annual
`RepoRt
`2011
`
`TURNING RESEARCH
`INTO RESULTS.
`
`annual RepoRt 2011
`
`actelion
`
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`
`

`

`CREATING
`LONG-TERM
`VALUE.
`
`Actelion todAy
`Actelion is a biopharmaceutical company with four products on
`the market. We are proud to have one of the richest product
`pipelines among pharmaceutical companies of comparable size.
`Our team of 2,500 committed professionals around the world
`is passionate about transforming innovation into novel medicines
`that treat diseases with significant unmet medical need. We
`will continue to invest in innovation to create lasting value for all,
`patients and shareholders alike.
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 2 of 144
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`

`

`contents
` Actelion AnnuAl RePoRt 2011
`
` Actelion
`toDAY
`
`Business stRAteGY
`AnD oPeRAtions
`
`ReseARcH AnD
`DeVeloPMent
`
`02
`
`02
`05
`
`08
`12
`
` Milestones 2011
` Letter to the
`Shareholders
` Financial Summary
` Global Reach.
`Prepared for the
`Future
`
` 17
`
`17
`
`18
`
`20
`22
`
` Solid Commercial
`Performance
` Actelionʼs Products
`in the Marketplace
` The Products
` Growing Knowledge.
`Growing Opportunities
`
`27
`
`27
`
`28
`
`29
`
`32
`34
`
` Dedicated to
`Innovation
` Clinical Development
`Pipeline Progress
` Clinical Studies
`Update
` The Pipeline
` Building PAH
`Leadership into the
`next Decade
`
`coRPoRAte
`GoVeRnAnce
`
`coRPoRAte sociAl
`ResPonsiBilitY
`
`FinAnciAl
`RePoRt
`
`65
`
`65
`68
`
` Our Commitments
` Common Effort
`to Fight Malaria
`
`39
`
`39
`
`42
`49
`52
`
`53
`54
`56
`
` Group Structure and
`Shareholders
` Board of Directors
` Management Board
` Shareholders’
`Participation Rights
` Auditors
` Information Policy
` Compensation Report
`
`73
`
`74
`
`78
`
` Consolidated
`Financial Statements
` Notes to the
`Consolidated
`Financial Statements
`117 Report of Actelion
`Management
`118 Auditors’ Reports
`122 Holding Company
`Statements
`124 Notes to the Financial
`Statements 2011
`136 Auditorsʼ Report
`138 Contacts
`
`Actelion Annual Report 2011
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 3 of 144
`
`

`

`SeVen PHASe i PRoGRAMS intitiAted
`Six novel compounds entered into man in 2011. Addition-
`ally, a Phase I study with macitentan in recurrent glioblas-
`toma was initiated.
`
`neW cHAiRMAn And boARd MeMbeRS
`At the company’s 2011 Annual General Meeting, share-
`holders elected two new Directors, Robert J. Bertolini and
`Jean-Pierre Garnier. In September, the Board appointed
`Jean-Pierre Garnier Chairman of the Board and in Novem-
`ber, Prof. Peter Gruss, President of the Max Planck Soci-
`ety, was nominated as a new member of the Board.
`
`StRenGtHened coMPAny MAnAGeMent
`Actelion adapted its Executive Committee (AEC) and ap-
`pointed a Chief Operating Officer (COO), Otto Schwarz, to
`meet the needs of a growing organization and to strength-
`en leadership and governance.
`
`innoVAtion AWARd
`Actelion was awarded this year’s French Prix Hermès de
`l’Innovation in the category “amélioration de la condition
`humaine” (improving the human condition).
`
`2
`
`MileStoneS
`
`continUed StRonG PRodUct deMAnd
`Product sales for 2011 were CHF 1,713.0 million, an in-
`crease of 7% in local currencies, with 41% of sales coming
`from the United States, 39% from Europe, 10% from Japan
`and 10% from the rest of the world.
`
`continUed oPeRAtionAl eARninGS GRoWtH
`Growth of Non-GAAP EBIT continued on a local currency
`basis to end the year at CHF 520.6 million, an increase of
`8% in local currencies.
`
`net incoMe Affected by litiGAtion
`US GAAP results were affected by the litigation award to
`Asahi Kasai Pharma Corp. resulting in a net loss of CHF
`146.3 million. The company appealed the judgement in De-
`cember 2011.
`
`fiRSt diVidend PAid
`Actelion shareholders approved a regular dividend pay-
`ment. The first dividend was CHF 0.80 per registered
`share.
`
`SWiSS fRAnc bond iSSUe
`Actelion made a successful debut in the bond market rais-
`ing CHF 235 million.
`
`SetiPiPRAnt in AlleRGic RHinitiS
`Actelion’s CRTH2 antagonist demonstrated efficacy in
`seasonal allergic rhinitis in a dose-ranging study. This is
`the first proof that this mechanism of action could bring
`clinically relevant benefit to patients suffering from aller-
`gic rhinitis.
`
`PoneSiMod in MUltiPle ScleRoSiS
`Actelion became the first company to report efficacy from
`a dose finding trial with a selective S1P1 receptor agonist
`in patients suffering from relapsing-remitting multiple
`sclerosis.
`
`MAcitentAn PRoMiSinG lonG-teRM SAfety
`An exploratory study with macitentan in patients with idi-
`opathic pulmonary fibrosis (IPF) showed a promising safe-
`ty and tolerability profile though efficacy data were not
`supportive of initiating a Phase III program in IPF.
`
`Actelion Annual Report 2011
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 4 of 144
`
`

