Dedicated to success Annual Report 2005

Transcription

1 Dedicated to success Annual Report 2005

2 Actelion at a glance Actelion Ltd is a biopharmaceutical company with corporate headquarters in Allschwil/ Basel, Switzerland, that focuses on the discovery, development and commercialization of innovative treatments to serve high unmet medical needs. Founded in late 1997, Actelion is a leading player in innovative science related to the endothelium the single layer of cells separating every blood vessel from the blood stream. The company currently has two approved drugs on the market. Actelion s lead product, Tracleer, an orally available dual endothelin receptor antagonist, has been approved as a therapy for pulmonary arterial hypertension (PAH), a chronic, lifethreatening disorder that severely compromises the functions of the lungs and heart. The second marketed product, Zavesca, was in-licensed from Oxford GlycoSciences. Zavesca is the only approved oral treatment for type 1 Gaucher disease, a rare debilitating metabolic disorder. At the beginning of 2006, Actelion is evaluating five compounds in clinical development and runs 12 projects in its drug discovery targeting several indications such as cardiovascular, cardiopulmonary, immunological, and infectious diseases, as well as metabolic and central nervous system disorders. Actelion aims to combine the innovation, entrepreneurial spirit and flexibility of biotech with the financial, risk management, regulatory and commercial discipline of a large pharmaceutical company. By implementing this strategy, the over 1,000 employees of the company leverage their proven ability to discover new compounds and to advance promising drug candidates from research through development to successful commercialization. The first substantial product sales were generated during 2002, followed by strong growth in annual revenues and a full-year net profit in In 2005, Actelion posted sales of CHF647.6 million and an operating profit of million. Actelion s shares are listed on the SWX Swiss Exchange (ticker symbol: ATLN) Total revenues EBIT (1.7) (32.0) (102.5) Net profit (9.9) (52.1) (122.9) EPS non-diluted (0.46) (2.45) (5.98) Cash from operations (35.8) (29.6) Net equity Employees (FTE equivalent) CHF mio except per share and employee data includes discontinued operations

3 Content Letter from the Chairman 04 Interview with the CEO 06 Marketing & Sales 11 Patient Story 14 Clinical Development 17 Drug Discovery 25 Inside Story 28 People 31 Letter from the CFO 32 Corporate Governance 36 Financial Statements 46 Shareholder Information 68 Contacts 70 Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 03

4 Letter from the Chairman Outstanding business results and rapid progress in the R&D pipeline Actelion s outstanding performance in 2005 underscored the rapidly evolving business expertise of our young company and our growing geographic presence. Total net revenue of CHF million, up 41% over the previous year, was driven by the stronger than expected sales of our flagship product Tracleer in pulmonary arterial hypertension (PAH). Our operating profit of CHF million, an increase of almost 78% over 2004, exceeded our forecasts and put us in a strong cash-generating position. Robert E. Cawthorn, Chairman of the Board The global rollout of Tracleer continued in 2005, reaching a total of 36 countries where the product is available. In June, we launched in the crucial market of Japan, which will continue to add to our sales momentum. Other launches in 2005 included Brazil, Turkey and the Czech Republic. Our second marketed product, Zavesca, contributed to top-line growth in 2005 with sales of CHF 14.4 million, and is now available in 18 countries. To capture the full potential of this innovative oral therapy for lipid storage disorders, we expanded our licensing agreement to all phases of manufacturing and supply. Our highly professional sales force mastered the challenges of conducting business on a global scale while expanding the market for Tracleer in PAH. To maximize market impact, we significantly increased the number of territory managers, part of the expansion of Actelion s workforce from 854 in 2004 to over 1,000 in R&D supporting a multi-track strategy for growth The ambitious number of clinical trials conducted by Actelion in 2005 reflects our multitrack strategy. We want to expand the number of indications for our two currently approved products while creating the foundation to commercialize the new compounds in our R&D pipeline, several of which are potential blockbusters. In the first category, there were positive results in 2005 from our clinical trials with Tracleer in BREATHE-5 (Eisenmenger s syndrome) and RAPIDS-2 (digital ulcers related to systemic sclerosis). While BUILD-1 and -2 (idiopathic and scleroderma-related pulmonary fibrosis) did not meet an endpoint, strong trends in reducing morbidity/mortality justify the start of a broader study in idiopathic pulmonary fibrosis. Additional studies are also underway to further evaluate the use of Tracleer in chronic thrombo-embolic pulmonary hypertension and in pulmonary hypertension secondary to sickle cell disease. Clinical programs evaluating Zavesca in lysosomal storage disorders other than type 1 Gaucher are ongoing. In terms of new compounds, our worldwide alliance with Merck on renin inhibitors reached the second milestone, moving into full pre-clinical development. Other innovative compounds moving forward in our pipeline include the immuno-modulator S1P1 and an orexin antagonist, a novel sleep-enhancing agent. Our R&D Day, held in September in our new Research Center, showed the breadth of our Drug Discovery and tracked the progress of a number of key projects. 04

