Finance Report
`
`https://www.roche.com/dam/jcr: 13c45df4-9cf6-4545-a23d-87 4d398aa 788/en/fb12e pdf
`
`Novartis Exhibit 2274.001
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Finance in brief
`
`Key results
`
`Pharmaceuticals
`
`Diagnostics
`
`Group
`
`IFRS results
`
`Sales
`Operating p rofit
`
`Net income
`
`Sales
`
`201 1
`
`201 1
`
`2011
`
`2012 i'"li I
`2012 =w +3.9
`2012 bi I
`
`+4.7
`+0.1
`
`I
`
`+ 5.9
`
`+4.5
`+1 .4
`
`Core operating profn margin.
`
`1--,~
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`I
`
`44.0
`40.9
`
`21.3
`22.4
`
`37.7
`
`35.6
`
`2012
`(mCHF)
`
`2011
`(mCHF)
`
`(CHFJ
`
`%change
`(CERJ
`
`2012
`
`% of sales
`2011
`
`+4
`
`Net income attributable to Roche shareholders
`
`Diluted EPS (CHF)
`
`Dividend per share (CHF) •l
`
`Core results
`Research and d evelopment
`
`Core operating profit
`
`Core EPS (CHF)
`
`Free cash flow
`Operating free cash flow
`Free cash flow
`
`N et debt
`
`Capitalisation
`
`- Debt
`
`- Equity
`
`1) Proposed by the Board of Directors.
`
`45,499
`14, 125
`9, 773
`9,539
`11.1 6
`7.35
`
`8,475
`17, 160
`
`13.62
`
`42.53 1
`13.454
`9,544
`9,343
`10.98
`
`6.80
`
`8.0 73
`15. 149
`
`12.30
`
`15.389
`4,630
`
`13,733
`3,904
`
`+7
`+5
`+2
`+2
`+2
`+8
`
`+5
`+ 13
`+ 11
`
`+12
`+19
`
`+3
`+1
`+1
`+2
`+8
`
`+2
`+11
`+ 10
`
`+10
`+15
`
`2012
`(mCHF)
`
`20 11
`(mCHF)
`
`(10,599)
`
`(15,566)
`
`41,3 18
`24,590
`16,728
`
`41,335
`26,853
`14,482
`
`3 1.0
`2 1.5
`21.0
`
`18.6
`
`37.7
`
`33.8
`10.2
`
`(CHF)
`
`- 32
`
`0
`- 8
`
`+16
`
`31.6
`22.4
`
`22.0
`
`19.0
`
`35.6
`
`32.3
`9.2
`
`% change
`(CER)
`
`- 31
`
`+3
`- 5
`
`+ 19
`
`CER (Constant Exchange Rates): The percentage changes at Constant Exchange Rates are calculated using simulations by reconsolidating both the 2012 and 2011
`results at constant currencies (the average rates for the year ended 31 December ?011).
`
`Core results and Core EPS (earnings per share): 1 hese exclude non- core items such as global restructuring charges and amortisation and impairment of goodwill
`and intangible assets. This allows a transparent assessment of both the actual results and the underlying performance of the business. A full income statement for
`the Group and tho operating results of the divisions arc shown on both an IFRS and core basis. Tho core concept is fully described on pages 146- 149 and
`reconciliations between the IFRS and core results are given there.
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.002
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Finance
`
`2012
`
`.
`1n brief
`
`Roche in 2012
`
`Sales
`
`Operating results
`
`The Roch e Group reported strong overall results in a challenging market in 2012. Core operating
`profit grew ahead of sales, and Core Earnings per Share increased by 10% at constant exchange
`rates (CER). The Swiss franc was weaker at average rates against some major currencies, notably
`the US dollar and Japanese yen, which had a positive overall impact on the income statement and
`cash flows expressed in Swiss francs.
`
`Group sales increased by 4% (CER) to 45.5 billion Swiss francs (+7% growth in Swiss franc terms).
`Pharmaceuticals sales growth was 5% (CER). The strong growth in both established and
`new oncology products, Actemra/RoActemra in rheumatoid arthritis and Pegasys in virology,
`was partially offset by the continuing impacts of generic competition and continuing pressures
`on prices, particularly in Japan and Western Europe.