`

`3
`
`Financial Report
`Responsibility
`Corporate Social
`Corporate Governance
`R & D
` Operations
`Business Strategy &
`Actelion today
`
` 1,292.1
`
` 1,428.9
`
`in CHF million
`
` 1,698.0
`
` 1,826.3
` 1,713.0
`
` 719.2
`
` 885.8
`
`in CHF million
`
` 1,083.5
`
` 1,203.6
`
` 1,275.6
`
`in CHF million
`
` 471.4
` 476.8
`
` 567.9
`
` 619.3
`
` 520.6
`
`PRodUct SAleS
`
`2007
`2008
`2009
`2010
`2011
`
`non-GAAP oPeX
`
`2007
`2008
`2009
`2010
`2011
`
`non-GAAP ebit
`
`2007
`2008
`2009
`2010
`2011
`
`eMPloyeeS PeR fUnction
`
`eMPloyeeS PeR ReGion
`
`
`Drug Discovery
`Clinical Development
`
`Markteting & Sales
`Support functions
`
`Total
`
`415
`676
`
`1,040
`439
`
`2,570
`
`
`CH
`US
`EU
`
`Japan
`RoW
`
`Total
`
`1,156
`471
`469
`
`242
`232
`
`2,570
`
`Actelion Annual Report 2011
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 5 of 144
`
`

`

`4
`
`Jean-Pierre Garnier and Jean-Paul Clozel
`
`Actelion Annual Report 2011
`
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`
`

`

`5
`
`Financial Report
`Responsibility
`Corporate Social
`Corporate Governance
`R & D
` Operations
`Business Strategy &
`Actelion today
`
`DEAR
`SHAREHOLDERS
`
`2011 was a challenging year for Actelion, as it was for most
`companies in our industry. We had to face a global eco-
`nomic crisis, a strengthening of the Swiss franc and in-
`creasing pricing pressures. In addition, our company faced
`an increasingly competitive market. Moreover, earnings
`for the year were affected by the litigation award to Asahi
`Kasei which resulted in Actelion posting its first loss since
`its start-up phase.
`
`We remain committed to generating value for you, our
`shareholders. Our response was to intensify our approach
`to balancing operational profitability with the investment
`required to assure an optimal future for Actelion. We are
`pleased to report that our efforts have led to solid opera-
`tional results, strengthened our product pipeline and
`opened the door to exciting new therapeutic areas.
`
`iMPRoVinG oPeRAtionAl PRofitAbility
`Actelion posted solid operating results in 2011. On a local
`currency basis, net sales increased 7%, and Non-GAAP
`EBIT operational profit grew 8%. Our improved opera-
`tional performance is the result of our ongoing efforts to
`expand our market reach and to optimize the sales activi-
`
`ties of our more than 30 affiliates. This includes extending
`our presence into growth markets such as Poland, Brazil,
`Mexico, Russia and China and, in 2011, Hungary and Tai-
`wan, where we opened affiliate offices.
`
`Our solid performance, however, was not fully reflected in
`our reporting currency, and our net income was negatively
`affected by the Asahi Kasei case. We were obligated to
`make a USD 407 million provision for potential future
`losses arising from this litigation. However, we remain
`convinced that the jury verdict and the trial court’s final
`judgment, reached in November 2011, are neither sup-
`ported by the facts nor correct as a matter of law. There-
`fore we filed an appeal in December 2011.
`
`PRePARinG foR tHe fUtURe WitH PAH
`Actelion’s three drugs for the treatment of pulmonary
`arterial hypertension (PAH) – Tracleer, Ventavis and Veletri
`– have established the company as the global market
`leader in PAH treatment. Competition, however, is in-
`creasing. In 2011, a change in a key competitor’s label cre-
`ated a more challenging environment in the United States.
`To maintain our leadership in PAH treatment, we are fo-
`
`Actelion Annual Report 2011
`
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`