5 Clinical trials are part of our strategy to manage the impact of new competitors in PAH and related indications. In 2005, we presented data from the Tracleer Post Marketing Surveillance Program (TRAX PMS TM ) of over 5,000 patients, which reconfirmed the longterm safety of Tracleer in PAH. Two new trials launched in 2005, COMPASS-1 and -2, are designed to evaluate the combination of Tracleer and sildenafil, the new market entry in PAH from Pfizer. Drawing on the experience of our Board and management The Board of Directors welcomed two distinguished new members in 2005: Juhani Anttila, former CEO of the Ascom Group and the Swisslog Group and Chairman of the Executive Board of Nokia (Deutschland) GmbH; and Carl Feldbaum, former President of the Biotechnology Industry Association in Washington, DC and former President of the Palomar Corporation as well as former Assistant to the US Secretary of Energy and Inspector General for Defense Intelligence in the US Department of Defense. The company s senior managers, the Actelion Executive Committee, tapped into the wealth of professional experience on our Board of Directors on a regular basis during This close collaboration allowed us to fine-tune the company s growth strategy and validate key decisions. A number of important changes were made during the year on the Actelion Executive Committee. Christian Chavy took on the expanded role of President of Business Operations to better coordinate global Marketing and Sales. Simon Buckingham filled the newly created post of President of Corporate and Business Development to coordinate our internal portfolio management and maximize external opportunities. Roland Haefeli, Head of Investor Relations and Public Affairs, joined the Executive Committee, reflecting the importance of transparency and open communications in relations with external and internal stakeholders. Powered by the drive and determination of our employees In our knowledge-based industry, where complex problems can only be solved by closely coordinated teams of specialists, people are the essential factor to success. During the past year, I saw many examples of how the people of Actelion live our core values: innovation, results-driven behavior, open communication, trust and teamwork. Our employees should feel proud of their outstanding achievements in I am convinced that our shared drive and determination will keep us on the fast track of growth and propel us toward the next level of excellence as a company. Robert E. Cawthorn Chairman of the Board Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 05

6 Interview with the CEO We are enjoying dynamic growth and expanding our development efforts Jean-Paul Clozel, Chief Executive Officer How would you characterize the business results for 2005? Actelion s business results in 2005 were outstanding. Sales increased 42% over 2004 to a total of CHF million. Net profit was up 44% to CHF million, even though we continued to invest in our R&D and Marketing infrastructure. Our results in 2005 are a tribute not only to the innovative science behind our products, but also to the professionalism and motivation of our Marketing and Sales force. It demonstrates that a young biopharmaceutical company can create a successful commercial organization on a global scale from scratch. Actelion is now being approached by other biotech companies that do not have a sales force and are impressed by our staff and their achievements. What is the key to realizing the potential of your flagship product, Tracleer? In the currently approved indication of pulmonary arterial hypertension (PAH), a key priority continues to be educating the medical community about the disease and raising awareness about treatment options. That is coupled with a more targeted marketing and sales approach. If anything, we have underestimated the potential of Tracleer (bosentan) in PAH because the number of patients is underreported and many more physicians today are interested in diagnosing and treating PAH because of the availability of Tracleer. We expect further momentum from the recent launch of Tracleer in key markets, such as Japan. With Tracleer in PAH as our main sales driver, Actelion is well on track to reach one billion Swiss francs in revenue by Beyond PAH, we have ongoing clinical trials in a number of indications any one of which would further boost sales. How do the mixed results of BUILD-1 and -2 in pulmonary fibrosis affect this strategy? We didn t reach the primary endpoint in improving exercise capacity, which illustrates the difficulty of designing a clinical trial in an indication for which there is no current treatment. What we did observe in patients with idiopathic pulmonary fibrosis (BUILD-1) was a strongly positive trend in reducing the mortality/morbidity rate. In 2006, we are planning to start a registration trial in this indication, where there is a high unmet medical need. It s important to remember that we have many other ongoing clinical programs with Tracleer we didn t put all our eggs in one basket. In 2005, we achieved positive results with Tracleer in Eisenmenger s syndrome (congenital heart defect). In addition, we initiated clinical trials with Tracleer in sickle cell disease (SCD) and chronic thrombo-embolic pulmonary hypertension (CTEPH). All of these indications are candidates for fast-track approval. And we are expecting the results for Tracleer in patients with early-stage PAH, as well as results of clinical trials with a new pediatric formulation of bosentan in children with idiopathic pulmonary hypertension, in We are prepared to take some risks and go for innovative indications. We didn t get where we are today by choosing the easy way or looking for generic solutions. 06