`Diagnostics sales grew by 4% (CER), ahead of the market. with Professional Diagnostics and
`Tissue Diagnostics being the major contributors,
`
`Core operating profit increased by 11% (CER) to 17.2 billion Swiss francs (+1 3% growth in
`Swiss franc terms). The sales growth, productivity improvements and cost savings from various
`global restructuring plans offset the higher operating costs from investments in key markets
`as well as the impacts from price pressure and increased competition, The core operating margin
`increased by 2.1 percentage points to 37.7%.
`Research and development expenditure remained broadly stable with a slight increase
`of 2% (CER) to 8.5 billion Swiss francs on a core basis. due to strict portfolio prioritisation while
`supporting the development of the pipeline. R&D costs are 18,6% of Group sales.
`IFRS operating results include non-core items of 3.0 billion Swiss francs. This includes 1.3 billion
`for the restructuring of the Pharmaceuticals Division's Research and Development organisation
`and the restructuring of the Diagnostics Division's Applied Science and Diabetes Care businesses.
`
`Non-operating results
`
`Net financial expenses increased by 0.2 billion Swiss francs to 1.8 billion Swiss francs as
`lower interest expenses were more than offset by higher net foreign exchange losses and higher
`losses on debt redemptions.
`
`Net income
`
`Cash flows
`
`Financial position
`
`Shareholder return
`
`IFRS net income increased by 1% at CER to 9.8 billion Swiss francs (+ 2% in Swiss franc terms).
`as the strong core operating results were offset by higher restructuring charges and a higher
`effective tax rate.
`Core Earnings per Share increased by 10% in constant currencies (+1 1% in Swiss francs).
`
`Operating free cash flow of 15.4 billion Swiss francs. up 10% at CER due to higher operating
`profit.
`Free cash flow of 4.6 billion Swiss francs. up 15% at CER.
`Repayment of debt is ahead of schedule with 52% of the notes and bonds issued in 2009 to
`finance the Genentech transaction being repaid by the end of 2012.
`
`Net working capital increased by 3% (CER). reflecting higher levels of inventories due to
`launches and growth of key products, higher safety stock levels and increased demand in key
`markets.
`Net debt position improved by 5,0 billion Swiss francs to 10,6 billion Swiss francs.
`Credit ratings strong: Moody's at Al and Standard & Poor's upgraded to AA.
`
`Dividends are proposed to increase by 8%. This will represent the 26th consecutive year
`of dividend growth and will result in a pay-out ratio of 54.0%. subject to AGM approval.
`Total Shareholder Return (TSR) was 20% representing a combined performance of share
`and non-voting equity security.
`
`https://www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.003
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`...
`
`https://www.roche.com/damfp:13c45df4-9cffi..4545-a23d-874d398aa788/en/lb12e.pdf
`
`Novartis Exhibit 2274.004
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Financial Review
`
`Roche Group results
`
`Sales in billions of CHF
`
`Core operating profit in billions of CHF
`
`2012
`20 11
`20 10
`
`% CERgrowth
`
`50
`
`+4.5
`+ 1.4
`+0.3
`
`1 ·
`
`1 ·
`
`I "
`
`I "
`
`Net income attributable to Roche shareholders m billions of CH F
`
`Core EPS in CHF
`
`2012
`2011
`2010
`
`10
`
`12
`
`9,5
`9,3
`8,7
`
`20
`
`'Mlof sales
`
`37.7
`35.6
`34.9
`
`13,62
`
`12.30
`12.78
`
`The Roche Group's results for 2012 reported growth in its core operating activities, with sales up by 4% and core operating
`profit up by 11% at constant exchange rates and core operating margin up by 2.1 percentage points to 37.7%. Sales volume
`increases. notably in the US and emerging markets such as China and Latin America, more than offset pricing pressures in
`many markets. The cost of sales ratio improved by 0.9 percentage points to 25.2% of sales, driven by continuing productivity
`improvements in the Pharmaceuticals Division. Operating costs were held at the necessary levels to support the future
`development of the business, notably for research and development which increased slightly by 2% due to portfolio prioritisation
`while supporting the development of the pipeline. This strong operating performance, partially offset by a higher tax rate,
`was responsible for an increase in Core EPS of 10% at constant exchange rates. Operating free cash flow grew at 10% to
`15.4 billion Swiss francs or 33.8% of sales.