`

`6
`
`GettinG ReAdy
`foR tHe neXt PHASe
`
`cusing on two new compounds in development: macitentan
`and selexipag. We aim to gradually shift the standard of
`care in PAH from symptomatic treatment toward delaying
`or stopping the disease's progression with these two new
`oral compounds. Macitentan is under assessment in a
`Phase III clinical trial (SERAPHIN) that is expected to
`deliver results in the first half of 2012. Selexipag also is in
`a Phase III clinical trial (GRIPHON), which is anticipated
`to report results in mid-2014.
`
`eMbARkinG on neW fRontieRS
`By leveraging our expertise in particular molecular tar-
`gets, including G-protein coupled receptors, we are able to
`diversify our disease and product portfolio in the areas of
`immunology, asthma and allergy.
`
`In 2011, we reported a positive Phase II trial with ponesi-
`mod, a promising compound for the treatment of relaps-
`ing-remitting multiple sclerosis. This selective S1P1 re-
`ceptor agonist is also under evaluation for the treatment
`of psoriasis in a Phase II study. In addition, we reported
`encouraging results with setipiprant, a CRTH2 receptor
`antagonist tested for its efficacy against allergic rhinitis.
`
`A Phase II study is evaluating setipiprant for the treatment
`of asthma, the results of which will be available in the first
`half of 2012.
`
`Actelion initiated Phase I programs for seven compounds
`in 2011 bringing its total number of compounds in Phase I
`to eight.
`
`StRenGtHeninG tHe boARd And MAnAGeMent
`At the Annual General Meeting (AGM) in May 2011, you –
`our shareholders – supported Actelion’s strategy by voting
`for the reelection of several Board members and for the
`election of two new Directors, Mr. Robert Bertolini and Dr.
`Jean-Pierre Garnier, our Chairman of the Board since
`September 2011. To further strengthen our Board, we have
`also nominated Prof. Peter Gruss, the president of the Max
`Planck Society, for election at the 2012 AGM in May.
`
`Throughout 2011, Actelion took further steps to enhance
`its strategic analysis and decision-making abilities on a
`management level. We appointed Mr. Otto Schwarz Chief
`Operating Officer and reduced the number of employees
`reporting directly to the Chief Executive Officer. We also
`
`Actelion Annual Report 2011
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 8 of 144
`
`

`

`7
`
`Financial Report
`Responsibility
`Corporate Social
`Corporate Governance
`R & D
` Operations
`Business Strategy &
`Actelion today
`
`All of us at Actelion thank you for your support over the
`past year. You can be assured that this is not taken for
`granted. We will remain focused on continuing to deliver
`value for all our shareholders and to share the results of
`our efforts with you.
`
`Jean-Pierre Garnier
`Chairman of the Board of Directors
`
`Jean-Paul Clozel
`Chief Executive Officer
`
`adapted the Actelion Executive Committee to the needs of
`an evolving organization.
`
`All these changes are part of our commitment to improve
`our effectiveness operationally and to build on our focus
`on innovative drugs that address unmet medical needs.
`The Board and management are convinced that this
`strategy will create long-term value for Actelion and its
`stakeholders.
`
`enHAncinG SHAReHoldeR RetURnS
`Actelion is still a young company. Not surprisingly, its
`investments in innovative health care solutions are just
`starting to pay dividends. As part of its commitment to en-
`hance shareholder returns, the Board recommended a
`share buyback program and the distribution of a dividend
`of CHF 0.80 in 2011, which were approved by shareholders.
`The Board proposes to declare a dividend of CHF 0.80 per
`share at the AGM in May 2012.
`
`Actelion Annual Report 2011
`
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`
`

