Regeneron v. Novartis, IPR2021-00816
`
`Novartis Exhibit 2276.001
`
`Novartis Exhibit 2276.001
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Finance in Brief
`
`Key results
`
`Pharmaceuticals
`
`Diagnostics
`
`Group
`
`Sales
`
`2016
`
`2016
`
`2016
`
`2017 l'"'hi I
`I +5.3
`I +5.0
`2017 I I
`2017 r=t:r 1
`
`I
`
`I
`
`+3.3
`
`+6.5
`
`+5.2
`+4.0
`
`Core operating profit 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=
`
`I
`
`I~ I
`
`42.7
`43.2
`
`15.8
`16.7
`
`35.7
`36.4
`
`2017
`(CHF m)
`
`2016
`(CHF m)
`
`(CHF)
`
`%change
`(CERJ
`
`2017
`
`% of sales
`20 16
`
`53,299
`13.003
`8,825
`8.633
`10.04
`8,30')
`
`10,39 2
`19.012
`15.34
`
`50,576
`14,069
`9,733
`9.576
`11.13
`8,20
`
`9,915
`18,420
`14.53
`
`17,827
`13.420
`
`14,086
`9,130
`
`+5
`- 8
`- 9
`- 10
`- 10
`+ 1
`
`+5
`+3
`+ 6
`
`+ 27
`+ 47
`
`+5
`- 8
`- 9
`-1 0
`-1 0
`
`+5
`+3
`+5
`
`+ 26
`+ 47
`
`2017
`(CHFm)
`(6,963)
`
`47,967
`18,960
`29,007
`
`2016
`(CHF m)
`(1 3,248)
`
`48,757
`22,355
`26,402
`
`24.4
`16.6
`16,2
`
`27.8
`19.2
`18.9
`
`19.5
`35.7
`
`19.6
`36.4
`
`33.4
`25.2
`
`(CHF)
`- 47
`
`- 2
`- 15
`+ 10
`
`27.9
`18.1
`
`% change
`(CER)
`- 45
`
`-1
`-1 4
`
`IFRS results
`Sales
`Operating profit
`Net income
`Net income attributable to Roche shareholders
`Diluted EPS (CHF)
`Dividend per share (CHF)
`
`Core results
`Research and development
`Core operating profit
`Core EPS (CHF)
`
`Free cash flow
`Operating free cash flow
`Free cash flow
`
`Net debt
`
`Capitalisation
`- Debt
`- Equity
`
`1) Proposed by the Board of Directors.
`
`CER (Constant Exchange Rates) : The percentage changes at constant exchange rates are calculated using simulations by reconsolidating both the 201 7 and 20 16 results at constant
`exchange rates (the average rates for the year ended 31 December 2016). For the definition of CER see page 148 .
`
`Core results and Core EPS (earnings per share): These exclude non-core items such as global restructuring plans and amortisation and impairment of goodwill and intangible assets.
`This allows an assessment of both the actual results and the underlying performance of the business. A full income statement for the Group and the operating results of the divisions
`are shown on both an IFRS and core basis. The core concept is fully described on pages 141- 144 and reconciliations between the IFRS and core results are given there.
`
`Free cash flow is used to assess the Group's abilrty to generate the cash required to conduct and maintain its operations. It also indicates the Group's ability to generate cash
`to finance dividend payments, repay debt and to undertake merger and acquisition activities. The free cash flow concept is used in the internal management of the business.
`The free cash now concept is fully described on pages 144- 146 and reconciliations between the IFRS cash flow and free cash now are given there.
`
`https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.002
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Finance - 2017 in Brief
`
`Roche In 2017
`
`The Roche Group reported good overall results in 2017. Sales and core earnings per share both grew by 5% at constant exchange rates (CER).
`IFRS net income decreased by 9% due to significant impairments of goodwill and intangible assets.
`
`Sales
`
`Group sales increased by 5% (CER) to CHF 53.3 billion (5% growth in CHF terms).
