Roche Group and Pharmaceuticals Division Above-market sales growth in both divisions Core EPS target Core earnings per share growth above sales growth 1 in local currencies barring unforeseen events 10 5

Performance up-date Our priorities 11 Roche Challenge # 1 Achieve above peer level sales growth for both divisions 1 Can we constantly gain market share in both divisions? 2006 2011 2016 12 6

YTD Sept 07: Sales growth two to three times the market Growing share of key growth drivers Local sales growth Key products as % of pharma sales Division Europe North America Latin America Japan 4% 6% 7% 6% 7% 14% 12% 14% 12% 16% Roche IMS YTD July '07 70% 60% 50% 40% 30% 20% 10% 0% 2.4% 5.5% 6.5% 0.2% 1.3% 2.9% 5.3% 6.4% 8.5% 9.6% 5.6% 2.8% 6.5% 7.4% 1.3% 2.4% 3.0% 4.5% 5.7% 6.8% 2.2% 2.9% 3.1% 4.4% 5.4% 5.8% 8.9% 11.0% 11.8% 13.2% 15.5% 15.4% 14.7% 15.1% 2004 2005 2006 2007 Bonviva/Boniva Tarceva Pegasys Cellcept NeoRecormon/ Epogin/Mircera / Rituxan 13 Key products on growth path New indications provide fresh growth opportunities MAT sales (CHF bn) 4 3 2 1 5 4 3 2 1 0 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 Tarceva 1.5 0 Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 6 MAT sales (CHF bn) 1 0.5 29% 4 2 50% 0 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 Pharma Division sales Roche Pharma sales 0 Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 MAT = Rolling 4 quarter sales at avg. YTD Sept. '07 exchange rates 14 7

Focus on differentiated medicines pays off A young and growing portfolio Pegasys Molecular Dx CellCept Tamiflu CHF 1 billion or more CHF 2 billion or more CHF 3 billion or more CHF 4 billion or more Rocephin RoAccutane NeoRecormon/ Epogin Centralized Diagnostics Diabetes Care CellCept Centralized Diagnostics Diabetes Care 2001 2006 Value drivers 6 10 Sales (CHF bn) 10 27 15 Our oncology strategy: Setting new standards of care New tumor types, new combinations, new lines of intervention Clinically differentiated product Example target all tumor types target all possible combinations target earlier (adjuvant) intervention Superior outcome for patients 3 rd line 3 rd line 3 rd line 2 nd line 2 nd line 1 st line 1 st line GIST Pancreatic 2 nd line Ovarian Adjuvant Prostate 1 st line RCC Adjuvant BC Adjuvant Completed NSCLC Ongoing CRC In preparation 16 8

Oncology: Many market opportunities on the horizon and addressed CRC NSCLC BC HER2+ BC HER2- RCC Adjuvant Approval Trials (mono) P3, (combo) P3 ; Tarceva P3 + (in planning) P3 ; Approval, (mono), (EU) (EU), Roferon A Metastatic 1st line Trials Filed (EU), (EU,US) line ext with oxaliplatin P3 + Tarceva, Tarceva maint. P3 + ; + pertuzumab P3 line ext. Filed (EU) Metastatic 2nd line Approval Trials (US)+ filed (EU) Tarceva P3 Tarceva+ P3 Approved Filed New market opportunities addressed 17 : Building standard of care, defending leadership Effectively maximizing a key asset Main Indication NSCLC 1 st line nonsquamous Adjuvant NSCLC 1 st line squamous 2 nd line Squamous and nonsquamous AVAiL ATLAS AVASQ BRIDGE BETA Lung ECOG 1505 Status Data presented at ASCO 2007 Initiated Q4 05 terminated Pilot study, initiated Q2 06 Initiated Q2 05 To start soon Main Indication Status mcrc 1 st line NO16966 met primary endpoint, filed Adjuvant AVANT Recruitment completed Q2 2007 CC NSABP C-08 Recruitment completed Q4 2006 Adjuvant rectal Ca E5204 Initiated Q1 06 RCC 1 st line AVOREN CALGB 90206 Data available Positive results Q4 06, Filing 2007 mbc 1 st line HER2- negative AVADO RIBBON-1 Recruitment completed Q2 07 Initiated Q4 05, H2 2007 completion target Pancreatic Cancer 1 st line AVITA Recruitment completed Adjuvant BC 1 st line HER2- positive 2 nd line HER2- negative AVEREL ( +/-) RIBBON-2 E2104 E5103 Initiated Q3 06 Initiated Q1 06 Completed enrolment Q4 06 To initiate H2 07 Ovarian Cancer Prostate Cancer 1 st line 2 nd line Hormone refractory GOG 218 ICON7 GOG 213 CALGB 90401 Initiated Q3 05 Initiated Q4 06 In preparation Initiated Q2 05 HER2- positive * Formerly called AVAIL BEATRICE BETH To initiate H2 07 In preparation NHL aggr. R_CHOP +/- To start in Q3 07 18 9