`

`8
`
`finAnciAl SUMMARy
`
`finAnciAl ReSUltS oVeRVieW
`
`2011
`
`2010
`
`oPeRAtinG eXPenSeS
`Operating expenses for 2011 were CHF 1,783.9 million
`compared to CHF 1,471.7 million during the previous year.
`This variance shows the impact of the Asahi Kasei litiga-
`tion award of CHF 340.6 million and of provisions made for
`doubtful debts related to increased sovereign debt risk
`from amounts owed to the company by public hospitals
`and institutions in southern Europe.
`
`in CHF million or shares
`
`Net revenues
`Operating expenses
`Operating income
`Non-GAAP EBIT
`Net income (loss)
`Diluted EPS in CHF
`No. of shares in calculation
`Gross cash
`Total assets
`Cash from operations
`Shareholders' equity
`No. of treasury shares
`
`1,796.1
`1,783.9
`12.2
`520.6
`(146.3)
`(1.23)
`118.8
`1,331.0
`2,740.6
`404.9
`1,510.5
`13.3
`
`1,929.0
`1,471.7
`457.3
`619.3
`390.6
`3.22
`121.4
`1,445.9
`2,921.0
`316.4
`1,795.2
`10.5
`
`Non-GAAP operating expenses for 2011 amounted to
`CHF 1,275.6 million, an increase of 4% in local currencies
`compared with 2010. Non-GAAP operating expenses ex-
`clude all charges related to employee stock options,
`depreciation and amortization, and one-off items that dis-
`tort comparative analysis, such as the legal provision of
`CHF 340.6 million.
`
`Cost of sales amounted to CHF 196.5 million, or 11.5% of
`product sales. This represents a small increase due to the
`proportionally higher sales of Ventavis and Veletri, which
`have a relatively higher cost of goods than Tracleer.
`
`2011 was a year shaped by repercussions from the global
`financial crisis, with government budget deficits adding to
`pricing pressures globally and continued currency turbu-
`lence. Additionally, a change in the competitive landscape
`for Tracleer adversely affected sales in the United States
`during the second half of the year, and ongoing legal pro-
`ceedings and doubtful debt provisions stemming from the
`European debt crisis had an adverse impact on earnings.
`
`Research and development expenses decreased 5% to
`CHF 457.7 million, compared with CHF 484.3 million in
`2010. Balanced R&D spending, with increases in some
`programs and decreases in others, reflects Actelion’s
`commitment to managing its bottom line. The ratio of R&D
`spend to product sales in 2011 was 27%, which the com-
`pany considers appropriate, balancing future growth and
`profitability.
`
`Selling, general and administration (SG&A) expenses for
`2011 amounted to CHF 749.9 million, a 8% increase in
`local currencies and a 1% increase in Swiss francs. The
`sovereign debt crisis in Europe continued to worsen dur-
`ing the second half of 2011. This has prompted Actelion to
`make a provision of CHF 44.3 million related to amounts
`owed to the company by public hospitals and institutions in
`southern Europe. This provision was the main driver of
`this increase along with legal and corporate expenses.
`The company also continued to increase its reach into
`emerging markets, which resulted in rest of the world
`product sales growth of 24% in local currencies.
`
`net ReVenUeS
`Sales of the company’s products continued to grow, al-
`though some of this growth was masked by the factors
`described above and particularly by the unprecedented
`strength of the Swiss franc. Product sales for the year
`were CHF 1,713.0 million, an increase of 7% in local cur-
`rencies. In our reporting currency, however, this repre-
`sents a decrease of 6%.
`
`Contract revenues for 2011 amounted to CHF 83.1 million.
`Most of that amount was the remaining deferred
`revenue from the ongoing orexin collaboration with
`GlaxoSmithKline.
`
`Net revenues for the year were CHF 1,796.1 million. This
`was an increase in local currency terms, of 5%, but a de-
`crease in our reporting currency, of 7%.
`
`Actelion Annual Report 2011
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 10 of 144
`
`

