Half Year Report 2010

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(1)WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Half Year Report 2010.

(2) Contents Facts and Figures Management Review . 03 . 04. Financial Statements. 07. Unaudited Interim Consolidated Income Statements. 07. Unaudited Interim Consolidated Balance Sheets. 08. Unaudited Interim Consolidated Statements of Cash Flows. 09. Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity. 10. Notes to the Unaudited Interim Consolidated Financial Statements. 11. 02. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Please click on the desired chapter.

(3) Facts and Figures In the first half of 2010, total net revenue grew to CHF 1,024.9 million, plus 23 percent in local currencies. Epoprostenol for Injection, an improved formulation of epoprostenol with increased stability at room temperature, launched in the US in April 2010. Non-GAAP EBIT reached CHF 405.1 million representing an increase of 39 percent in local currencies. Clazosentan pivotal Phase III study CONSCIOUS-2 fully enrolled in April with results forthcoming in October 2010. Product sales – Tracleer ®. Total net revenues CHF millions. CHF millions 1,024.9. 1,200. 1,000 750. 600. 500. 300. 250. 0. 0 HY 2009. HY 2010. HY 2009. HY 2010. Product sales – Zavesca®. Non-GAAP EBIT CHF millions. CHF millions. 500. 40 405.1. 400 300. 835.3 739.3. 304.8. 35.8. 30 20. 200. 10. 100. 0. 22.4. HY 2009. 0 HY 2009. HY 2010. HY 2010. Product sales – Ventavis® CHF millions 80 60. 61.5. 61.9. HY 2009. HY 2010. 40 20 0. Back to Contents. 03. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. 900. 855.2.

(4) Management Review. The company saw strong sales and marketing performance in the United States (US) (+14%), Europe (+4%) and elsewhere (+41%). This performance is a result of increased demand for all of our products in all markets. Net income for the period amounted to CHF 254.2 million, which translates into fully diluted earnings per share of CHF 2.10, an increase of 17 percent. In February 2010, we learned that the BUILD-3 study with bosentan in idiopathic pulmonary fibrosis (IPF) does not support a regulatory filing. Actelion is proceeding with confidence; we have built a strong franchise in PAH and will continue to lead the way with our expertise in the field. The addition of an improved formulation of epoprostenol to our portfolio and the rapidly progressing development of new PAH compounds, macitentan and selexipag, should maintain our PAH franchise growth moving forward. This growth will be further strengthened by the multiple additional opportunities offered by our innovative pipeline.. Back to Contents. Products Tracleer ® – treatment of choice for first-line therapy in PAH Sales of Tracleer ® (bosentan) were CHF 835.3 million for the first half of 2010, compared to CHF 739.3 million for the same period in 2009, representing a 16 percent increase in local currencies. Tracleer ® continues as the treatment of choice for first-line therapy in PAH due to both proven efficacy and physician’s treatment experience. Today, with over 80,000 patients treated and a broad set of clinical evidence, Tracleer ® continues to lead the way in PAH. Tracleer ® has shown proven efficacy in returning patients to WHO Functional Class II (FCII) as well as in maintaining patients at this important therapeutic goal. In addition, the Tracleer ® growth is supported outside the US by its use in the reduction of new digital ulcers in patients with systemic sclerosis and ongoing digital ulcer disease. Actelion’s continued commitment to PAH During the first half of 2010, Ventavis® (iloprost) had sales in the US of CHF 61.9 million compared to CHF 61.5 million in the first half of 2009, representing a 5 percent increase in local currency. Actelion’s commitment to patients using Ventavis® through the introduction of an increased strength formulation has resulted in the vast majority transferring to this more convenient formulation. Ultimately this has helped Ventavis® to perform very well despite new competition since the second half of 2009.. 04. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Actelion’s strong performance in the first half of 2010 is based on our core business led by the pulmonary arterial hypertension (PAH) franchise. With sales of the three marketed products increasing compared to the same period a year ago, Actelion generated total net revenues of CHF 1,024.9 million (HY 2009: CHF 855.2 m). With Non-GAAP operating expenses of CHF 619.7 million (HY 2009: CHF 550.4 m), the company reported a half year 2010 Non-GAAP EBIT of CHF 405.1 million (HY 2009: CHF 304.8 m), an increase of 39 percent in local currencies..