`
`In the first half of 2012 the Group initiated a number of major restructuring initiatives to position the business for the future,
`notably in the Pharmaceuticals Division's Research and Development organisation with the announcement of the closure
`of the Nutley site in the US. In Diagnostics the division initiated global restructuring programmes in the Applied Science
`and Diabetes Care business areas to address long-term profitability by focusing on fewer businesses and products and by
`consolidating operations. Net income on an IFRS basis increased by 1% to 9.8 billion Swiss francs (+2% in Swiss francs)
`as the strong operating result was offset by the large restructuring costs in 2012.
`
`Sales in the Pharmaceuticals Division rose by 5%, led by 9% growth in the oncology portfolio with sales of over 21 billion
`Swiss francs. The key growth drivers were Herceptin, MabThera/Rituxan, Avastin, Actemra/RoActemra, Zelboraf and
`Pegasys. The E7 key emerging markets showed growth of 14%, led by 27% sales growth in China. Diagnostics sales grew
`at 4%, expanding the division's leading market position. The major growth areas were Professional Diagnostics and Tissue
`Diagnostics, while sales in Diabetes Care and Applied Science both declined.
`
`Core operating profit increased by 11%, with the Pharmaceuticals Division growing at 13% while the Diagnostics Division
`fell by 2%. Both divisions showed increases in marketing and distribution costs driven by investments in new products and
`key markets, notably in the US and China. There were also increased costs for factoring which contributed towards improved
`cash collections. especially in Southern Europe. Bad debt expenses decreased compared to 20 11 on a Group level. The
`profitability in Pharmaceuticals increased by 3.1 percentage points to 44.0% due to the sales growth. a decrease in cost of
`sales from productivity improvements and portfolio prioritisation in research and development. In Diagnostics. profitability
`in 2012 declined by 1.1 percentage points to 21.3% mainly due to pricing pressures in the Diabetes Care business.
`
`https:/twww.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Financial Review I Roche Finance Report 2012
`
`J
`
`Novartis Exhibit 2274.005
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Opera ting free cash flow was 15.4 billion Swiss francs, an increase of 100/o compared to 2011. This reflects the continued
`strong underlying cash generation of the Group's operations while making the necessary investments to develop
`the business. The increase in free cash flow was 150/o to 4.6 billion Swiss francs.
`
`In 2012 on average the Swiss franc was weaker compared to the average 2011 rates for some major currencies. notably the
`US dollar and Japanese yen. The overall impact is positive on the income statement and cash flows expressed in Swiss francs
`compared to the results at constant exchange rates.
`
`Income st atement
`
`IFRS results
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General and administration
`Operating profit
`
`Associates
`Financial income
`Financing costs
`Profit before taxes
`
`Income taxes
`Net income
`
`Attributable to
`- Roche shareholders
`- Non- controlling interests
`
`Diluted EPS (CH F)
`
`Core results
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General and administration
`Operating profit
`
`Associates
`Financial income
`Financing costs
`Profit before taxes
`
`Income taxes
`Net income
`
`Attributable to
`- Roche shareholders
`- Non- controlling interests
`
`Core EPS (CHF)
`
`2012
`(mCHF)
`
`2011
`(mCHF)
`
`% change
`( CH F)
`
`% change