`Pharmaceuticals sales growth was 5% (CER) due to recently launched medicines Ocrevus, Tecentriq and Alecensa. In oncology there was
`continued growth in the HER2 franchise, while sales of Avastin decreased due to competitive pressure. Immunology sales increased, led by Xolair
`and Actemra/RoActemra. Sales of Tamiflu fell due to generic competition in the US, The entry of biosimilars had a negative impact on sales of
`MabThera/Rituxan in Europe.
`Diagnostics sales showed growth of 5% (CERJ with the immunodiagnostics business being the major contributor,
`
`Operating results
`
`Core operating profit increased by 3% (CER) to CHF 19.0 billion (3% increase in CHF terms).
`Research and development expenditure grew by 5% (CER) to CHF I 0.4 billion on a core basis, with the focus on the oncology and
`immunology therapeutic areas, Research and development costs represented 19,5% of Group sales.
`IFRS operating results include non-core expenses (pre-tax) of CHF 6.0 billion. The major factors were CHF 3.5 billion for the impairment
`of goodwill and intangible assets, CHF 1,7 billion for the amortisation of intangible assets and CHF 1,2 billion from global restructuring plans,
`notably the Pharmaceuticals Division's strategic realignment of its manufacturing network.
`
`Non-operating results
`
`Financing costs (IFRS) decreased by CHF 0.3 billion to CHF 0.8 billion, driven by lower interest expenses and lower losses on bond
`redemptions.
`Income tax expenses (IFRS) include transitional expenses of CHF 0.1 billion arising from changes to US tax rates. The core effective tax rate
`was 26.6%,
`
`Net income
`
`IFRS net income decreased by 9% at CER to CHF 8.8 billion (9% decrease in CHF terms).
`Core earnings per share increased by 5% at CER (+6% in CHF terms).
`
`Cash flows
`
`Operating free cash flow increased significantly to CHF 17,8 billion. The underlyi ng cash generation in both divisions, lower net working capital
`and lower capital expenditure led to an increase of operating free cash flow of 26% at CER (27% in CHF terms).
`Free cash flow increased by 47% at CER (47% in CHF terms) to CHF 13,4 billion, driven by the higher operating free cash flow as well as lower
`pension contributions and lower interest paid.
`
`Financial position
`
`Net working capital decreased by 19% (CER), due to higher payables and accrued liabilities and lower inventories offset by an increase
`in receivables driven by increased sales.
`Net debt decreased to CHF 7.0 billion. as the generated free cash flow more than offset the dividends paid. Net debt as a percentage
`of total assets was 9%,
`Credit ratings strong: Moody's at Al and Standard & Poor's at AA.
`
`Shareholder return
`
`Dividends. A proposal will be made to increase dividends by 1% to CHF 8.30 per share. This will represent the 31" consecutive year of dividend
`growth and will result in a pay- out ratio of 54.1%, subject to AGM approval.
`Total Shareholder Return (TSR) was 9% representing the combined performance of share and non- voting equity security.
`
`https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.003
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.004
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Financial Review I Roche Group
`
`Financial Review
`
`Roche Group results
`
`Sales in billions of CHF
`
`Core operating profit in billions of CHF
`
`2017
`2016
`201 5
`
`'ll>CERgrowth
`
`+5.2
`+ 4.0
`+5.3
`
`20
`
`% of sales
`
`35.7
`36.4
`36.4
`
`Net income attributable to Roche shareholders in billionsofCHF
`
`2017
`2016
`201 5
`
`10
`
`12
`
`8.6
`9.6
`8.9
`
`Core EPS in CHF
`
`1=· 1=· I" I ..
`
`15.34
`14.53
`13,49
`
`The Roche Group's results for 2017 showed sales growth of 5% at constant exchange rates (CER), with core operating profit up by
`3% and Core EPS up by 5%, The sales growth was driven by the recently launched Pharmaceuticals products Ocrevus, Tecentriq and
`Alecensa. and by the immunodiagnostics business in the Diagnostics Division. The Group continued supporting the development and
`launch of new products, and reported growth in core operating profit despite the base effect of income from pension changes in the
`2016 results. Operating free cash flow was CHF 17.8 billion, an increase of 26%, due to the cash generated from the business coupled
`with a decrease in net working capital and lower capital expenditure.