(5) Zavesca® – providing important benefits to patients Actelion’s ongoing commitment to type 1 Gaucher disease (GD1) patients and greater awareness in the Niemann-Pick type C (NP-C) community resulted in Zavesca® (miglustat) sales for the first half of 2010 of CHF 35.8 million compared to CHF 22.4 million during the same period last year, representing a 65 percent increase in local currencies. We are currently reviewing options following discussions with the FDA after receiving a complete response letter for Zavesca® in NP-C in March 2010. Following our successful orphan disease strategy in PAH, we intend to highlight the importance of screening and diagnosis in NP-C by undertaking several initiatives to screen and establish the prevalence of NP-C disease and to develop new biomarkers.. Pipeline At the end of June 2010 Actelion was developing 10 different compounds in our clinical pipeline with around 25 active projects in drug discovery. Four compounds were in Phase III, with first results from one of these advanced programs – clazosentan – expected in the second half of 2010.. Phase I. Phase II. After just 12 years, Actelion has demonstrated its ability to discover and develop multiple first-in-class compounds such as the first orally available endothelin receptor antagonist, the first orexin receptor antagonist as well as the first selective S1P1 receptor agonist. The result is a very strong and broad pipeline and it is with the same passion for innovation and scientific drive that we will continue our efforts. For the first six months of 2010 Actelion’s investment in research and development has totaled CHF 233.2 million, an increase of 11 percent. This level of investment reflects our long-term strategy for growth by pursuing internal projects, especially those which would accelerate value creation. Advancing early-stage pipeline This year Actelion’s early stage pipeline has made significant progress, specifically with the selective S1P1 receptor agonist. With over 50 percent of the 400 patients foreseen to be enrolled into the multiple sclerosis study, data is expected in the second half of 2011. We also expect to initiate a study in psoriasis before the end of the year. Our CRTH2 receptor antagonist is also moving forward with the dose-ranging studies in both asthma and allergic rhinitis before the end of this year. Macitentan in IPF has completed enrollment in an exploratory study. The results, expected in the second half of 2011, together with the detailed analysis of the BUILD- 3 data, will allow us to better understand the role of dual endothelin receptor antagonism in IPF. We are encouraged by the Phase I results seen with our first potent, novel antibiotic which is highly active against problematic and multi-resistant pathogens. As a result we will commence a Phase II program in the second half of this year.. Phase III. Reg.. Indication. Clazosentan. Vasospasm as consequence of subarachnoid hemorrhage. Macitentan. PAH. Selexipag 1) Almorexant. PAH 2). Sleep disorders. S1P1 agonist. Multiple Sclerosis. CRTH2 antagonist. Asthma. CRTH2 antagonist. Allergic rhinitis. S1P1 agonist. Psoriasis. Macitentan. Idiopathic pulmonary fibrosis. Antibiotic. Anti-infective. Cardiovascular. Cardiovascular. 1). partnered with Nippon Shinyaku, 2) partnered with GSK. Back to Contents. 05. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. In late April 2010 we saw the market introduction of our fourth product, Epoprostenol for Injection, a parenteral prostacyclin formulation providing the efficacy of epoprostenol with an increased stability at room temperature so that it can be used without ice packs. This product is now available in the US and the registration process is ongoing outside the US, initially in France. In addition, clinical experience studies have been initiated..

(6) A maturing late-stage pipeline – Four Phase III programs Progress has also been made with the late stage pipeline. The SERAPHIN study with macitentan in PAH is advancing approximately one year ahead of schedule, with study results most likely becoming available before the end of 2011. Selexipag is also accelerating in the GRIPHON study and, together, these compounds should secure our PAH franchise in the future.. death from any cause. We expect to obtain study results in October this year and, if positive, we are planning to approach health authorities for filing. A second Phase III study with clazosentan, CONSCIOUS-3, is currently enrolling globally. In this study, patients post aneurysmal subarachnoid hemorrhage are treated by endovascular coiling; the primary endpoint is identical to that of CONSCIOUS-2. Prepared for long-term growth. At the end of 2009, Actelion obtained positive efficacy data with its dual orexin receptor antagonist almorexant in primary insomnia. However, due to certain safety observations, the non-pivotal part of the program was expanded during the first half of 2010 to better understand the safety and tolerability profile of this innovative compound. In Q1 2011, data from this nonpivotal program should allow Actelion and its collaboration partner, GSK, to decide on the initiation of the remaining Phase III studies. The almorexant development program was recently discussed at a meeting with the US Food and Drug Administration. Clazosentan, our most advanced compound in clinical development, is nearing completion in the CONCIOUS-2 study to prevent vasospasm-related morbidity/mortality post aneurysmal subarachnoid hemorrhage treated by surgical clipping. The study is measuring the clinical benefits of clazosentan through the primary endpoint of vasospasm-related morbidity and all-cause mortality, which includes neurological deterioration, new brain infarcts, introduction of vasospasm rescue therapy or. After the reporting period, on 20 July 2010 we announced that we have obtained, for EUR 10 million, an option to acquire privately-held Trophos SA, a clinical stage pharmaceutical company. Trophos has a pipeline of compounds in neurodegenerative orphan diseases including olesoxime, a first-in-class molecule, currently under Phase III investigation in Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrig’s disease. The study is expected to report data by the end of 2011. Should Actelion then exercise its option, this would trigger a cash payment of between EUR 125 and 195 million. In a drug discovery collaboration, Actelion and Trophos will also further explore the novel therapeutic approach pioneered by olesoxime. With our solid core business and excellence in marketing, the potential offered by our robust development pipeline and the continued emphasis placed on our drug discovery efforts, we are confident that we have established an optimal strategy for Actelion’s long-term growth.. Dr. Jean-Paul Clozel CEO. Back to Contents. Andrew J. Oakley CFO. 06. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Allschwil, 20 July, 2010.