`(CER)
`
`45,499
`1,945
`(l 2,175)
`(8,539)
`(9,552)
`(3,053)
`14,125
`
`-
`
`471
`(2,273)
`12,323
`
`(2,550)
`9,773
`
`9.539
`234
`
`11. 16
`
`45,499
`1,945
`(11,444)
`(8.392)
`(8.475)
`(1 .973)
`17,160
`
`-
`
`471
`(2, 273)
`15,358
`
`(3.480)
`11,878
`
`42,531
`1,582
`( 11,942)
`(8,049)
`(8,326)
`(2,342)
`13,454
`
`12
`647
`(2,228)
`11,885
`
`(2,341)
`9,544
`
`9,343
`201
`
`10.98
`
`42,531
`1,582
`( 11 ,1 17)
`(7,967)
`(8,073)
`(1 ,807)
`15,149
`
`12
`647
`(2,228)
`13,580
`
`(2,895)
`10,685
`
`11.643
`235
`
`10.470
`215
`
`13.62
`
`12.30
`
`+7
`+23
`+2
`+6
`+ 15
`+30
`+5
`
`-1 00
`- 27
`+2
`+4
`
`+9
`+2
`
`+2
`+ 16
`
`+2
`
`+7
`+23
`+3
`+5
`+5
`+9
`+13
`
`-1 00
`- 27
`+2
`+13
`
`+20
`+ 11
`
`+11
`+9
`
`+ 11
`
`+ 4
`+17
`- 1
`+ 4
`+1 1
`+26
`+3
`
`- 30
`- 2
`+2
`
`+5
`+1
`
`+1
`+10
`
`+ 2
`
`+4
`+ 17
`0
`+3
`+2
`+6
`+11
`
`- 30
`- 2
`+11
`
`+16
`+10
`
`+ 10
`+3
`
`+1 0
`
`4
`
`Roche Finance Report 2012 I Roche Group - Financial Review
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.006
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Sale s
`In 2012 sales increased by 4% at constant exchange rates (+7% in Swiss francs; +1% in US dollars) to 45.5 billion Swiss
`francs. Sales in the Pharmaceuticals Division rose 5% with Herceptin, MabThera/Rituxan, Avastin, Actemra/RoActemra,
`Zelboraf and Pegasys growing strongly. Avastin returned to growth with a 6% increase in sales. These positive results were
`partially offset by the continued decline in Bonviva/Boniva and CellCept sales from generic erosion following patent expiry
`and NeoRecormon/Epogin due to competition from biosimilars. In the E7 key emerging market sales in Pharmaceuticals
`grew by 14%. led by 27% growth in China. The Diagnostics Division sales were 10.3 billion Swiss francs. an increase of 4%
`at constant exchange rates. expanding its leading market position. The major growth area was Professional Diagnostics,
`which represents half of the division's sales and grew by 8%. Tissue Diagnostics ( + 12%) also showed strong growth. while
`Diabetes Care sales declined by 4% and Applied Science sales by 3%.
`
`Divisional operating results for 2012
`
`Sales
`Core operating profit
`- margin. % of sales
`Operating profit
`- margin. % of sales
`Operating free cash flow
`- margin, % of sales
`
`Pharmaceuticals
`(mCHF)
`
`Diagnostics
`(mCHF)
`
`35.232
`15,488
`44.0
`13.677
`38.8
`14,052
`39.9
`
`10,267
`2,187
`21.3
`1,284
`12.5
`1,826
`17.8
`
`Divisional operati ng results - Development of results compared to 2011
`
`Corporate
`(mCH F)
`
`(515)
`
`(836)
`
`-
`-
`-
`-
`
`(489)
`
`Group
`(mCHF)
`
`45,499
`17,160
`37.7
`14.125
`31.0
`15.389
`33.8
`
`Sales
`- % increase at GER
`Core operating profit
`- % increase at GER
`- margin: percentage point increase
`Operating profit
`- % increase at GER
`- margin: percentage point increase
`Operating free cash flow
`- % increase at GER
`- margin: percentage point increase
`
`Pharmaceuticals
`
`Diagnostics
`
`Corporate
`
`Group
`
`+5
`
`+13
`+3.4
`
`+10
`+ 1.8
`
`+7
`+0.8
`
`+ 4
`
`- 2
`- 1.4
`
`- 25
`- 4.7
`
`+43
`+4.9
`
`-
`
`+ 17
`
`-
`
`+81
`-
`
`+ 11
`
`-
`
`+4
`
`+ 11
`+2.2
`
`+3
`-0.4
`
`+ 10
`+ 1.7
`
`Core operating results
`Pharmaceuticals Division. The division increased its core operating profit by 13% at constant exchange rates, driven
`by growth of the underlying business with a 5% increase in sales, an improved gross profit margin and contained spending.
`Core research and development costs remained broadly stable with a slight 2% increase, while there was only a 2%
`increase in marketing and distribution and a fall of 3% in general and administration.