/ Tarceva/ / : Maximizing across the portfolio Main Indications Adjuvant CC Adjuvant BC Combo with Combo with oxaliplatin AVANT NO16968 NO 17629 Status Recruitment completed Q2 2007 Recr. completed, Final analysis end 07/early 08 Recr. completed Tarceva NSCLC 1st line maintenance NSCLC 2nd line Adjuvant NSCLC Combo with chemotherapy Combo with Combo with SATURN ATLAS BETA Lung RADIANT Initiated Q4 05, Recruitment to complete 07 Initiated Q4 05, Recruitment to complete end 07 Initiated Q2 05 Initiated Q3 06 NHL maintenance 1st line After induction PRIMA Recruitment completed Q1 2007 CLL 1st line ML17102 Recr. completed CLL relapsed REACH Recruitment to complete end 07 Gastric Ca ToGA Initiated Q3 05, final analysis in 2009 Adjuvant BC 1yr vs. 2yrs treatment HERA Final analysis 2008/2009, event driven 19 The key goal of all our efforts in oncology: Moving from extending life to potentially saving life Filed Ongoing adjuvant BC adjuvant CC combo adjuvant CC Adjuvant Maintenance 1 st Line 2 nd Line Tarceva adjuvant NSCLC adjuvant rectal Ca adjuvant NSCLC Tarceva & NSCLC maintenance Tarceva NSCLC maintenance inhl maintenance RCC gastric Ca mbc combo hormonal mbc 1st line ext. pancreatic Ca & mbc 1st line ext. NSCLC mcrc 1st line ext. mcrc 1st line combo NSCLC 1st line ext. ovarian Ca gastric Ca mbc 1st line CLL mcrc 2nd line combo prostate Ca Tarceva & NSCLC 2nd line mbc 2nd line relapsed CLL Starting soon adjuvant BC & adj. BC, HER2+ & aggr. NHL & Pertuzumab HER2+ mbc 20 10

Funding: Roche oncology products are cost-effective GBP in (000) Cost per QALY for selected drugs (UK data NICE/SMC) We aim to expand use of our products to earlierstage cancers, providing full benefit to patients 59-111 22-28 29-38 36-38 8 8-11 2-18 5-23 1st Line Follicular NHL Stage III/IV Aggressive NHL early BC Tarceva 2nd line NSCLC Statins high risk mbc Glivec CML Statins Elderly low risk 21 Oncology is still dramatically under funded Compared to other disease areas Mental disease 25.3% Total disease burden in DALYs Other 26.3% Cardiovascular 17.1% Cancer 16.7% Injuries 8.7% Resp. 5.9% Total healthcare costs Cancer 6.4% Cost breakdown in oncology (example: Germany) Inpatient hospital care 67% Drugs 8% Ambulatory 16% Other 9% Source: A pan-european comparison regarding patient access to cancer drugs, Karolinska Institute DALY: Disability-Adjusted Life Years, figures from 2002/3; Commonly used measure of the burden of disease 22 11