(7) Financial Statements Unaudited Interim Consolidated Income Statements Six months ended June 30, (in CHF thousands, except per share amounts). Notes. 2010. 2009. Product sales. 11. 933,210. 823,247. Contract revenue. 11. 91,653. 31,992. 1,024,863. 855,239. Net revenue:. Total net revenue. Cost of sales. 100,742. 89,028. Research and development. 233,229. 209,585. Selling, general and administration. 342,612. 299,589. Amortization of acquired intangible assets. 21,647. 14,161. Total operating expenses. 698,230. 612,363. Operating income. 326,633. 242,876. 1,543. 2,502. Interest income Interest expense. (3,567). (2,490). Amortization of debt discount and issuance costs. (9,225). (8,836). Other financial income (expense), net. (30,181). 7,524. Income before income tax expense. 285,203. 241,576. Income tax expense. (30,997). (23,136). Net income. 254,206. 218,440. 5. 2.14. 1.85. 118,912. 118,256. 2.10. 1.79. 121,314. 122,340. Research and development. 16,181. 13,363. Selling, general and administration. 25,003. 21,145. Total stock-based compensation. 41,184. 34,508. Basic net income per share Weighted-average number of common shares (in thousands) Diluted net income per share Weighted-average number of common shares (in thousands). (1). 5. Includes employee stock option costs as follows:. The accompanying notes form an integral part of these financial statements.. Back to Contents. 07. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Operating expenses (1).

(8) Unaudited Interim Consolidated Balance Sheets (in CHF thousands, except number of shares). June 30,. December 31,. Notes. 2010. 2009. 6. 1,075,047. 877,325. 236,427. 466,234. Assets Current assets Cash and cash equivalents Short-term deposits Derivative instruments. 7. Trade and other receivables, net. 7,875. 11,545. 512,902. 469,557. Inventories. 59,196. 61,365. Other current assets. 33,420. 46,916. Deferred tax assets, current portion Total current assets Property, plant and equipment, net Other non-current assets Intangible assets, net. 5,001. 4,868. 1,929,868. 1,937,810. 315,754. 281,152. 19,014. 19,443. 271,384. 283,364 77,630. Goodwill. 3. 78,618. Long-term financial assets. 7. 12,282. 13,149. 50,258. 52,369. 2,677,178. 2,664,917. Deferred tax assets, less current portion Total assets Liabilities and shareholders' equity Trade and other payables. 99,259. 117,460. 277,184. 406,343. Deferred revenue, current portion. 21,909. 107,599. Other current liabilities. 42,924. 48,583. 435,383. 426,910. 876,659. 1,106,895. Deferred revenue, less current portion. 83,187. 89,065. Other non-current liabilities. 27,691. 47,794. 6,376. 13,100. Accrued expenses. Short-term financial debt. 7. Total current liabilities. Pension liability Deferred tax liabilities Total liabilities Shareholders' equity Common shares (par value CHF 0.50 per share, authorized 248,151,860 and 248,290,335 shares; issued 129,301,361 and 128,527,224 shares in 2010 and 2009, respectively). 399. 412. 994,312. 1,257,266. 10 64,651. 64,264. Additional paid-in capital. 1,156,575. 1,098,840. Accumulated profit. 1,136,466. 882,260. Treasury shares, at cost. (582,502). (558,227). Accumulated other comprehensive income (loss). (92,324). (79,486). Total shareholders' equity. 1,682,866. 1,407,651. Total liabilities and shareholders' equity. 2,677,178. 2,664,917. The accompanying notes form an integral part of these consolidated financial statements.. Back to Contents. 08. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Current liabilities.

(9) Unaudited Interim Consolidated Statements of Cash Flows Six months ended June 30, (in CHF thousands). 2010. 2009. 254,206. 218,440. Cash flow from operating activities Net income Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization. 37,325. 27,463. Stock-based compensation, incl. treasury shares to members of Board of Directors. 41,791. 34,508. Excess tax benefits from share-based payment arrangements. (1,287). (4,353). (Gains) Losses on derivative instruments. 11,653. (7,767). Amortization of debt discount and issuance costs Trade and other receivables Inventories Other current assets Other assets Trade and other payables. 9,225. 8,836. (71,841). (72,980). 2,162. (4,034). 13,871. (2,808). 924. (4,477). (12,669). 826. Accrued expenses. (127,106). (29,595). Deferred revenue. (91,573). (31,679). Other liabilities. 1,453. 1,478. Changes in other operating cash flow items. 6,081. (6,654). 74,215. 127,204. Purchase of short-term and long-term deposits. (90,193). (432,504). Proceeds from short-term and long-term deposits. 320,000. 567,321. Purchase of property, plant and equipment. (50,760). (45,349). Purchase of marketable securities. -. (50,000). Settlement of derivative instruments. -. (3,457). (4,755). (3,964). Net cash flow provided by operating activities Cash flow from investing activities. Purchase of intangible assets Acquisition of subsidiary. (42,933). (57,785). Net cash flow provided by (used in) investing activities. 131,359. (25,738). Payments on capital leases Repayment of financial debts Proceeds from exercise of stock options, net of expense Purchase of treasury shares Proceeds from exercise of options related to own shares Excess tax benefits from share-based payment arrangements Net cash flow provided by (used in) financing activities Net effect of exchange rates on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period. (69). (76). -. (193,800). 16,366. 49,746. (25,000). -. -. 188,637. 1,287. 4,353. (7,416). 48,860. (436). 3,659. 197,722. 153,985. 877,325. 727,459. 1,075,047. 881,444. The accompanying notes form an intergral part of these consolidated financial statements.. Back to Contents. 09. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Cash flow from financing activities.