`
`Sales in the Pharmaceuticals Division rose by 5% to CHF 41,2 billion with Ocrevus, Tecentriq and Alecensa contributing CHF 1,4 billion of
`new sales, representing 65% of the division's growth. In oncology, HER2 franchise sales increased by 7% to CHF 10.1 billion, led by Perjeta.
`MabThera/Rituxan sales were CHF 7,4 billion, a growth of 1% globally, despite sales in Europe being 11% lower following biosimilar entry,
`Sales of Avastin were CHF 6.7 billion, a decline of 2% due to competitive pressure. Sales in immunology grew to CHF 7.6 billion. with
`Xolair and Actemra/ RoActemra increasing by 16% and 14% respectively. Sales ofTamiflu fell by 33% due to competition from generics
`in the US market. Diagnostics Division sales grew by 5%. with the major growth area being Centralised and Point of Care Solutions
`where sales increased by 7% led by its immunodiagnostics business.
`
`IFRS operating profit was stable in the Pharmaceuticals Division and down by 74% in the Diagnostics Division, with both divisions
`impacted by impairment charges to goodwill and intangible assets. In Pharmaceuticals core operating profit increased by 4%, while in
`Diagnostics it remained stable, with the operating profit growth rates of both divisions being impacted by the base effect of income
`in 2016 from changes to the Group's Swiss pension plans. For Pharmaceuticals. marketing and distribution costs grew by 6% due to the
`launch of new products, notably Ocrevus and Tecentriq. There was continued investment in research and development, which totalled
`over CHF 10 billion for the Group. The major areas in Pharmaceuticals were oncology, with Tecentriq and the cancer immunotherapy
`portfolio being key drivers, immunology and neuroscience. Diagnostics activities increasingly focused on integrated core laboratory
`and digitalised data management projects and during 2017 the division acquired Viewics, a software company focused on laboratory
`business analytics.
`
`Operating free cash flow was CHF 17.8 billion, an increase of CHF 3.7 billion or 26%. This was due to the high cash generation of the
`business. with sales growth exceeding the increases in cash expenses. Furthermore net working capital decreased overall in 2017 after
`an increase in 2016. The decrease was mainly due to higher payables partially offset by higher receivables. Capital expenditure decreased
`as well compared to 2016. The free cash flow was CHF 13.4 billion, an increase of CHF 4.3 billion, due to the higher operating free cash
`flow, lower pension contributions and lower interest payments.
`
`Net income decreased by 9% at CER on an IFRS basis while it increased by 6% on a core basis. In addition to the items described above
`in the core results, the IFRS results include intangible asset impairment charges totalling CHF 3.5 billion, notably CHF 1.7 billion for
`the partial impairment of the Esbriet product intangible asset and impairments for the Diagnostics sequencing business of CHF 0.8 billion.
`
`https://www.roche.com/darn/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Roche Finance Report 2017 I 3
`
`Novartis Exhibit 2276.005
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche Group I Financial Review
`
`Global restructuring expenses were CHF 1,2 billion. in line with 2016 expenses. There was offsetting income of CHF 0.4 billion from
`the reversal of contingent consideration arrangements and CHF 0.2 billion of income from the release of legal provisions. Financing costs
`were lower due to decreasing interest expenses and lower losses on bond redemptions. The changes to US tax rates that will become
`effective from 1 January 201 8 resulted in a transitional expense ofCHF 0.1 billion in 2017 arising from the remeasurement of the Group's
`year- end deferred tax positions. Core EPS increased by 5% at CER. in line with the sales growth of 5%.
`
`In 2017 compared to 2016, the Swiss franc was weaker against the euro and other European currencies and against several major
`currencies in the Asia- Pacific region. This was partially offset by the stronger Swiss franc against the Japanese yen. The Swiss franc
`remained stable against the US dollar. The net impact is negligible on the results expressed in Swiss francs compared to constant
`exchange rates for sales. core operating profit and Core EPS.