`

`9
`
`Financial Report
`Responsibility
`Corporate Social
`Corporate Governance
`R & D
` Operations
`Business Strategy &
`Actelion today
`
` 1,317.4
`
` 1,473.5
`
`in CHF million
`
` 1,772.6
`
` 1,929.0
` 1,796.1
`
` 3.57
` 3.40
`
` 3.31
`
` 394.2
`
` 424.2
`
` 404.9
`
` 316.4
`
`in CHF
`
` 4.38
` 4.54
`
`in CHF million
`
` 513.7
`
`in CHF million
` 219.7
` 212.6
`
` 204.6
`
`Actelion Annual Report 2011
`
`totAl ReVenUeS
`
`2007
`2008
`2009
`2010
`2011
`
`non-GAAP dilUted ePS
`
`2007
`2008
`2009
`2010
`2011
`
`cASH fRoM oPeRAtionS
`
`2007
`2008
`2009
`2010
`2011
`
`cASH RetURned to SHAReHoldeRS
`
`2007
`2008
`2009
`2010
`2011
`
` 35.0
`
` 115.9
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 11 of 144
`
`

`

`10
`
`Although masked by the above mentioned factors, as well
`as the strong Swiss franc, we continue to see margin im-
`provement in our commercial organization with base com-
`mercial expenses remaining flat compared to product
`sales growth of 7%, both on a local currency basis.
`
`Interest expense on the award amounted to CHF 19.7 mil-
`lion. The remainder of the interest charge is mostly related
`to future payments for Veletri, the improved formulation of
`intravenous epoprostenol that the company acquired in
`March 2009.
`
`At the end of 2011, Actelion employed 2,570 people world-
`wide, of whom more than 1,100 are located in Allschwil.
`Actelion believes that concentrating especially its re-
`search efforts in one location greatly enhances produc-
`tivity through open and transparent communication. This
`approach, though, requires investing in infrastructure.
`In late 2010, Actelion opened a business center and a
`new building for its clinical development team. A second
`research building is under way and should be finished
`toward the end of 2012.
`
`oPeRAtinG incoMe
`Operating income was negatively affected by the litigation
`provision, by currency fluctuations, and by doubtful debt
`provisions. For the full year 2011, our operating income
`amounted to CHF 12.2 million, compared with CHF 457.3
`million in 2010. Better reflecting the actual operating per-
`formance of the business is the Non-GAAP operating
`profit which amounted to CHF 520.6 million, an increase of
`8% in local currency terms.
`
`non-oPeRAtinG ReSUltS And tAXeS
`Interest income for 2011 amounted to CHF 6.2 million
`which includes CHF 2.9 million interest paid relating to
`amounts outstanding by public hospitals in Spain. This
`compares with CHF 3.2 million in 2010.
`
`Interest expense for the year amounted to CHF 21.9 mil-
`lion, compared with CHF 2.7 million for the previous year.
`The interest provision on the litigation award, which
`accrues at an annual rate of 10% and is payable only if the
`appeal is not successful, had a negative impact on interest
`expense in 2011.
`
`Amortization of debt discount for 2011 amounted to
`CHF 18.1 million, compared with CHF 18.7 million in 2010.
`On 1 January 2009, Actelion adopted FSP APB 14-1, which
`divides convertible bonds into debt and equity components
`and applies a non-cash interest charge equivalent to
`“market rates” based on a company’s individual circum-
`stances. The CHF 460 million convertible bond that this
`charge relates to matured on 22 November 2011 and was
`settled in cash.
`
`The company issued a CHF 235 million bond in December
`2011. The coupon of the four-year bond is 4.875%, which
`resulted in an interest expense of CHF 0.8 million for the
`last three weeks of the year, booked under "Amortization
`of debt discount", premium and issuance cost.
`
`Changes to US GAAP required the company to add an ad-
`ditional line item to its Profit & Loss. The item “Impair-
`ment on financial assets” refers to charges of CHF 24.7
`million related to Greek bonds as well as losses on other
`financial instruments.
`
`Other financial expenses for the year amounted to
`CHF 22.9 million, compared with income of CHF 1.7 million
`in 2010. The currency environment, meanwhile, continues
`to add great volatility to gains and losses on the company’s
`hedge positions and to the valuation of intercompany
`receivables.
`
`Income tax expense for the period under review amounted
`to CHF 77.0 million, compared with CHF 50.3 million in
`2010. Excluding the Asahi provision, the tax rate for 2011 is
`17.3%, compared with 11.4% for the previous year. A por-
`tion of this increase can be attributed to the strength of the
`Swiss franc.
`
`Actelion Annual Report 2011
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1068, p. 12 of 144
`
`