(10) Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity (in CHF thousands, except number of shares). At January 1, 2009. Common shares. Shares. Amount. 117,207,367. 62,508. Additional paid-incapital. Accumulated profit. Treasury shares. Accum. other comprehensive income (loss). Shareholders' equity. 700,296. 570,990. (442,816). (48,875). 842,103. Comprehensive income (loss) net of tax: Net income. 218,440. 218,440. Other comprehensive income (loss): Currency translation adjustment Unrealized gain (loss) on marketable securities. 7,853. 7,853. (11,336). (11,336). Comprehensive income (loss). 214,957. Excess tax benefit and underrealization from share-based payment arrangement Exercise of stock options Transactions in treasury shares. 1,863,200. 931. 10,524. Stock-based compensation expense 119,081,091. 3,756 49,746. 37. Options related to own shares. At June 30, 2009. 3,756 48,815. 63,439. 536. 573. 188,637. 188,637. 34,508. 34,508. 976,049. 789,430. (442,280). (52,358). 1,334,280. Comprehensive income (loss) net of tax: Net income. 92,830. 92,830. Other comprehensive income (loss): Currency translation adjustment. (20,378). (20,378). Not recognized components of net periodic benefit costs. (10,129). (10,129). (5,893). (5,893). Unrealized gain (loss) on marketable securities Reclassification into earnings. 9,272. Comprehensive income (loss). Transactions in treasury shares. 1,648,417. 825. (1,958,898). 1,720. 1,720. 57,471. 58,296. (1). (115,947). (115,948). Options related to own shares. 27,288. 27,288. Stock-based compensation expense. 36,313. 36,313. At December 31, 2009. 118,770,610. 64,264. 1,098,840. 882,260. (558,227). (79,486). 1,407,651. Comprehensive income (loss) net of tax: Net income. 254,206. 254,206. Other comprehensive income (loss): Currency translation adjustment. (11,971). Unrealized gain (loss) on marketable securities. (867). Comprehensive income (loss). Transactions in treasury shares. 774,137. 387. (515,534). Back to Contents. 799. 799. 15,979. 16,366. (118). Stock-based compensation expense At June 30, 2010. (867) 241,368. Excess tax benefit and underrealization from share-based payment arrangement Exercise of stock options. (11,971). (24,275). (24,393). 41,075 119,029,213. 64,651. 1,156,575. 41,075 1,136,466. (582,502). (92,324). 1,682,866. 10. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Excess tax benefit and underrealization from share-based payment arrangement Exercise of stock options. 9,272 65,702.

(11) Notes to the Unaudited Interim Consolidated Financial Statements (CHF thousands, except share and per share amounts). The unaudited condensed interim consolidated financial statements for Actelion Ltd (“Actelion” or the “Group”) have been prepared under Generally Accepted Accounting Principles in the United States (“US GAAP”) for interim financial information. Accordingly, such financial statements do not include all the information and footnotes required by US GAAP for annual financial statements. These interim financial statements should be read in conjunction with the audited financial statements of the Group for the year ended December 31, 2009. All amounts are presented in Swiss francs (“CHF”) unless otherwise indicated.. Note 2. Adoption of new accounting policies ASU 2009-16, Accounting for Transfers of Financial Assets As of January 1, 2010, the Group prospectively applied the provisions of ASU 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”), an update to the Transfers and Servicing Topic of FASB ASC (“ASC 860”). ASU 2009-16 requires additional disclosures about the transfer of financial assets, including securitization transactions, and continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity”. ASU 2009-16 also changed the requirements for derecognizing financial assets. The revised guidance became effective for interim and annual reporting periods beginning after November 15, 2009. As ASU 2009-16 applies to prospective transactions entered into after the effective date and generally relates to whether transactions will be recognized as sales or secured financings for accounting purposes but will not change the economics of the underlying transactions, the adoption of this standard did not have a material impact on Group’s financial condition, results of operations and cash flows. ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities As of January 1, 2010, Actelion adopted the accounting guidance issued in ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“VIE”) (“ASU 2009-17”), an update to the Consolidation Topic of FASB ASC (“ASC 810”). ASU. Back to Contents. 2009-17 changed the guidance on determination of a primary beneficiary of a VIE and expands disclosure provisions about a reporting entity’s involvement in VIEs. The guidance eliminated the quantitative approach and requires an ongoing qualitative assessment of whether a reporting entity is the primary beneficiary of a VIE and therefore required to consolidate the VIE. ASU 2009-17 became effective for interim and annual reporting periods beginning after November 15, 2009. For determination whether or not an entity is a VIE, the Group considers if the equity at risk for the entity is sufficient to support its operations, if the voting rights of the equity holders are in disproportion to their risk and rewards or if substantially all of the entity’s activities are on behalf of the Group. Variable interest entities, irrespective of their legal structure, are consolidated if the Group has determined to be the primary beneficiary and thus has the power to direct the activities that most significantly impact the VIE’s economic performance and will also absorb the majority of the VIE's expected losses, receive the majority of the VIE's expected residual returns, or both. Based on these analyses the Group did not identify any changes in its consolidation scope and in the risk associated with its involvement with VIEs. The adoption of this standard did not have a material impact on Group’s financial condition, results of operations and cash flows. ASU 2010-06, Improving Disclosures about Fair Value Measurements As of June 30, 2010, the Group adopted the applicable disclosure requirements of ASU 2010-06, Improving Disclosures about Fair Value Measurements, an update to the Fair Value Measurements and Disclosures Topic of FASB ASC (“ASC 820”). ASU 2010-06 requires additional disclosures for significant transfers in and out of Level 1 and Level 2 as well as a detailed reconciliation for fair value measurements using Level 3 inputs. The guidance also provides amendments that clarify the required level of disaggregation for each class of assets and liabilities and expands the disclosures about inputs and valuation techniques for both recurring and non recurring fair value measurements that fall in either Level 2 or Level 3. ASU 2010-06 became effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures in the roll-forward of activity in Level 3 fair value measurements. These disclosures will be effective and applied by the Group for. 11. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Note 1. Basis of presentation.