`
`Diagnostics Division, Core operating profit was down 2%, with the 4% sales increase more than offset by pricing pressures
`in the Diabetes Care business. Cost of sales increased at a higher rate than sales growth due to pricing impacts and
`increased placement costs following the expansion of the worldwide installed instrument base. Research and development
`and marketing and distribution costs were kept in line with sales growth. There was significant growth in general and
`administration costs with a base effect due to the release of a provision in 2011. As described below. the division has initiated
`global restructuring plans to address the long-term profitability of the Applied Science and Diabetes Care business areas.
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Financial Review I Roche Finance Report 2012
`
`5
`
`Novartis Exhibit 2274.007
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Global restructuring plans
`In the first half of 2012 the Group initiated several major global restructuring plans, notably for the reorganisation of research
`and development in the Pharmaceuticals Division and to address long-term profitability in the Applied Science and Diabetes
`Care business areas.
`
`Global restructuring pl ans: costs incurred in millions of CHF
`
`Pharma R&D"
`
`Pharma
`Informatics
`
`Other plans"
`
`Total
`
`16 1
`125
`325
`611
`
`-
`112
`1
`
`724
`
`486
`569
`381
`1,436
`
`187
`187
`244
`
`2,054
`
`46
`
`-3
`
`
`49
`
`---
`
`49
`
`2012
`Global restructuring costs
`- Employee-related costs
`- Site closure costs
`- Other reorganisation expenses
`Total global restructuring costs
`
`Additional costs
`Impairment of goodwill
`-
`-
`Impairment of intangible assets
`- Legal and environmental costs
`
`Total costs
`
`188
`38 1
`27
`596
`
`-
`46
`243
`
`885
`
`91
`63
`26
`180
`
`187
`29
`-
`
`396
`
`1)
`2)
`3)
`
`Includes closure or the Nutley site and associated infrastructure and environmental remediation costs,
`Includes restructuring or the Applied Science and Diabetes Care business areas,
`Includes Operational Excellence (Pharmaceuticals and Diagnostics) and dalcetrapib (Pharmaceutical s).
`
`Pharmaceuticals Division - Research and Development reorganisation. On 26 June 2012 the Group announced
`a streamlining of the research and development activities within the Pharmaceuticals Division. As part of this plan the US site
`in Nutley, New Jersey, will be closed by the end of 2013, with a reduction in the workforce of approximately 1,000 people.
`The research and development activities currently undertaken at Nutley will be consolidated at existing sites in Switzerland
`and Germany and at the planned Translational Clinical Research Centre at the Alexandria Centre for Life Science in
`Manhattan in the US. The resulting savings from the global site consolidation and related infrastructure costs, the bundling
`of support functions as well as shifts in the portfolio will allow the reallocation of resources to the growing number of clinical
`programmes. During 2012 costs of 885 million Swiss francs were incurred, based on latest estimates of the cost of the
`reorganisation. Of this amount, 188 million Swiss francs were provisions for severance payments and other employee-related
`costs, net of estimated pension curtailment gains. A charge of 381 million Swiss francs was recorded for impairments of
`property, plant and equipment at the Nutley site. In addition to these restructuring costs, environmental remediation costs
`of 243 million Swiss francs were booked based on the initial estimates of the additional remediation activities that may be
`needed before the Nutley site can be sold. Impairment charges to intangible assets of 46 million Swiss francs were recorded
`as a result of portfolio prioritisation decisions linked to this reorganisation.
`
`Diagnostics Division - Applied Science and Diabetes Care restructuring. Initiatives were announced in 2012 for
`the Applied Science and Diabetes Care businesses. which include streamlining the product portfolio. consolidating research
`and development activities and increasing the efficiency of marketing and distribution operations. Costs of 180 million Swiss
`francs were incurred in 2012, which relate to employee termination and site closure costs. In addition goodwill impairment
`charges of 187 million Swiss francs were incurred for the full write- off of the goodwill from the 2007 NimbleGen acquisition.
`resulting from the decision to exit the Microarray business as part of the reorganisation of the Applied Science business
`area. as well as 29 million Swiss francs from the impairment of intangible assets in this business area.
`
`Pharmaceuticals Division - Global Informatics reorganisation, Costs of 49 million Swiss francs were incurred,
`which mainly consist of severance payments and other employee-related costs.