`

`11
`
`Financial Report
`Responsibility
`Corporate Social
`Corporate Governance
`R & D
` Operations
`Business Strategy &
`Actelion today
`
`net incoMe And eARninGS PeR SHARe
`Because of the litigation provision, the company reported
`a net loss of CHF 146.3 million for 2011. Basic and diluted
`loss per share for the same period amounted to CHF 1.23
`compared with fully diluted earnings per share in 2010 of
`CHF 3.22.
`
`Non-GAAP earnings per share dereased by 4% in local
`currencies to CHF 3.31 from CHF 4.54.
`
`bAlAnce SHeet And cASH floW
`The company’s operating activities continue to generate
`solid cash flows, driven by top-line growth and the careful
`management of working capital. Cash from operations for
`the period under review amounted to CHF 404.9 million,
`compared with CHF 316.4 million in 2010, and were again
`affected by currency fluctuations. The company’s gross
`cash position at 31 December 2011 amounted to CHF 1.3
`billion and was negatively affected by the cash settlement
`of the outstanding 2011 convertible bond in November.
`
`As mentioned, in December 2011 the company issued a
`CHF 235 million bond, available to Swiss investors only.
`This marks Actelion’s first issue in the bond market. High
`demand for the bond signaled the confidence that inves-
`tors have in the company.
`
`The difficult health care environment, particularly in
`southern Europe, resulted in trade and other receivables
`increasing to CHF 536.5 million at the end of December,
`compared with CHF 520.0 million at the end of the previous
`year. Days sales outstanding (DSO) increased to 103 days
`from 91 days in 2010. Actelion continues to evaluate and
`pursue measures to improve cash collection that include
`factoring and securitization arrangements.
`
`Investment in property, plant and equipment decreased in
`2011 to CHF 89.4 million, compared with CHF 127.6 million
`in 2010. The majority of this investment is for the con-
`struction of a research and development building. Total
`property, plant and equipment at year-end was CHF 424.7
`million, compared with CHF 399.0 million at the end of
`2010. We are nearing the completion of our building pro-
`gram, so capital expenditure going forward should be at
`lower levels.
`
`Total shareholders' equity decreased from CHF 1,795.2
`million at the end of 2010 to CHF 1,510.5 million at the end
`of 2011.
`
`SHAReHoldeR VAlUe
`Actelion’s Board proposes to maintain a dividend payment
`of CHF 0.80 per share and will ask for shareholder ap-
`proval to do so at the upcoming Annual General Meeting on
`4 May 2012.
`
`During 2011, the company bought back 2.9 million shares
`at a cost of CHF 109.3 million on the second trading line
`as part of the CHF 800 million share buyback program
`announced in October 2010. This brings the number of
`treasury shares held to 13.3 million, or 10% of the total
`issued.
`
`inteRnAl contRol oVeR finAnciAl RePoRtinG
`Actelion is committed to maintaining strict oversight of its
`financial reporting. In keeping with that commitment, for
`the sixth consecutive year the company’s internal controls
`over financial reporting were certified as meeting the re-
`quirements of SOX 404 (Sarbanes-Oxley Act 2002, section
`404) at 31 December 2011.
`
`Actelion Annual Report 2011
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`GloBAl oRGAniZAtion
`
`GLOBAL REACH.
`PREPARED
`FOR THE FUTURE.
`
`Actelion has built a global commercial infrastructure of
`more than 30 affiliates, many of which have already celebrated
`their 10th anniversary. Recently, we have expanded into
`emerging growth markets. We now have a presence in all
`principal pharmaceutical markets, which is key to maximizing
`the value of our current and future assets and to coping
`with the challenging, changing economic and health care
`environment. Despite health care reforms and global financial
`market uncertainty, our commercial organization delivered
`a solid performance in 2011.
`
`Actelion Annual Report 2011
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`soliD PeRFoRMAnce
`
`ACTELION WORLDWIDE
`AFFILIATES
`
`Actelion was founded in 1997. In just 14 years, it has established
`operational affiliates in over 30 countries. Today, Actelion is a truly global
`company – with strong commercial and medical impact.
`
`SWITzERLAND (Headquarters)
`US (San Francisco)
`
`FRANCE
`
`AUSTRALIA
`CANADA
`GERMANY
`GREECE
`JAPAN
`UK & IRELAND
`ITALY
`
`AUSTRIA
`NETHERLANDS
`BRAzIL
`SWEDEN
`SPAIN
`
`CzECH REPUBLIC
`SWITzERLAND (affiliate)
`
`ISRAEL
`
`TURKEY
`
`1997
`
`1998
`
`1999
`
`2000
`
`2001
`
`2002
`
`2003
`
`2004
`
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`