(12) ASU 2010-09, Amendments to Certain Recognition and Disclosure Requirements As of June 30, 2010, the Group applied the provisions of ASU 2010-09, Amendments to Certain Recognition and Disclosure Requirements, an update to the Subsequent Events Topic of FASB ASC (“ASC 855”). ASU 2010-09 introduced three modifications to previously existing accounting guidance by a) including a definition of an SEC filer which also refers to entities subject to Section 12 (i) of the Securities Exchange Act of 1934; by b) requiring an SEC filer to evaluate subsequent events through the date that the financial statements are issued and all other entities through the date the financial statements are available to be issued; and by c) removing the requirement for an SEC filer to disclose a date in issued or revised financial statements. ASU 2010-09 became effective as of February 24, 2010.. Note 3. Acquisitions and Goodwill On March 11, 2009, the Group acquired a new formulation of epoprostenol sodium with improved thermal stability for the intravenous treatment of pulmonary arterial hypertension (“PAH”) from privately-held GeneraMedix Inc. (“GXI”). The acquisition has been recorded as a business combination in compliance with the requirements of the guidance codified in the Business Combinations Topic of the FASB ASC (“ASC 805”). Accordingly, the fair value of the total consideration transferred has been allocated to the assets acquired based on their estimated fair values at the date of the acquisition and goodwill. The aggregate purchase price of CHF 150.7 million (USD 130.4 million) consisted of cash paid to GXI of CHF 57.8 million (USD 50 million) and the fair value of deferred and contingent considerations of CHF 92.9 million (USD 80.4 million) as follows: CHF (1). USD. Contingent consideration. 17,437. 15,088. Deferred consideration. 75,458. 65,292. Cash paid. 57,785. 50,000. 150,680. 130,380. Total fair value of consideration transferred. The deferred consideration is payable for the three consecutive years following the acquisition date whereas Actelion has the right to not make all or a portion of these deferred payments and thus would forgo its rights to commercialize epoprostenol in various countries. In 2010, the Group settled CHF 42.9 million (USD 40 million) of the deferred consideration. The contingent consideration is related to future patent issuance events in various markets and thus re-measured at fair value at each reporting date using Level 3 inputs. In determining the fair value the Group considered present value calculations of the expected cash-outflows as well probabilities of amounts and timing of settlement of the contingencies. The Group applied a discount rate of 8.1%, the Bloomberg Composite US Industrial BB yield, which is equivalent to a market participant’s cost of borrowing. As of June 30, 2010, the fair value of the contingent consideration amounts to CHF 20.2 million (USD 18.6 million). Thereof, CHF 13.9 million (USD 12.8 million) included in other current liabilities and CHF 6.3 million (USD 5.8 million) disclosed as other non-current liabilities. Compared to December 31, 2009, the fair value of the contingent consideration has increased by CHF 2.3 million (USD 2.2 million) due to contingent consideration expense and by CHF 0.8 million due to effects of foreign currency translation, which are included in operating expenses. The maximum undiscounted amount of the contingency remains unchanged at USD 20 million (CHF 21.7 million). Except for the effect of foreign currency translation, the net carrying amount of goodwill has not been adjusted in the current reporting period. The following table summarizes the changes in 2010:. January 1 77,630. Translation effects. June 30. 988. 78,618. (1) The USD/CHF foreign exchange rate used for translation of the acquisition’s opening balance was 1.1557, which was the foreign exchange rate as of the acquisition date, March 11, 2009.. Back to Contents. 12. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. annual and interim periods beginning after December 15, 2010. ASU 2010-06 mandates additional disclosures and, as such, did and will not impact Group’s financial position, results of operations and cash flows upon adoption..