`
`6
`
`Roche Finance Report 2012 I Roche Group - Financial Review
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.008
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Other global restructuring plans. In 2012 costs of 484 million Swiss francs were incurred for the previously announced
`Operational Excellence programme, mainly for employee-related costs for sales force restructuring initiatives in the
`Pharmaceuticals Division and employee-related and site closure costs in the Diagnostics Division for the sites in Burgdorf,
`Switzerland and Graz, Austria. In the second quarter of 2012 the Pharmaceuticals Division initiated a detailed review
`following the announcement of the results of the second interim analysis of the dalcetrapib dal-OUTCOMES Phase Ill trial
`and the subsequent termination of the dal-OUTCOMES trial and all the studies in the dal-HEART programme. Consequently
`restructuring costs of 128 million Swiss francs were incurred, which consisted of the remaining trial costs and write-offs
`of inventories and property. plant and equipment. Additionally 112 million Swiss francs were expensed for the write-off of
`previously acquired intangible assets.
`
`Impairment of goodwill and intangible assets
`Impairment charges for goodwill and intangible assets were 187 million Swiss francs and 525 million Swiss francs,
`respectively, approximately half of which was incurred for the various global restructuring initiatives as described above.
`In addition, unrelated to global restructuring plans, further impairment charges of 338 million Swiss francs were recorded.
`The major elements of this amount are charges of 103 million Swiss francs following from a portfolio prioritisation decision
`by the Pharmaceuticals Division, which relates to a decision to return the global rights to the monoclonal antibody RG
`7334 anti- PLGF MAb to the alliance partners, and charges of 162 million Swiss francs follow from the latest clinical data
`assessment of a project acquired as part of the Marcadia acquisition.
`
`Legal and environmental settlements
`In addition to the environmental remediation costs of 243 million Swiss francs for the Nutley site mentioned above,
`a further 146 million Swiss francs of legal and environmental costs were recorded, unrelated to global restructuring plans.
`These include the estimated additional remediation costs of a landfill site near Grenzach, Germany, that was previously
`used by manufacturing operations that were closed some years ago.
`
`Treasury and taxation
`Financial income was 0.5 billion Swiss francs, a decrease of 30% mainly due to foreign currency losses whereas in 2011
`devaluation- related foreign exchange gains occurred in Venezuela. Financing costs were 2.3 billion Swiss francs, a decrease
`of 2%, with interest costs being 8% lower at constant exchange rates as debt was repaid. Core tax expenses increased by
`16% to 3.5 billion Swiss francs and the Group's effective core tax rate increased to 22.7% compared to 21.3% in 2011. This
`was mainly as a consequence of the higher percentage of core profit contribution coming from the US. which has a relatively
`higher local tax rate than the average Group rate.
`
`Net income and Earnings per share
`IFRS net income increased by 2% and diluted EPS by 2% with the strong core operating performance offset by costs of
`the various global restructuring plans. On a core basis, which excludes non- core items such as global restructuring costs
`and amortisation and impairment of goodwill and intangible assets, net income and Core EPS were 10% higher, driven by
`the strong operating performance part ially offset by the higher effective tax rate.
`
`Supplementary net income and EPS information is given on pages 146- 149. This includes calculations of Core EPS and
`reconciles the Core results to the Group's published IFRS results.
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Financial Review I Roche Finance Report 2012
`
`7
`
`Novartis Exhibit 2274.009
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Financial position
`
`Pharmaceuticals
`Net working capital
`Long- term net operating assets
`Diagnostics
`Net working capital
`Long- term net operating assets
`Corporate
`Net working capital
`Long- term net operating assets
`Net operating assets
`
`Net debt
`Pensions
`Income taxes
`Other non- operating assets, net
`Total net assets
`
`2012
`(mCHF)
`
`5,548
`12,955
`
`3,347
`11 ,382
`
`(71)
`(309)
`32,852
`
`(10,599)
`(6,585)
`1,591
`(531)
`16,728
`
`2011
`(mCHF)
`
`5.445
`14, 563
`
`3,501
`12,022
`
`(42)
`2
`35,491
`
`( 15,566)
`(4,952)
`174
`(665)
`14,482
`
`% change
`( CH F)
`
`% change
`(CER)
`
`+2
`- 11
`
`-4
`- 5
`
`+ 69
`-
`-1
`
`- 32
`
`+7
`- 8
`
`- 3
`- 4
`
`+70
`
`-s
`
`- 3 1
`
`+ 33
`Over +500
`
`- 20
`+ 16
`
`+ 35
`Over + 500
`- 19
`+19
`
`Compared to the start of 2012 the Swiss franc strengthened against some major currencies by the year-end, most importantly
`against the US dollar and the Japanese yen. Following the intervention of the Swiss National Bank starting from the second
`half of 2011, the Swiss franc was stable against the euro during 2012.