`
`Income statement
`
`IFRS results
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General and administration
`Operating profit
`
`Financing costs
`Other financial income (expense)
`Profit before taxes
`
`Income taxes
`Net Income
`
`Attributable to
`- Roche shareholders
`- Non- controlling interests
`
`EPS - Basic (CH F)
`EPS - Diluted (CHF)
`
`Core results •i
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General and administration
`Operating profit
`
`Financing costs
`Other financial income (expense)
`Profit before taxes
`
`Income taxes
`Net income
`
`Attributable to
`- Roche shareholders
`- Non- controlling interests
`
`Core EPS - Basic (CHF)
`Core EPS - Diluted (CHF)
`
`2017
`(CHFm)
`
`53.299
`2, 44 7
`(18,179)
`(9 ,847)
`(1 1,292)
`(3.425)
`13,003
`
`(839)
`8 4
`12,248
`
`(3.423)
`8,825
`
`8,633
`192
`
`10. 12
`10.04
`
`53,299
`2,447
`(14,366)
`(9,51 2)
`( 10,392)
`(2,464)
`19,0 12
`
`(819)
`75
`18,268
`
`(4,864)
`13,1104
`
`13, 192
`212
`
`15.47
`15.34
`
`2016
`(CHF m)
`
`% change
`(CHF)
`
`'lb change
`(CER)
`
`50,576
`2,060
`( 16.180)
`(9.140)
`( 11 ,532)
`(1 ,715)
`111,069
`
`(1 ,099)
`37
`13,00 7
`
`(3,274)
`9,733
`
`9,576
`157
`
`11 ,24
`11 .13
`
`50.576
`2,060
`( 13,469)
`(9,007)
`(9,9 15)
`(1 ,825)
`18,1120
`
`(1,034)
`37
`17,1123
`
`(4,735)
`12,688
`
`12,507
`181
`
`14.68
`14.53
`
`+5
`+19
`+ 12
`+8
`- 2
`+1 00
`-8
`
`- 24
`+ 127
`-6
`
`+5
`-9
`
`- 10
`+ 22
`
`- 10
`- 10
`
`+5
`+ 19
`+7
`+6
`+5
`+35
`+3
`
`- 21
`+1 03
`+5
`
`+3
`+6
`
`+5
`+ 17
`
`+5
`+6
`
`+5
`+ 19
`+ 12
`+8
`- 2
`+100
`- 8
`
`- 24
`+130
`- 6
`
`+5
`- 9
`
`-1 0
`+28
`
`- 10
`- 10
`
`+5
`+ 19
`+6
`+6
`+5
`+3 6
`+3
`
`- 21
`+ 105
`+5
`
`+3
`+6
`
`+5
`+22
`
`+5
`+5
`
`1) See pages 141 - 144 forthe definition of core resulls and Core EPS.
`
`https:~t%allc~~~~i~r:b7041 5c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.006
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.007
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche Group I Financial Review
`
`Core operating results
`
`Core operating profit for the Group increased by 3% at CER. For the Pharmaceuticals Division core operating profit increased by 4%,
`while in the Diagnostics Division it was stable at CHF 1.9 billion. In 20 16 there was income of CHF 426 million (pre-tax) from changes
`to the Group's pension plans in Switzerland. Excluding this item, core operating profit for the Group grew by 6% compared to 2016.
`with growth of 6% for the Pharmaceuticals Division and 4% for the Diagnostics Division.
`
`Pharmaceuticals Division. The division's core operating profit increased by 4% at CER. which was below the 5% sales increase.
`There was increased expenditure on research and development. as well as launch expenses for Ocrevus and Tecentriq and other
`new products. Income from product disposals and other income was CHF 611 million in 2017 compared to CHF 325 million in 2016.
`The income from the pension plan changes in 2016 was CHF 310 million.
`
`Diagnostics Division. Core operating profit was stable in CER. with an increase of 4% when the 2016 pension changes are excluded.