(13) Note 4. Collaborative agreements In 2006, the Group entered into an agreement with Roche to jointly develop and commercialize Group’s selective S1P1 receptor agonist. Following the new alignment of its strategic research portfolio, Roche terminated the agreement effective June 7, 2010. As more detailed discussed in Actelion’s consolidated financial statements for the year ended December 31, 2009, this resulted into an accelerated recognition of deferred revenue in the current reporting period. The year-end deferred revenue balance of CHF 77.2 million has been fully recognized during the six months ended June 30, 2010. The Group continues its research and development efforts to improve medical care for patients with autoimmune disorders.. Note 5. Earnings per share Basic and diluted earnings per share are based on weighted-average common shares and exclude anti-dilutive shares relating to employee share options of 14,527,750 and 10,973,993 for the six months ended June 30, 2010 and 2009, respectively. The following table sets forth the basic and diluted earnings per share calculations: June 30, 2010. June 30, 2009. Basic. Diluted. Basic. Diluted. Net income. 254,206. 254,206. 218,440. 218,440. Net income available for earnings per share calculation. 254,206. 254,206. 218,440. 218,440. 118,911,667. 118,911,667. 118,256,412. 118,256,412. Numerator. Denominator Weighted-average number of common shares. Convertible bond. -. 59,538. -. 410,516. Share options. -. 2,342,686. -. 3,673,273. Total average equivalent shares. 2,402,224. Earnings per share. 2.14. 2.10. 4,083,789 1.85. 1.79. Note 6. Cash and cash equivalents Cash and cash equivalents consisted of the following at:. Cash (1) Short-term bank deposits Total. June 30, 2010. December 31, 2009. 1,070,475. 873,089. 4,572. 4,236. 1,075,047. 877,325. (1) Contains CHF 0.5 million pledged for an unused credit line of CHF 5 million (December 31, 2009 - CHF 0.8 million).. Back to Contents. 13. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Incremental shares for assumed conversion:.

(14) Note 7. Financial assets and liabilities The information about Group’s financial assets and liabilities reflects the requirements of the Fair Value Measurements and Disclosures Topic of FASB ASC (“ASC 820”) as well as of the Investments – Debt and Equity Securities Topic of FASB ASC (“ASC 320”). The following table states Group’s financial assets and liabilities carried at fair value that are not disclosed elsewhere: June 30, 2010. Level 1. Level 2. December 31, 2009. Level 1. Level 2. 1,075,047. 1,075,047. -. 877,325. 877,325. 11,545. Financial assets carried at fair value: (1) Cash and cash equivalents Derivative financial instruments Equity Securities Total. 7,875. -. 7,875. 11,545. -. 12,282. 12,282. -. 13,149. 13,149. -. 1,095,204. 1,087,329. 7,875. 902,019. 890,474. 11,545. Derivative financial instruments (2). 8,576. -. 8,576. 593. -. 593. Total. 8,576. -. 8,576. 593. -. 593. (1). For the six months ended June 30, 2010, no transfers to or from Level 1 and Level 2 took place.. (2). Included in other short-term liabilities.. Derivative financial instruments include gross unrealized gains of CHF 5.2 million (December 31, 2009: CHF 13.5 million, thereof CHF 10.4 million related to foreign currency gains) and gross unrealized losses of CHF 16.9 million (December 31, 2009: CHF 1.8 million), which have been recorded in other financial income (expense), net. For the six months ended June 30, 2010, all unrealized gains and losses relate to foreign currency gains and losses. Derivative financial instruments A significant portion of the Group’s operations is denominated in foreign currencies, principally in US Dollars, Euros and Yen. Exposures to fluctuations in foreign currencies may adversely impact the Group’s net income and net assets. The Group uses derivatives to partially offset these risks. The Group records all derivatives on the balance sheet at fair value. The Group’s derivative instruments, while providing economic hedges under the Group’s policies, do not qualify for hedge accounting as defined by the Derivatives and Hedging Topic of FASB ASC (“ASC 815”).. Back to Contents. The Group determines the fair value of its derivative contracts based on observable inputs, which include foreign exchange rates, counterparty information and other related inputs. Changes in the fair value of all derivative instruments are recognized immediately in other financial income (expense) in the consolidated income statement. Fair value amounts recognized for the right to reclaim or the obligation to return cash collateral arising from derivative instruments recognized at fair value and executed with the same counterparty under a master netting arrangement are not offset. The following tables reflect the contract or underlying principal amounts and fair values of derivative financial instruments analyzed by type of contract as of June 30, 2010 and 2009. Contract or underlying principal amounts indicate the volume of outstanding positions at the balance sheet date and do not represent amounts at risk.. 14. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Financial liabilities carried at fair value: (1).