7 What will happen with the PAH market in the future? Tracleer has made PAH a better recognized, treatable disease. Tracleer is also the best documented PAH drug, with safety and efficacy data generated in thousands of patients over the last six years. That s why it has become the cornerstone therapy for pulmonary arterial hypertension. As a doctor or patient, you don t switch from a proven and well-documented therapy just because there is something new. Moreover, the recent market entry sildenafil from Pfizer has a different mode of action than Tracleer. I don t view the two products as competitive but as complementary comparable to AIDS treatment with several anti-viral therapies, all with different mechanisms of action. That s why Actelion is starting two trials (COMPASS-1 and -2) to evaluate the complementarity of Tracleer and sildenafil in a clinical setting. Tracleer, with its well-documented long-term experience, is very well prepared for the upcoming competition from two compounds that only partly block the endothelin system. We have the data and we have the marketing and sales organization to discuss our product and its merits with the rapidly growing and widely diverse physician population that diagnoses and treats PAH. Actelion s strategic priorities Grow and defend current top line revenues Bring one or two innovative new products to the market in the near term Continue to innovate through substantial R&D How do you see the potential of Actelion s second product, Zavesca? Zavesca combines a very innovative mode of action for lipid storage diseases with a convenient oral formulation. Sales in 2005 were CHF 14.4 million, an increase of 135% over 2004, in our approved indication of mild to moderate type 1 Gaucher disease, if enzyme replacement therapy (ERT) is not suitable or not a therapeutic option. The first-line treatment ERT from Genzyme, administered by intravenous injections, is assumed to be treating up to 1,000 patients. If the clinical trial MAINTENANCE can demonstrate that patients can be successfully maintained with Zavesca after an initiated ERT therapy, we believe that Zavesca could capture a significant share of that market. This could give an edge to the patientfriendly oral formulation of Zavesca. In terms of new indications, we have started in late 2005 to evaluate the results of clinical trials in extremely rare lysosomal storage disorders with multiple neurological manifestations, Niemann-Pick type C disease, Late Onset Tay- Sachs disease, and type 3 Gaucher disease. We are just beginning to tap the potential of Zavesca. That s why we expanded our license in 2005 to include all phases of the manufacturing and supply chain. With Tracleer as our main sales driver, Actelion is well on track to reach one billion Swiss francs in revenue by Which projects in the discovery pipeline do you find most promising? I would start with clazosentan, a potential therapy to prevent vasospasms following nontraumatic subarachnoid hemorrhage (ruptured blood vessels in the brain). The mortality/morbidity rate for these patients is very high, so there is a clear unmet medical need. Our Phase IIa results were very good and we are optimistic about the Phase IIb/III. Another favorite is our orexin antagonist, which has the potential to totally shift the paradigm for sleep-inducing agents. It actually extends in animal models vital REM (rapid eye movement) sleep and shows no hangover effects, a major drawback of today s prevalent therapies. Then there is our S1P1 agonist for autoimmune diseases, with the Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 07