Roche has a low exposure to generics Long-term sustainable business Sales erosion due to generisation (% of 2004 sales) 100% 80% 60% Average European peers 40% 20% Roche 0% 2004 2006 2008 2010 2012 2014 23 Roche has a unique investment case Roche: Unique geographic risk diversification USA (Greater) Europe Japan Asia China Latin America Roche: Unique pillars of value risk diversification Tamiflu Boniva Actemra in CRC Mircera Pegasys Tarceva in RA CellCept NeoRecormon Diabetes Care in NSCLC in BC JTT- 705 (R1658) Immuno- Diagnostics Molecular Diagnostics GLP-1 R 1583 FUTURE PILLARS 24 12

The short/medium term sales perspective Challenge # 1: Achieve above industry-standard sales growth Conclusion # 1: Roche wants to maximize assets on hands and to translate value opportunities into reality 25 Challenge # 2 Turn attractive top line into attractive bottom line Can we achieve an 2 attractive top-line and still deliver strong EPS growth? 2006 2011 2016 26 13

Doing the right things right Three focus areas People are key! Activate potential and constantly educate: to learn faster than our competitors is the only sustainable factor of success! The right quantum size for Roche? Fixed cost versus variable cost Operational productivity 27 Activate our employees potential Constant education to overcome fear of change Number of employees To achieve our ambitions we have to activate the potential of our 72,000 employees! Our leadership and communications efforts have to concentrate here low Readiness for change high 28 14

Organizations do not grow linearly Fixed cost base grows in quantum steps The highest profitability is achieved at the top of a quantum step 29 What is the right quantum size for a sustainable Roche? Even if costs grow considerably slower than sales, there is risk that we build up too much infrastructure / fixed costs! Sales 30 15

Constantly improving operational productivity Operational productivity is an important key enabler for the Roche Group We must become better and cheaper in whatever we do! 31 Focus on differentiated products paying off Sales doubling, operating profits tripling Group sales 1 (CHF bn) Group operating profit 2 (CHF bn) 45 14 27.9% 40 35 30 25 20 15 10 5 12 10 8 6 4 2 16.3% 20.2% 21.3% 22.9% 25.9% 0 2001 2002 2003 2004 2005 2006 0 2001 2002 2003 2004 2005 2006 1 Pharmaceuticals and Diagnostics 2 before exceptional items 32 16

Core EPS rising steadily Core EPS CAGR 1 ('02 '06): 23 % CHF 12.0 10.0 9.86 8.0 7.84 6.0 4.0 4.34 4.71 5.87 2.0 0.0 1 Compound Annual Growth Rate 2002 2003 2004 2005 2006 33 Economic success translated into shareholder returns Again a substantial increase in 2006 Dividend CAGR 1 ( 91-06): 18 % CHF 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 1 Compound Annual Growth Rate 1995 including centenary bonus 2006 Dividend: Proposed by the Board of Directors 1 compound annual growth rate 34 17

Short/medium term bottom-line perspective Challenge # 2: Achieve above industry-standard value creation Conclusion # 2: Roche has many programs running to ensure above industry standard EPS-growth 35 Challenge # 3 Filling the strategic gap 1 2 3 Can we produce enough internal and external innovation to maintain the Roche Group s Leadership position? 2006 2011 2016 36 18

Sustainable leadership How can we constantly provide benefit to customers? Innovation Research Development Production Marketing & Distribution Customer benefit Which degree of innovation (= medical differentiation) is necessary to jump regulatory and reimbursement hurdles? 37 The Roche hub & spoke -model: Roche controls the global value chain, but is open for Research partnerships Roche core Innovation partners Research Development Production Marketing + Distribution 38 19