`
`In the Pharmaceuticals Division net working capital increased by 7% at constant exchange rates. Inventories increased by
`18% mainly due to inventory building to support both recent and upcoming product launches, to ensure supply for increased
`sales demand and to meet business expansion in emerging markets. Receivables increased by 3%, with the impacts of
`continued sales growth in US and emerging markets being partly offset by strong collection of outstanding receivables,
`notably in Southern Europe. Payables were 8% higher than the previous year due to increased accrued liabilities for sales
`related chargebacks. employee incentives and accrued royalties. Long-term net operating assets decreased by 8% mainly
`due to the impact of global restructuring plans and lower intangible assets. In Diagnostics the net working capital decreased
`by 3%. The main driver was a decrease in receivables after strong collections and factoring initiatives in Southern European
`countries, which more than offset higher inventory levels due to product launches and higher safety stocks due to increasing
`market demand in China and a decrease in payables. The long-term net operating assets decreased by 4% as intangible
`assets decreased and additional provisions for restructuring costs were created.
`
`The decrease in the net debt position was mainly due to the free cash flow of 4.6 billion Swiss francs. The net pension
`liabilities increased by 1.6 billion Swiss francs due to continuing low interest rates increasing the discounted defined benefit
`obligation. The net tax assets increased mainly due to the deferred tax effect of this increase in net pension liabilities.
`Other non- operating net assets decreased by 19% due to a decrease in interest payables.
`
`Free cash flow
`
`Pharmaceuticals
`Oiagnostics
`Corporate
`Operating free cash flow
`Treasury activities
`Taxes paid
`Dividends paid
`Free cash flow
`
`2012
`(mCHF)
`
`14,052
`1,826
`(489)
`15,389
`(1 ,542)
`
`(3,329)
`(5,888)
`4,630
`
`2011
`(mCHF)
`
`12,914
`1,259
`(440)
`13,733
`(1,493)
`(2,594)
`(5,742)
`3,904
`
`% change
`( CH F)
`
`% change
`(CER)
`
`+9
`+ 45
`+ 11
`+12
`
`+3
`+28
`
`+3
`+19
`
`+ 7
`+43
`+11
`
`♦ 10
`- 2
`+ 25
`+ 2
`
`♦ 15
`
`8
`
`Roche Finance Report 2012 I Roche Group - Financial Review
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0010
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`The Group's operating free cash flow for 20 12 was 15.4 billion Swiss francs, with the 11% increase in core operating
`profit at constant exchange rates feeding through to a 10% increase in operating free cash flow. Cash generation in the
`Pharmaceuticals Division increased by 7% to 14.1 billion Swiss francs as the strong operating results were partially offset
`by increases in net working capital from the increased inventory holdings for recently launched products and additional
`capital expenditure for property plant and equipment. Diagnostics operating free cash flow increased due to improved
`collection of trade receivables and factoring initiatives in Southern European countries. The free cash flow in 2012 shows
`an increase of 0.7 billion Swiss francs to 4.6 billion Swiss francs. This was primarily due to the 1.7 billion Swiss francs increase
`in operating free cash flow which was partially offset by higher tax payments and an increase in the annual dividend.
`
`Pharmaceuticals Division operating results
`
`Pharmaceuticals Division operating results
`
`IFRS results
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General an d administration
`Operating profit
`- margin, % of sales
`
`Core resuhs 1>
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General an d administration
`Core operating profit
`- margin, % of sales
`
`Financial position
`Net working capital
`Long- term net operating assets
`Net operating assets
`
`Free cash Row
`Operating free cash flow
`- margin, % of sales
`
`1J See pages 146- 149 for definition of Core results and Core EPS.