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9 Interview with the CEO promise as seen in animal models to provide rapidly reversible suppression of lymphocyte trafficking, a feature not available with any current approach, either marketed or in clinical development. The Global Actelion Merck Renin Inhibitor Alliance is making progress on all levels, with the first of what should become a series of highly bioavailable development compounds to enter man by mid As a scientist, I am excited about our innovative research. As CEO, I am very pleased about the depth of our drug discovery pipeline. Why is the new Research Center at the headquarters a milestone for Actelion? Our new Research Center is the first facility custom built for Actelion, rather than adapting to rented premises. It is part of our vision to create a pleasant, stimulating workplace with the latest scientific technology. Furthermore, it brings all our researchers together in one location face to face communication is one of our core values. Deciding to make this investment four years ago took some courage. It says something about our faith in the company and in our future. Actelion s assets Two products on the market Broad pipeline including potential blockbusters Global infrastructure & dedicated professionals Financial strength Many successful start-up companies experience growing pains. How will you manage growth at Actelion? We place a high priority on preserving the culture of speed, flexibility and innovation that got us where we are today. I am confident that we can preserve our pioneering spirit as we create new business processes and expand our workforce. The key is to redefine our vision. That is my job as CEO to keep setting the bar higher and to motivate our people to strive for more ambitious goals. At the same time, all of us at Actelion are constantly reviewing our existing infrastructure as well as policies and processes to adapt them to growing internal and external demands. Actelion is in a strong position as one of the few successful biotech companies based in Europe. If you look at our market success and our drug discovery pipeline, there is no reason why we cannot become another Genentech or Biogen in 10 to 20 years. Actelion s core values supporting growth Innovation Open Communication Trust & Teamwork Results Driven Positive Work Environment Which accomplishment of 2005 makes you most proud of Actelion s employees? Rather than pick one accomplishment, I would highlight the overall combination of scientific innovation and excellence in Marketing and Sales that makes us unique for a company of our size. Both aspects are absolutely essential to what we accomplished in 2005 and to realizing our long-term goals. The ability to make the most of individual talent in a variety of disciplines and work together as a team shows the quality and dedication of the over 1,000 employees of Actelion. Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 09

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11 Marketing and Sales Growing business on a global scale Actelion s revenue of CHF million in 2005 was generated across the markets of North America, Europe, Asia-Pacific, Australia and Brazil. These impressive figures and the broad geographic distribution of sales prove that a small, professional and highly motivated Marketing and Sales organization can achieve world-class results. A focused strategy, new organizational structures and continued expansion into new markets reflect the growing maturity of Actelion as a commercially successful biopharmaceutical company. In 2005, Tracleer was launched in Japan, Brazil, Turkey and the Czech Republic, with new regulatory approvals in Thailand and Taiwan. Christian Chavy, President of Business Operations, leads the Strategic Marketing and Medical Marketing functions at the corporate level as well as Actelion s Marketing and Sales organization worldwide. Global Brand Teams each consisting of a marketing expert, a medical marketing expert, a life cycle team leader and representatives of the five largest affiliates ensure that decisions reflect both the global strategic brand intent and local market conditions, and can be implemented rapidly and effectively. The strategy for the company s flagship product, Tracleer, includes marketing initiatives aimed at cardiologists, pulmonologists and rheumatologists inside and outside of hospitals and specialist centers. This is combined with satellite symposia and continuing medical education (CME) credits at medical congresses to raise awareness about pulmonary arterial hypertension (PAH) and treatment options. In parallel, there are educational efforts designed to help other specialists and general practitioners recognize the symptoms of PAH a life-threatening disease that is still frequently misdiagnosed. Established position as a long-term therapeutic option The established position of Tracleer as the cornerstone therapy in pulmonary arterial hypertension is based on years of efficacy and safety data. TRAX PMS, a post-marketing surveillance study of close to 5,000 European patients completed in 2005, confirmed the existing safety profile of Tracleer. Given Actelion s leadership position in PAH, new competitors such as Pfizer s sildenafil are often viewed by treating physicians as potentially complementary. Accordingly, Actelion has launched two clinical trials (COMPASS-1 and -2) to evaluate the combination use of Tracleer with sildenafil in PAH. Already in 2005, the increased awareness for PAH created by the entry of a large pharmaceutical company into the market has provided additional interest to diagnose and treat this disease, reinforcing Actelion s on-going educational initiatives on pulmonary arterial hypertension and efforts to capture previously undiagnosed patients. Christian Chavy President of Business Operations We have a clear strategy for our flagship product, Tracleer. Our goal is to continue to gain market share in pulmonary arterial hypertension, maintain the existing customer base against new competitors, and expand the overall market by finding untreated patients and investigating new indications. Tracleer (bosentan) in PAH First orally active drug approved for pulmonary arterial hypertension (PAH, Class III and IV in the United States, Class III in the European Union) Established as the cornerstone therapy of PAH with both symptomatic benefit and long-term experience Proven and well-documented Tracleer efficacy and safety profile with more than four years experience on the market The Cornerstone of PAH Therapy Tracleer strategy Further strengthen a global marketing/sales organization Continue geographical expansion Further support Tracleer with new and long-term data in PAH and related diseases Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 11