`

`soliD PeRFoRMAnce
`cHAnGinG enViRonMent
`It has been an extraordinary year,
`for countries, companies and individu-
`als, a year whose driving dynamics
`included health care reforms, auster-
`ity measures, and currency rates. As
`a company with its headquarters in
`Switzerland, Actelion had to deal with
`the challenges of the global macroeco-
`nomic environment and of a changing
`health care environment. But it is pre-
`cisely in such times that our established
`global infrastructure shows its value
`through its ability to deliver a solid
`performance.
`
`GlobAl footPRint
`We have centralized our expertise in
`Allschwil, Switzerland, with the infra-
`structure, the quality systems, the
`regulatory experience and the enthu-
`siasm to perform high-quality, clini-
`cally relevant research and development
`that really meets the needs of patients.
`
`Actelion, however, has also invested in
`local markets, establishing more than
`30 operational affiliates globally. We
`have expanded into such markets as
`
`Poland, Brazil, Mexico, Russia, China
`and, most recently, Hungary and Taiwan
`in 2011. The breadth of our affiliate
`network and a distributor network
`ensures that we can deliver our drugs
`to patients globally.
`
`ReMARkAble PeRfoRMAnce
`Of the 10th anniversary celebrations in
`2011, there is perhaps none more poign-
`ant than that of our affiliate in Japan.
`The decision to set up our own affiliate
`in Japan was made early on during
`Actelion’s evolution. To be able to gain
`approval for Tracleer in Japan soon
`after the US and European approvals
`and then to commercialize Tracleer in
`the Japanese market without the help
`of a Japanese partner is a unique
`achievement. The expertise and repu-
`tation of our Japanese colleagues has
`proven to be an asset demonstrated by
`the signing of a partnership agreement
`with Nippon Shinyaku for the global
`development of selexipag.
`
`Our Japanese affiliate is our second
`largest, achieving a remarkable increase
`in net sales of almost 20% in 2011.
`
`This is all the more significant given
`that in 2011 Japan had to deal with
`much more than the global pressures
`that everyone is so acutely aware of.
`The nation also had to cope with the
`disastrous consequences of an earth-
`quake and subsequent tsunami in
`March. Through all of this, the dedi-
`cated employees at our Japanese
`affiliate managed to ensure drug sup-
`plies to patients and to keep clinical
`development activities on track.
`
`MAXiMiZinG oUR ASSetS
`Each of Actelion’s local teams have
`unique capabilities that contributed to
`the very solid commercial performance
`that Actelion achieved in 2011. We have
`proven our capability to build specialty
`markets where no therapy exists for
`patients with rare diseases. The rela-
`tionships that we have developed have
`enabled us to spearhead top-rated,
`innovative, continuing medical educa-
`tion events locally, regionally and glob-
`ally. Using our knowledge, relationships
`and infrastructure to facilitate and
`enhance disease understanding and
`medical practices, we create and shape
`markets and medical practices through
`our comprehensive approach to PAH
`beyond just providing drugs.
`
`BELGIUM
`PORTUGAL
`SOUTH KOREA
`
`POLAND
`BRAzIL
`SLOVAK REPUBLIC
`RUSSIA
`
`CHINA
`MEXICO
`SINGAPORE
`
`HUNGARY
`TAIWAN
`
`2005
`
`2006
`
`2007
`
`2008
`
`2009
`
`2010
`
`2011
`
`Actelion Annual Report 2011
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`BUSINESS
`STRATEGy &
`OPERATIONS
`DELIVERING
`OUTSTANDING
`VALUE.
`
`Solid coMMeRciAl
`PeRfoRMAnce
`
`Sales growth driven by strong demand for our products in
`all major markets and significant progress in emerging
`markets made 2011 another commercially successful year
`for Actelion. Our performance is particularly satisfying,