`Cost of sales increased due to an unfavourable product mix arising from higher instrument placements, notably in the Asia-Pacific
`region. Marketing and distribution increased. with higher spending in emerging markets. especially in China. General and administration
`increased due to the income from pension changes in 2016, with a base effect in 2016 of CHF 77 million.
`
`Acquisitions
`
`In 2017 the Group acquired a 100% controlling interest in mySugr GmbH. which has developed one of the leading mobile diabetes
`platforms in the market. The total cash consideration was CHF 70 million. In addition the Group acquired a 100% controlling interest
`in Viewics. Inc. for a consideration of CHF 80 million. Viewics is a software company focused on laboratory business analytics.
`On 22 December 2017 the Group announced an agreement to fully acquire lgnyta, Inc. with a total transaction value of USO 1.7 billion.
`
`In 2017 there was CHF 353 million of non- core income from contingent consideration provisions, mainly due to the reversal of the
`remaining provision related to the Seragon acquisition and the partial reversal of the provisions related to the Dutalys and Trophos
`acquisitions. There were impairment charges of CHF 653 million related to these acquisitions. as noted below in the 'Impairment
`of goodwill and intangible assets' commentary. In 2016 there was CHF 408 million of non-core income from contingent consideration
`provisions and related intangible asset impairment charges of CHF 1,072 million. Non- core costs in 2016 also included expenses of
`CHF 167 million from the release of the Esbriet inventory fair value adjustment. which was fully unwound by mid-2016.
`
`Further details are given in Notes 5 and 29 to the Annual Financial Statements.
`
`Global restructuring plans
`
`During 2017 the Group initiated various resourcing flexibility plans in its Pharmaceuticals Division to address various future challenges
`including biosimilar competition. The areas of the plans include biologics manufacturing. commercial operations and product development/
`strategy. The Group also continued with the implementation of several major global restructuring plans initiated in prior years, notably
`the strategic realignment of the Pharmaceuticals Division's manufacturing network, and programmes to address long-term strategy in
`the Diagnostics Division.
`
`https:~i%1lillc~~~%'i~r:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.008
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Gl obal restructu ring pl ans: costs incurred for 20 17 in millions of CHF
`
`Global restructuring costs
`
`- Employee- related c osts
`
`- Site c losure c osts
`
`- Divestment of products and businesses
`
`- Other reorganisat ion expenses
`Total global restructuring costs
`
`A ddi tional costs
`
`-
`
`-
`
`Impairment of goodwill
`
`Impairment of intangible assets
`
`- Legal and environmental cases
`
`Total costs
`
`Financial Review I Roche Group
`
`Diagnostics" Site consolidation"
`
`Other plans•>
`
`152
`
`48
`-
`92
`292
`
`-
`-
`-
`
`29 2
`
`13
`
`245
`
`166
`
`160
`584
`
`-
`-
`46
`
`630
`
`258
`
`2
`
`72
`332
`
`332
`
`Total
`
`423
`
`295
`
`166
`
`324
`1,208
`
`46
`
`1,254
`
`Includes strategy plans in the Diagnostics Division and the Diabetes Care 'Autonomy and Speed' plan.
`1)
`2) Includes the Pharmaceuticals Division's strategic realignment of its manufacturing network and resourcing flexibility in biologics manufacturing network.
`3)
`Includes plans for resourcing dexibility in the Pharmaceutical s Division's commercial operauons and global product development/strategy organisations.
`
`Diagnostics Division. Strategy plans in the Diagnostics Division that were launched in 201 6 incurred costs of CHF 212 million mainly
`for employee- related costs. Spending on other smaller plans within the division was CHF 80 million and included costs related to
`the 'Autonomy and Speed' initiative in Diabetes Care and certain IT projects.
`
`Site consolidation. On 12 November 2015 the Pharmaceuticals Division announced a strategic realignment of its manufacturing network
`including exiting from the manufacturing sites at Clarecastle, Ireland; Leganes, Spain; Segrate, Italy: and Florence. US. Costs from
`this plan in 2017 were CHF 480 million, of which CHF 185 million were non-cash write-downs and accelerated depreciation of property.