12 Marketing and Sales Zavesca strategy Generate data to increase market share in type 1 Gaucher disease Geographical expansion Continue to develop line extensions Balance by Substrate Reduction Zavesca has strong assets For Zavesca, Actelion s second product on the market, the situation is different. The current market leader in treating type 1 Gaucher disease is Genzyme s imiglucerase. This enzyme replacement therapy (ERT) must be administered by intravenous injection. Zavesca, a small molecule, today indicated for mild to moderate type 1 Gaucher patients unwilling or unable to undergo ERT, combines a novel mode of action with a convenient oral form. These assets are reflected in a satisfying growth in sales since the product was launched in 2003 in type 1 Gaucher disease. The key to accelerate growth in this approximately USD 900 million market will be the results of the initiated Phase III MAINTENANCE study, evaluating whether the disease continues being stabilized by Zavesca therapy after a switch from ERT in adult patients with stable type 1 Gaucher disease. In parallel, there are a number of clinical trials designed to evaluate the safety and efficacy of Zavesca in very rare diseases (see section on Clinical Development). In 2005, the licensing agreement on Zavesca was expanded so that Actelion now has full control over the manufacturing and supply chain, as well as the management of patent-related activities. Dynamic sales force, global markets and new opportunities Actelion continued to expand its global Marketing and Sales presence in Tracleer is now available in 36 countries, including recent launches in the major market of Japan, as well as in Brazil, Turkey and the Czech Republic. To keep step with its expanding geographical presence and maximize market opportunities for its current products, Actelion increased its Marketing and Sales organization by 27% in 2005, to 570 professionals in 21 affiliates. The combination of scientific expertise, key account management techniques and specialized selling skills has made the Actelion sales force a unique asset that helps the company retain maximum value from its products. This has also opened up new business opportunities in a niche unoccupied by Big Pharma. Biotech companies without a dedicated sales force are approaching Actelion to capitalize on its expertise in marketing specialized products on a global scale. Simon Buckingham: President of Corporate and Business Development Very few companies combine Corporate Strategic Development, Business Development and Portfolio Management into one function as Actelion does. We are drug hunters both internal and external. We aim to evaluate external and internal product opportunities with the same financial and qualitative criteria. New business processes built on the pioneering spirit Simon Buckingham, President of Corporate and Business Development, leads another new business process that attests to the growth and evolution of Actelion. The first task of this department is to develop, in collaboration with all major functional areas, the long term Strategic Plan of the company and adapt it on an ongoing basis. Using this as the base to guide the future, the second task is to optimize the life-cycles of existing products, Tracleer and Zavesca, as well as to manage the portfolio of new compounds reaching development. The third task is to evaluate external opportunities that could complement inhouse R&D in the form of partnerships (such as the current alliance with Merck in renin inhibitors), mergers, acquisitions or in-licensing individual compounds. Actelion s strong cash generation gives the company considerable strategic and operational freedom. Actelion s vision is to bring innovative, highly differentiated medicines to patients with unmet medical needs. These medicines are leading compounds from new drug classes that improve or prolong patients lives. Clear parameters are set for concentrating on focused therapeutic fields and developing new drugs that achieve a balance between business opportunities and addressing unmet medical needs. At the same time, the vision and strategy retain enough flexibility to follow the path of innovation wherever it leads. Actelion is and will always be a company based on the spirit of discovery and pioneering achievements in new frontiers of science. 12