(15) Derivative financial instruments not designated as hedging instruments. Contract or underlying principal amount. Location of gain or (loss) recognized in income on derivatives. Amount of gain recognized in income on derivatives. Forward rate contracts. 417,026. Other financial income (expense), net. 10,904. (23,783). Total. 417,026. 10,904. (23,783). (4,952). Amount of (loss) recognized in income on derivatives. June 30, 2010. June 30, 2009 Foreign currency options Forward rate contracts. 8,029. Other financial income (expense), net. 3,724. 267,947. Other financial income (expense), net. 9,211. (7,227). -. Other financial income (expense), net. 3,088. (3,795). 16,023. (15,974 ). Interest rate swap Total. 275,976. Asset Derivatives Derivative financial instruments not designated as hedging instruments. Liability Derivatives. Balance Sheet Location. Fair Value. Balance Sheet Location. Fair Value. Derivative instruments. 7,875. Other current liabilities. 8,576. June 30, 2010 Forward rate contracts Total. 7,875. 8,576. December 31, 2009 Derivative instruments. 11,545 11,545. Marketable securities The Group holds certain equity investments, classified as available-for-sale (“AFS”) marketable securities and recorded under long-term financial assets. The following table summarizes Group’s investments in AFS marketable securities in an unrealized loss position as of June 30, 2010: Less than 12 months Fair Value. Unrealized Losses (1). Equity Securities. 12,282. 867. Total. 12,282. 867. June 30, 2010. December 31, 2009 Equity Securities. 13,149. Total. 13,149. (1). Included in other comprehensive income.. Back to Contents. -. Other current liabilities. 593 593. As of June 30, 2010, the Group reviewed the securities for impairment in order to determine if the decline in the fair value below cost may be other than temporary. The Group performed analyses of certain indicators, like the length of time and the extent to which the market value of the investment has been less than its cost; the financial conditions and the long-term prospects of the issuer; the volatility and the relative stock performance compared to the corresponding indicators of the sector. Based on these analyses and Group’s intent and ability to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value, the Group does not consider the AFS investments to be other than temporarily impaired. At June 30, 2009, the Group held CHF 50 million in corporate debt securities, which have been classified as AFS marketable securities. The contractual maturity of these securities was September 23, 2009. As of June 30, 2009, gross unrealized gains relating to this investment of CHF 0.1 million were included in other comprehensive income.. 15. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Forward rate contracts Total.

(16) June 30, December 31, 2010 2009 Financial liabilities carried at amortized cost: Short-term financial debt (1). 435,383. 426,910. Total. 435,383. 426,910. (1). Represents the net carrying amount of the liability component of the 2006 convertible bond.. 2006 Convertible bond In November 2006, the Group issued CHF 460 million in convertible bonds (“2006 convertible bond”). The 2006 convertible bond is structured as a zero coupon convertible bond with a yield to maturity of zero percent. The conversion price is CHF 54.17 per share, issue and redemption price were set at 100% and is non-callable for life. On or after June 30, 2007, and until the 30th trading day prior to the maturity date on November 22, 2011, the 2006 convertible bond is, in accordance with its terms, convertible free of charge into cash up to the principal amount and any conversion value above the principal amount may be settled, at the option of the Group, into cash or shares or a combination of cash and shares. The shares to be delivered to bondholders upon conversion amount to 8,492,099. Due to the cash conversion option the Group bifurcates the liability and equity components of the bond, applying an effective interest rate of 3.995% to determine the carrying amount of the liability component. For the six months ended June 30, 2010 and 2009, the Group recognized interest expense of CHF 8.5 million and CHF 8.1 million, respectively, which relate to the amortization of the discount on the liability component. As of June 30, 2010, the unamortized discount and the net carrying amount of the liability are CHF 24.6 million and CHF 435.4 million, respectively. The discount is being amortized till maturity date of the bond. The fair value of the bond at June 30, 2010, is 97.8% of the principal amount. As the 2006 convertible bond is convertible since June 30, 2007, for cash up to the principal amount and there are no contingencies to be met for the bondholders to be able to convert, the 2006 convertible bond is classified as short-term debt.. The Group invests its excess cash in deposits with major banks and other high quality money market instruments. The majority of the financial institutions is either protected by a state guarantee or owned by public authorities. Deposits and other money market investments mature on average within six months and the Group has not incurred any related losses. In addition, the Group reviews on an ongoing basis the creditworthiness of counterparties to foreign exchange and interest rate agreements. The Group has not experienced and does not expect to incur any significant losses from failure of counterparties to perform under the agreements. There are no significant concentrations of credit risk related to the Group’s financial instruments with any individual counterparty. At June 30, 2010, approximately 51% of trade accounts receivables are due from public institutions funded by governmental agencies in certain Southern European countries. Based on its review of the local economic environment, of the historical payment patterns and on analyses of days sales outstanding in these countries, the Group considers collectibility of the outstanding receivables as ensured.. Note 8. Guarantees and commitments In the context of its ongoing facility expansion, the Group has entered into capital commitments totaling CHF 53.6 million, with the majority of this amount expected to be paid within the next twelve months. In order to secure its obligations from derivative trading, cash pooling and forward transactions in foreign currencies, the Group has issued guarantees and a letter of indemnity to various financial institutions in the total amount of CHF 76.7 million. In addition, in the ordinary course of business the Group has entered into certain guarantee contracts and letters of credit amounting to CHF 4.8 million. The guarantees primarily relate to operating leases and credit lines for subsidiaries in foreign jurisdictions. Due to the nature of these arrangements, the Group has never been required to make payments under these contracts and does not expect any potential required future payments to be material.. Credit and interest rate risk Cash and cash equivalents, short-term deposits, marketable securities, derivatives and accounts receivable are financial instruments, which potentially subject the Group to concentrations of credit risk.. Back to Contents. 16. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. The following table states Group’s financial liabilities carried at amortized cost:.