Why do we network in the Research field? Discovery Research Development Manufacturing Marketing Selling Intellect intensive Size does not increase productivity beyond a certain critical level! Capital intensive Size is critical to optimize investment, speed and coverage! More trials More patients Investigator networks In-licensing power More launches Larger products Market entry speed Sales force flexibility Economies of scope Economies of scale: Size matters 39 Access to Innovation is key - competition growing Costs of third party innovation is raising steeply! Average cost of in-licensing (Rx), $m 500 400 300 200 100 Early-stage Late-stage Average cost of in-licensing deals rose 40% (CAGR) since 2000 By 2010, 40% of Pharma peers revenues expected to come from external sources of innovation 0 2000 2001 2002 2003 2004 2005 40 20

The potential is there: unmet medical needs in many age-related diseases Met medical needs Unmet medical needs Alzheimer s Dementia Parkinson s Depression CNS RA / MS Osteoporosis CHD / Dyslipidemia Hypertension Inflammation/ Cardiovascular Bone COPD Respiratory Incontinence Urology AGE-RELATED DISEASES Diabetes T2 Cancer Stroke Endocrine Tumors Accidents/ Injuries Roche focus area 41 Current and future key sources of growth (Metastatic use) (Oncology ) Autoimmune portfolio Mircera (Renal & oncology) (Adjuvant use) Diabetes portfolio CETP inhibitor (Dyslipidemia) The coming 3 to 4 years will be decisive on how well we can fill the value propositions for beyond 2015 2006 2011 2016 42 Illustrative 21

YTD Sep 2007: Autoimmune portfolio Ocrelizumab additionally developed for MS and lupus RA Phase I Phase II Phase III R7277 (RA) Toyama R1503 (RA) p38 inhib. Ocrelizumab (RA) (RA) DMARD IR Actemra (RA) Approved (RA TNF IR) All Autoimmune R7277 (RA) Toyama R3477 (MS) Actelion R1295 (MS) IFN-alpha Ab (SLE) GNE Ocrelizumab (SLE) Ocrelizumab (LN) Ocrelizumab (RRMS) (RRMS) GNE moving to ph. 3 moving to ph. 3 Ocrelizumab (RA) (PPMS) GNE ANCA avasc. GNE (SLE) GNE (RA) DMARD IR Actemra (RA) Actemra (sjia) CellCept (LN) (RA TNF IR) R3421 (AI) Biocryst (LN) GNE CellCept (PV) 43 YTD Sep 2007 Metabolism/Diabetes pipeline making good progress- major new area for Roche emerging CETP Inhibitor Phase IIb data available internally: very encouraging Torcetrapib side effects (elevated blood pressure) appear compound-specific GLP-1 phase II data available soon First phase II data (sustained release formulation) before year end Decision for phase III to be taken in early 2008 DDP-IV (3) moves into phase II Good safety profile Potential for weight reduction? 44 22

Roche 2015 This program provides strategic direction and aligns our priorities to fill sustainable long-term growth gap Roche: Innovation Is Our Core Scope of Innovation Innovation Capabilities Choices around where we should focus to ensure advantaged participation Choices around how we will run our Innovation Model Innovation Investment Choices around how much resources to allocate and deploy 45 Roche internal R&D 5 Disease Biology Leadership Teams responsible for the start of the value chain Today s model New model NMP TA LI LO Ph 0 Ph 1 Ph 2 Ph 3 Reg. NMP TA LI LO Ph 0 Ph 1 Ph 2 Ph 3 Reg. Site Management Committees R&D Committee LCC Disease Biology Leadership Teams (DBLT) (x5) PPG BDC Strategic Portfolio Committee Non-Clinical Drug Safety Committee Drug Safety Committee Non-Clinical Drug Safety Committee Drug Safety Committee Decision Making Committees Decision Making Committees & Peer Reviews 46 23

Long-term perspective Roche 2015 is a crucial platform Challenge # 3: Filling the value gap Conclusion 3: With Roche 2015 we have the right platform in place to identify the right priorities 47 We Innovate Healthcare 24