`given the competitive environment especially in the United
`States and the challenging macro-economic environment
`in Europe that gave rise to pricing pressure and concern
`over the liquidity of national governments.
`
`Total product sales increased 7% in local currencies to
`CHF 1,713.0 million with 41% of sales coming from the
`United States (US), 39% from Europe, 10% from Japan and
`10% from the rest of the world. Product sales growth was
`mainly driven by patient demand and supported by price
`increases for Ventavis (iloprost) and zavesca (miglustat) in
`the US.
`
`GlobAl ReAcH And ReSUltS
`
`At the end of 2011, Actelion had over 30 affiliates worldwide
`and, through partnership arrangements, we further reach
`more than 30 additional markets.
`
`
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`18
`
`European and Asia-Pacific countries contributed double-
`digit, local-currency sales growth to our solid results in
`2011.
`
`Japan especially had an excellent year of continued strong
`growth momentum despite the impact of the natural dis-
`aster on new patient recruitment and despite rising com-
`petition in the endothelin receptor antagonist (ERA) market
`since 2010. On a local currency basis, Actelion Japan
`achieved a remarkable increase in net sales of 20% in 2011
`compared with the previous year.
`
`European countries likewise delivered solid performances,
`collectively contributing 38% of total product sales on a
`constant currency basis. In 2011, the company felt the full
`effect of government austerity measures taken in 2010,
`including, for example, a 10% increase in mandatory rebates
`in Germany in August 2010. In addition, price cuts that came
`into effect in early 2011 affected our overall growth in Europe.
`
`The United States (US) delivered 43% of our total sales for
`2011 on a constant currency basis, but we face an increas-
`ingly competitive situation that is affecting Tracleer (bosentan)
`sales in the US.
`
` “The in-depth understand-
`ing of the market environ-
`ment together with a
`tailored business approach
`will enable us to leverage
`the business potential
`and to continuously expand
`our market leadership.”
`Matthias Hess, General Manager Belgium
`
`Actelion’S PRodUctS in tHe MARketPlAce
`
`tRAcleeR
`focUSinG on PRoVen efficAcy
`In 2011, Tracleer again delivered excellent sales growth of
`5% in local currencies and 8% in units – an impressive
`achievement 10 years after its market intro duction. These
`gains translate into total Tracleer sales of CHF 1,522.1
`million for 2011.
`
`In March 2011, the competitive dynamics for Tracleer
`shifted in the US when a competitor’s product received a
`change to its label and a simplified risk evaluation and
`mitigation strategy (REMS) obligation. Actelion has, as a
`result, seen a gradual decline in Tracleer‘s share of new
`prescriptions in the US. Actelion has taken several initiatives
`to counteract this situation.
`
`Only Tracleer has consistently, in three major studies,
`demonstrated an ability to improve a patient’s functional
`class, an important objective unsurpassed by other thera-
`pies on the market. Thus, its proven efficacy remains the
`overwhelming argument for prescribing Tracleer.
`
`Outside the US, Tracleer sales were driven by the continued
`growth of the use of ERAs in pulmonary arterial hyper tension
`(PAH). The ongoing increase in utilizing Tracleer to treat
`digital ulcers as a consequence of systemic sclerosis and
`the successful conversion of sitaxentan patients to Tracleer
`following the withdrawal of sitaxentan in early 2011 also
`contributed to Tracleer sales.
`
`VentAViS
`HoldinG itS GRoUnd
`Ventavis (iloprost), the first inhaled prostacyclin to treat
`PAH, performed very well in a highly competitive inhaled
`prostacyclin market. Ventavis sales in the US amoun