`
`2012
`(mCH F)
`
`35,232
`1.794
`(7,348)
`(5,914)
`(8,529)
`(1,558)
`13,677
`
`38.8
`
`35,232
`1.794
`(7,097)
`(5,851)
`(7,529)
`(1,061)
`15,488
`44.0
`
`5,548
`12,955
`18,503
`
`14,052
`39.9
`
`2011
`(mCHFJ
`
`% change
`(CH F)
`
`% change
`(CER)
`
`32,794
`1,453
`(7,436)
`(5,636)
`(7,397)
`(1,527)
`12,2 51
`37.4
`
`32,794
`1,453
`(7,053)
`(5,564)
`(7,173)
`(1 ,051)
`13,40 6
`40.9
`
`5,445
`14,563
`20,008
`
`12,914
`
`39.4
`
`+7
`
`+ 23
`- 1
`
`+5
`+ 15
`
`+2
`+12
`+ 1.4
`
`+ 7
`+ 23
`+1
`+5
`+5
`+1
`+ 16
`
`+3. 1
`
`+2
`- 11
`
`-8
`
`+9
`+0.5
`
`+ 5
`+1 8
`- 5
`+2
`+ 12
`- 2
`+10
`
`+ 1.8
`
`+5
`+1 8
`- 3
`+ 2
`+ 2
`- 3
`+1 3
`
`+3.4
`
`+7
`- 8
`
`+ 7
`+0.8
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Financial Review I Roche Finance Report 2012
`
`9
`
`Novartis Exhibit 2274.0011
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Sales overview
`
`Pharmaceuticals Division - Sales by therapeutic area
`
`Therapeutic area
`
`Oncology
`Virology
`Inflammation/Autoimmune/Transplantation
`Metabolism/Bone
`Ophthalmology
`Respiratory diseases
`Cardiovascular diseases
`Renal anemia
`Central nervous system
`Infectious diseases
`Other therapeutic areas
`Total sales
`
`2012
`(mCHF)
`
`21,341
`3.121
`3.043
`1.611
`1.48 1
`1.242
`992
`880
`858
`358
`305
`35,232
`
`2011
`(mCHF)
`
`19,210
`2.663
`2.816
`2,015
`1,523
`1,095
`901
`1,018
`851
`355
`347
`32,794
`
`'lb change
`(CER)
`
`% of sales
`(2012)
`
`'lb of sales
`(2011)
`
`+9
`+14
`+5
`- 23
`- 8
`+9
`+6
`- 16
`+ l
`-1
`- 14
`+s
`
`6 1
`9
`9
`5
`4
`3
`3
`2
`2
`1
`1
`100
`
`59
`8
`9
`6
`5
`3
`3
`3
`2
`l
`l
`100
`
`Pharmaceuticals Division sales increased by 5% at constant exchange rates mainly due to the continuing strength of the
`oncology portfolio, which grew 9%. The division benefited from strong growth in the US (+7%), China (+ 27%) and Brazil
`(+11%). The growth in most key products offset the negative impacts from pricing pressures as well as expected decreases
`in sales of some medicines due to loss of patent exclusivity and competition. Sales growth was primarily driven by six
`products: Herceptin, MabThera/Rituxan. Avastin, Actemra/RoActemra, Zelboraf and Pegasys. These products represent
`60% of the portfolio (201 1: 57%) and together generated 2.4 billion Swiss francs of additional sales in 2012. This growth
`was partly offset by lower sales of Bonviva/Boniva. NeoRecormon/Epogin. lucentis and CellCept. Tamiflu sales increased
`mainly due to the strong influenza season in the US.
`
`Oncology continued to account for the majority of the division's sales. with continued growth in Herceptin and MabThera/
`Rituxan and a return to growth for Avastin. The recently launched Zelboraf was also a significant growth contributor.
`Virology sales grew, benefiting from the continued growth of Pegasys, and higher Tamiflu sales in the US and Japan. Sales
`in inflammation/autoimmune/transplantation increased due to the continuing strong uptake of Actemra/RoActemra and
`growth of MabThera/Rituxan in rh eumatoid arthritis more than compensating for the negative impact of continued generic
`erosion of CellCept.
`
`J Q
`
`Roche Finance Report 2012 I Roche Group - Financial Review
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0012
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Product sales
`
`Pharmaceuticals Division - Sales
`
`Oncology
`Herceptin
`
`A