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14 Patient Story Two lives: before and after Tracleer Pierre N., a 42-year-old art dealer in Paris and the father of two children, ages 16 and 5, couldn t explain what was happening to him. He began experiencing bouts of breathlessness that became more and more severe, several times resulting in a temporary loss of consciousness. Olivier Sitbon, MD, Center of Pulmonary Vascular Diseases, Hôpital Antoine Béclère, Clamart, France, and Pierre N. In September 1996, a cardiologist diagnosed Pierre with severe pulmonary arterial hypertension (PAH), and referred him to the French Expert Centre for PAH at Antoine Béclère Hospital for further examinations. While his exercise capacity was quite satisfactory, pulmonary hemodynamics showed severe pulmonary hypertension with a mean pulmonary artery pressure of 60 mmhg and a low cardiac output. Pierre willingly accepted intravenous infusion of epoprostenol the only available therapy at the time and exercise capacity and pulmonary hemodynamics showed marked improvement. In October 2002, Pierre was still on epoprostenol. During those five years of therapy, he suffered seven catheter-related infections and had to live everyday with a portable infusion pump and an intravenous line into his chest. With his morale at a very low ebb, he pleaded with his physicians to find a new therapy. Tracleer (bosentan), a breakthrough treatment for PAH available as an oral tablet, had just been launched in France. Given the stability of his condition, Pierre was a good candidate for switching treatment. After ensuring that he experienced no adverse effects with Tracleer, his doctors gradually reduced doses of epoprostenol over a 12-month period. Since December 2003, Pierre has been taking Tracleer only. His condition is stable and the treatment is well tolerated. When asked to describe the personal impact of this new therapy, Pierre responds: It was like two different lives. With my previous treatment, I was depressed, my self-image was poor and I stopped working. With Tracleer, I have resumed my professional activity. I lead a normal, active life and I feel good about myself. It makes all the difference in the world. 14

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17 Clinical Development Expanding the foundation for future success Actelion s Clinical Development department has the proven ability to take a drug candidate through all the clinical and regulatory steps necessary for approval and to provide the supporting efficacy and safety data needed to create a successful pharmaceutical product. This 140-member, multi-disciplinary team is conducting 25 Phase I to Phase III trials at 400 centers in 24 countries, involving some 3,000 patients. Clinical Development has two major priorities: extending the company s currently approved drugs, Tracleer and Zavesca, into new medical indications while simultaneously moving forward in clinical trials on a number of new molecules promoted from Drug Discovery. Opportunities for Tracleer in multiple indications A major pillar of Actelion s Clinical Development strategy is to leverage the proven efficacy and safety of Tracleer (bosentan) in new medical indications. Tracleer is the only antagonist of endothelin receptors approved as an oral therapy. Endothelin has a variety of deleterious effects such as vasoconstriction, hypertrophy, inflammation and fibrosis. Tracleer causes selective vasodilation and shows anti-proliferative, anti-fibrotic and antiinflammatory effects in a pre-clinical setting. Therefore, it has the potential to play a major role in a number of diseases for which there is either no current therapy or insufficient treatment options. Actelion is conducting multiple clinical trials to realize the potential of this innovative therapy. In November 2005, Actelion presented Phase IV results from BREATHE-5, the first ever placebo-controlled trial for Eisenmenger s syndrome, at CHEST 2005 (American College of Chest Physicians) in Montreal. The BREATHE-5 study showed that Tracleer improved exercise capacity and decreased pulmonary vascular resistance in patients not amenable to any other therapy, including surgery. Patients suffering from Eisenmenger s syndrome develop a severe form of PAH as a complication of a congenital heart defect ( hole in the heart ). At the American College of Rheumatology (ACR) meeting in San Diego in November 2005, Actelion made a poster presentation on Phase III results from RAPIDS-2, a placebo-controlled, randomized study that evaluated bosentan in preventing or treating digital ulcerations in patients with systemic sclerosis. The 188-patient study achieved its first co-primary endpoint in reducing the occurrence of new digital ulcerations, confirming the positive findings from the earlier trial RAPIDS-1. The recent results from RAPIDS-2 also confirmed that bosentan did not impact the healing process of digital ulcerations. Bosentan was well tolerated and the safety profile was consistent with earlier findings in clinical studies that led to the approval of Tracleer in PAH. Discussions with regulatory authorities for filing are ongoing. Tracleer A multitude of opportunities Clinical studies in PAH Class II PAH: Pediatric PAH: Combination with sildenafil: Clinical studies to expand existing PAH label CTEPH: Eisenmenger s syndrome: SCD-PH: Line extension opportunities Digital ulceration: Idiopathic Pulmonary Fibrosis Metastatic Melanoma EARLY FUTURE-1/-2 COMPASS-1/-2 BENEFIT BREATHE-5 ASSET-1/-2 RAPIDS-1/-2 BUILD-3 Also in November 2005, Actelion announced the Phase II/III results of the BUILD-1 and BUILD-2 trials, evaluating the efficacy and safety of bosentan in two forms of pulmonary fibrosis: idiopathic pulmonary fibrosis (IPF) and pulmonary fibrosis related to systemic scleroderma. While statistical significance was not reached on the primary endpoints (exercise capacity measured by the six-minute-walk test), a positive trend did emerge in IPF. These findings suggest an important role for Tracleer in IPF that needs to be confirmed in a larger Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 17