(17) Note 9. Pension plans. Note 10. Shareholders’ equity. Swiss Employee Pension Plan The Group maintains a pension plan (the “Basic Plan”) covering all of its employees in Switzerland. The Plan insures remuneration up to a maximum annual base salary of CHF 150,000 as well as additional cash incentives paid voluntarily by the Group to its employees. In addition to retirement benefits, the Basic Plan provides benefits on death or long-term disability of its employees.. Conditional capital. Swiss Management Pension Plan The Group also maintains a defined benefit plan (“the Swiss Management Pension Fund”) that also provides retirement benefits and risk insurance for death and disability for components of remuneration in excess of the maximum insurable amount of base salary described in the previous paragraph. The Swiss Management Pension Fund insures base salary above CHF 150,000, and annual incentives, up to an aggregate maximum of CHF 820,800. It is funded through contributions by the Group and its employees. In addition, the Group maintains other pension plans outside Switzerland, which are insignificant to the Group. The Group uses a measurement date of December 31 for all pension plans. Net periodic benefit costs for the Group’s defined benefit pension plans include the following components:. Six months ended June 30,. Service cost Interest cost Expected return on plan assets Amortization of net (gain) loss Net periodic benefit cost. Back to Contents. 2010. 2009. 7,834. 5,797. 3,048. 2,483. (2,719). (2,198). 99. -. 8,262. 6,082. Movements in conditional capital are as follows:. December 31 , 2008 Creation of conditional capital for convertible bonds and similar forms of financing Forfeited Challenge Award options. 26,423 4,300 (85). Exercise of options. (1,756). December 31 , 2009. 28,882. Forfeited Challenge Award options Exercise of options June 30, 2010. (69) (387) 28,426. Treasury shares At June 30, 2010, the Group held 10,272,148 treasury shares, which were acquired at an average price of CHF 56.71 (December 31, 2009: 9,756,614 treasury shares acquired at an average price of CHF 57.22). During 2010, the members of the Board of Directors received 13,737 treasury shares at an average price of CHF 52.83 as compensation. Treasury shares are deducted from equity at their cost value and are shown as a separate component of shareholders’ equity. The Group intends to use the repurchased stock to offset dilution caused by the issuance of shares related to the Group’s share-based payment plans and shares issued upon conversion of the convertible bond.. 17. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. The Basic Plan is organized under the legal form of a pension foundation. The Group and its employees pay retirement contributions, which are defined as a percentage of the employees’ covered salaries. Interest is credited to the employees’ accounts at the minimum rate provided in the Basic Plan, payment of which is guaranteed by the insurance contract, which represents the Basic Plan’s primary asset. Future benefit payments are managed by the insurance company.. Since inception, the Group has created conditional capital for the establishment of share option plans, convertible bonds and similar forms of financing. The Annual General Meeting on April 24, 2009, approved the creation of additional conditional capital for issuance of convertible bonds and similar forms of financing. At June 30, 2010, the Group had conditional capital of CHF 28.4 million of which CHF 12.2 million relate to share option plans and CHF 16.2 million to convertible bonds and similar forms of financing..

(18) Note 11. Segment and geographic information The Group operates in one segment of discovering, developing and commercializing drugs for unmet medical needs. The chief operating decision-makers, which are comprised of the Group’s executive committee, review the profit and loss of the Group on an aggregated basis and manage the operations of the Group as a single operating unit. The Group currently derives product revenue from sales of Tracleer ®, Zavesca®, Ventavis® and Epoprostenol for Injection. Contract revenue is derived from collaboration and service agreements with third parties. Product revenue attributable to individual countries is based on location of the customer. The Group’s geographic information is as follows:. June 30, 2010: Product revenue from external customers Contract revenue from external customers Property, plant and equipment. Switzerland. United States. Europe. Other. Total. 11,875. 420,788. 350,723. 149,824. 933,210. 91,599. -. -. 54. 91,653. 264,400. 41,198. 5,028. 5,128. 315,754. 11,821. 369,722. 335,233. 106,471. 823,247. June 30, 2009: Product revenue from external customers Contract revenue from external customers Property, plant and equipment. 31,992. -. -. -. 31,992. 192,368. 5,286. 5,642. 4,391. 207,687. Note 12. Subsequent events. On July 19, 2010, the Group obtained, for a consideration of EUR 10 million, an option to acquire Trophos SA, a French clinical stage pharmaceutical company developing drugs for patients with neurodegenerative diseases. The option will become effective upon payment of the consideration by the Group and end two months after the Group’s receipt of the results of an ongoing Phase III study with olesoxime, but not later than December 31, 2012. The Group has the right to terminate the agreement at any time during the option period. The acquisition price will be paid in cash and is partially contingent on market approval of olesoxime by the U.S. Food and Drug Administration (“FDA”) as well as overall pipeline progression of other compounds. Consequently, the acquisition price might vary between EUR 125 million and EUR 195 million. As of the issue date of the half year report the Group is still evaluating the financial effect of this subsequent event.. Back to Contents. 18. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. The Group evaluated subsequent events till July 20, 2010..

(19) Copyright © 2010 Actelion Pharmaceuticals Ltd. WorldReginfo - ab6f74c0-ecff-4040-965c-4d32d25f42ec. Actelion Pharmaceuticals Ltd / Investor Relations & Corporate Communications Gewerbestrasse 16 / CH-4123 Allschwil / Switzerland Phone +41 61 565 65 65 / Fax +41 61 565 65 00 / www.actelion.com / [email protected].

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