`plant and equipment. Some employee-related provisions were reversed as the most likely scenario for the Segrate site was changed
`from closure to divestment. The divestments of the Florence, Segrate and Leganes sites have been completed and result in total costs
`of CHF 201 million. This includes CHF 100 million of accumulated currency translation losses on consolidation that were transferred to
`the income statement. The expected costs of the environmental remediation at the Clarecastle site were reassessed and resulted in an
`increase in provisions for environmental remediation. Other plans include the resourcing flexibility in biologics manufacturing network
`which resulted in headcount reductions in the US and also at the Kaiseraugst site in Switzerland and the exit from the small molecules
`manufacturing site at Toluca. Mexico.
`
`Other global restructuring plans. The major item was CHF 247 million for resourcing flexibility in the Pharmaceuticals Division. including
`global field force reductions, notably in the US and Europe. The remaining CHF 85 million includes plans for the outsourcing of IT and
`other functions to shared service centres and external providers.
`
`Further details are given in Note 6 to the Annual Financial Statements.
`
`Impairment of goodwill and intangible assets
`
`There were impairment charges of CHF 2,572 million in the Pharmaceuticals Division. The largest item was a charge of CHF 1,664 million
`for the partial impairment of the Esbriet product intangible acquired as part of the lnterMune acquisition, An impairment charge was
`recorded in the first half of 2017 for this intangible asset following lower-than-expected sales of Esbriet in the first half of 2017 relative
`to the most recent long-term forecasts. The revised long-term forecasts prepared in the second half of 2017 show a further reduction
`in sales expectations which resulted in an additional impairment charge,
`
`There was a charge of CHF 384 million for the full write-off of the goodwill relating to the Seragon acquisition due to the decision to
`stop development of the back-up compound acquired. In addition. there was an impairment of CHF 195 million relating to a compound
`acquired as part of the Trophos acquisition arising from the launch of a competitor product and an impairment of CHF 149 million due
`to the decision to stop development of one compound with an alliance partner following assessment of clinical and non- clinical data.
`
`There was a related decrease in the contingent consideration provisions, mainly from the Seragon, Trophos and Dutalys acquisitions,
`which contributed to the income of CHF 353 million noted above in the 'Acquisitions· commentary.
`
`https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Roche Finance Report 2017 17
`
`Novartis Exhibit 2276.009
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche Group I Financial Review
`
`The Diagnostics Division recorded impairment charges of CHF 946 million. The major part of this was in the sequencing business
`with impairment charg es of CHF 674 million against goodwill and CHF 120 million against product intangible assets acquired as part of
`the Ariosa acquisition. These impairments are due to the latest long-term forecasts projecting a decrease in forecasted cash flows
`due to changed assumptions around market penetration, pricing and reimbursement and a revised time to market of the single molecule
`sequencing technology.
`
`In addition. in the molecular diagnostics business, a partial impairment of CHF 152 million was also recorded against the product
`intangible assets acquired as part of the GeneWeave acquisition. This was also due to a decrease in forecasted cash flows. and follows
`a change in the timelines for future product development and updated market size assumptions.
`
`Further details are given in Notes 8 and 9 to the Annual Financial Statements.
`
`Pensions and other post-employment benefits
`
`During 2016 operating income of CHF 426 million was recorded for past service costs from changes to the Group's pension plans in
`Switzerland that were announced in June 20 16. This represented the one-time impact of the adjustment of the pension liability for the plan
`changes. Of this amount. CHF 3 10 million was recorded in the Pharmaceuticals Division. CHF 77 million in the Diagnostics Division
`and CHF 39 million in Corporate. The after-tax impact was CHF 341 million. This matter has a base effect on the growth rates shown in
`the 2017 results.
`
`Further information on the Group's pensions and other post-employment benefits is given in Note 25 to the Annual Financial Statements.
`
`Legal and environmental cases
`
`Based on the development of the various litigations, notably the Accutane case, some of the provisions previously held were released,
`resulting in income of CHF 219 million in 2017. The expected costs of the environmental remediation at the Clarecastle site in Ireland
`were reassessed and resulted in an increase in provisions for environmental remediation. There were no other significant developments
`impacting the 2017 financial results. Further details are given in Note 19 to the Annual Financial Statements.
`
`Treasury and taxation
`
`Core financing costs were CHF 8 19 million, a decrease of 2 1%, due to lower interest expenses, lower interest costs of pension plans
`and lower losses on bond redemption. Core other financial income was CHF 75 million. including net income from equity securities of
`CHF 162 million. partly offset by net foreign exchange losses of CHF 115 million. Core tax expenses increased by 3% to CHF 4.9 billion and,
`since this was lower than the increase in profit before tax. the Group's effective core tax rate decreased to 26.6% compared to 27.2% in
`2016. This was largely due to mix effects within the manufacturing supply chain.
`
`On 22 December 2017 changes to US tax rates were enacted that will become effective from 1 January 2018. Among the changes is
`a decrease in the US Federal tax rate from 35% to 21%. These resulted in a transitional expense of CHF 116 million in 2017 arising from
`the remeasurement of the Group's deferred tax positions which has been treated as a non- core item. Had these new rates applied for
`the whole of 2017. and excluding any transition impacts. the Group's 2017 effective core tax rate in percentage terms would have been
`in the low twenties.
`
`https:~i%1lillc~~~%'i~r:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Novartis Exhibit 2276.0010
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Financial Review I Roche Group
`
`Net Income and earnings per share
`
`IFRS net income decreased by 9% in Swiss franc terms and at CER and Diluted EPS decreased by 10% in Swiss franc terms and at
`CER. Core net income increased by 6% and Core EPS increased by 5% at CER. The core basis excludes non-core items such as global
`restructuring costs. amortisation and impairment of goodwill and intangible assets, and alliance and business combination costs.
`Core EPS increased by 8% when excluding the base impact from the changes to the Group's Swiss pension plans in 2016,
`
`%change
`(CHFJ
`
`-9
`
`% change
`(CERJ
`-9
`
`-1
`+29
`+132
`+56
`
`- 7 1
`+6
`
`0
`+29
`+ 131
`+56
`
`---
`
`- 71
`+6
`
`2016
`(CHFm)
`9,733
`
`965
`9 12
`1, 146
`(222)
`57
`(11)
`-
`108
`12,688
`
`20 17
`(CHFm)
`8,825
`
`962
`1, 178
`2.651
`(347)
`(30)
`18
`11 6
`31
`13,404
`
`Net income
`
`IFRS net Income
`
`Reconciling items (net of tax)
`- Global restructuring plans
`-
`Intangible asset amortisation
`- Goodwill and intangible asset impairment
`- Alliances and business combinations
`- Legal and environmental cases
`- Pension plan settlements
`- Transitional effect of changes in US tax rates
`- Normalisation of equity compensation plan tax benefit
`Core net income
`
`Supplementary net income and EPS information is given on pages 141 to 144. This includes calculations of Core EPS and reconciles
`the core results to the Group's published IFRS results.
`
`Financial position
`
`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
`
`20 17
`(CHFm)
`
`3.420
`23.539
`
`2,594
`12.849
`
`(119)
`(178)
`42,105
`
`(6,963)
`(6,620)
`21
`464
`29,007
`
`2016
`(CHFm)
`
`4,582
`26, 174
`
`2,796
`13,392
`
`(104)
`(213)
`46,627
`
`(13,248)
`(6,940)
`(390)
`353
`26,402
`
`%change
`(CHFJ
`
`% change
`(CER)
`
`- 25
`- 10
`
`- 7
`- 4
`
`+ 14
`- 16
`-10
`
`- 47
`- 5
`-
`+31
`+10
`
`- 24
`- 8
`
`-1 0
`- 4
`
`+1 5
`- 2 1
`-9
`
`- 45
`- 9
`
`+30
`+10
`
`Compared to the start of the year the Swiss franc depreciated significantly against the euro. This had a positive translation impact
`on balance sheet positions. The appreciation of the Swiss franc against the US dollar had a negative translation impact on net operating
`assets. which was mostly offset at Group level by the natural hedge from the Group's US dollar- denominated debt. The exchange rates
`used are given on page 28.
`
`https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94bd280e0/en/fb17e.pdf
`
`Roche Finance Report 2017 I 9
`
`Novartis Exhibit 2276.0011
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche Group I Financial Review
`
`In the Pharmaceuticals Division net working capital decreased by 24% at CER. A major driver was higher liabilities for sales rebates and
`chargebacks. Another factor was inventories. where write-offs and a decrease in inventory levels for certain mature products were partly
`offset by higher inventories for launch products. This was offset by the increase in trade receivables due to higher sales and extended
`post-launch payment terms for Ocrevus in the US. Long-term net operating assets were lower due to the CHF 2.6 billion of impairments
`of intangible assets. In the Diagnostics Division the decrease in net working capital of 10% at CER was driven by an increase of other
`payables due to higher liabilities for pending rebates. Inventories decreased due to inventories optimisation initiatives and high demand.
`The decrease in trade payables followed the lower spending, while trade receivables increased due to higher sales. Long-term net
`operating assets decreased by 4% due to lower goodwill and intangible assets, partially offset by higher property, plant and equipment
`and lower provisions.
`
`The decrease in net debt was due to free cash flow of CHF 13.4 billion. partly offset by dividend payments of CHF 7.1 billion. The net
`pension liability decreased by CHF 0.3 billion to CHF 6.6 billion due to improved asset performance. The net tax liabilities decreased
`mainly due to the deferred tax impact from the impairment of intangible assets, partially offset by the deferred tax impact from the
`changes in US tax rates announced in late 2017.
`
`Free cash flow
`
`Free cash flow
`
`Pharmaceuticals
`Diagnostics
`Corporate
`Operating free cash flow
`Treasury activities
`Taxes paid
`Free cash flow
`
`201 7
`(CHFmJ
`16,8 17
`1,553
`(543)
`17,827
`(498)
`(3,909)
`13,420
`
`2016
`(CHF mJ
`13,859
`720
`(493)
`14,086
`(1 ,218)
`(3,738)
`9,130
`
`% change
`(CH FJ
`+21
`+116
`+ 10
`+27
`- 59
`+5
`+47
`
`% change
`(CERJ
`+ 21
`+ 111
`+10
`+26
`- 59
`+5
`+47
`
`For the definition of free cash flow and a detailed breakdown see pages 144- 146.
`
`The Group's operating free cash flow for 2017 was CHF 17.8 billion. an increase of CHF 3.7 billion or 26% at CER. This reflects
`the higher cash generation of the business due to improved operating results with sales growth exceeding cash operating expenses.
`The development of the operating free cash flow was also positively impacted by net working capital. which decreased in 2017 after
`an increase in 2016. The decrease was mainly due to higher payables partially offset by higher receivables. There is also a base impact
`from inventories, where the build- up in 2016 was not repeated, and this contributed to the year-on-year growth in operating free cash
`flow. Capital expenditure was also lower than in the comparative period. The free cash flow in 2017 was CHF 13.4 billion. an increase of
`CHF 4.3 billion compared to 2016, due to the higher operating free cash flow, lower pension contributions and lower interest payments.
`
`https:-c~«;?Wi~n£«;l'm~&W1/~Cj'.f b 70415c0-954f-4a2a-a0e2-4 7f94bd280e0/en/fb 17 e. pdf
`
`Novartis Exhibit 2276.0012
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Pharmaceuticals Division operating results
`
`Pharmaceuticals Division operating results
`
`Financial Review I Roche Group
`
`IFRS results
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General and administration
`Operating profit
`- margin,% of sales
`
`Core results 11
`Sales
`Royalties and other operating income
`Cost of sales
`Marketing and distribution
`Research and development
`General and administration
`Core operating profit
`- ma