18 Clinical Development Phase III mortality/morbidity study (BUILD-3). The observed safety profile in the BUILD program was consistent with earlier findings in clinical studies that led to the approval of Tracleer in PAH. At the European Society of Cardiology conference in Stockholm in September 2005, Actelion presented results from the Tracleer Excellence Post Marketing Surveillance Program (TRAX PMS TM ), which confirms the long-term safety profile of Tracleer in various pulmonary arterial hypertension subgroups such as chronic thrombo-embolic pulmonary hypertension (CTEPH) and congenital heart disease (CHD). Almost 5,000 PAH patients were enrolled in the European Union in TRAX PMS TM. In August 2005, the Journal of the American College of Cardiology published a new study on the long-term outcome of children with pulmonary arterial hypertension (PAH) treated with Tracleer. The authors concluded that Tracleer, with or without concomitant prostanoid therapy, was efficacious for the treatment of PAH in children, and the safety profile appeared similar to that in adult PAH patients. In order to develop a special pediatric formulation of Tracleer, Actelion is conducting the Phase III trial FUTURE-1, with results expected in mid Once this is completed, the trial will be extended to FUTURE-2. In June 2005, Actelion presented abstracts at the Annual European Congress of Rheumatology in Vienna that showed the positive long-term impact of Tracleer in treating pulmonary arterial hypertension in patients with systemic sclerosis (scleroderma). As many as 15% of scleroderma patients develop PAH and the prognosis is extremely poor. Untreated, there is a median survival of just 12 months for these patients, according to published data. Building on the success of Tracleer in treating class III patients in the EU and class III/IV patients in the United States, a double-blind, placebo-controlled clinical trial was launched for class II patients (EARLY). Results for this Phase III study are expected late A recent amendment to the EARLY trial will allow class II patients currently on sildenafil to participate, which will generate the first information on the combination of these two therapies. The combination of Tracleer and Pfizer s sildenafil will be further explored in two Phase III studies. COMPASS-1 will evaluate the hemodynamic effects of sildenafil versus placebo in PAH patients treated with Tracleer. COMPASS-2 will examine the morbidity/mortality outcome of the combination Tracleer and sildenafil versus sildenafil in monotherapy. Both trials are expected to be initiated in early Chronic thrombo-embolic pulmonary hypertension (CTEPH) is caused by blockage of the main arteries leading from the heart to the lungs by thrombotic material. Even after surgery, many of these patients have high pulmonary pressure associated with increased levels of endothelin in their blood. After several open-label studies showing that Tracleer seems effective and well tolerated in this indication, a double-blind, placebo-controlled Phase III trial BENEFIT was launched, with results expected in mid

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21 Clinical Development As many as 30% of patients with sickle cell disease develop pulmonary hypertension, a complication that results in a median survival rate of only 26 months. Two Phase III trials are being conducted with Tracleer in pulmonary hypertension secondary to sickle cell disease, ASSET-1 and ASSET-2, with results expected in mid The two trials will also explore the potential of Tracleer to reduce the frequency of sickle crises, for which endothelin is believed to play a central role. Endothelin is also known to play a role in metastatic melanoma (skin cancer that spreads throughout the body), which is usually fatal in its advanced stages. Current treatments have a very low response rate, underlining the high unmet medical need. An open-label trial in end-stage patients at five centers in Australia showed that high doses of bosentan were well tolerated. Based on this study, a placebo-controlled randomized trial in less advanced patients has started, with results expected sometime in Realizing the potential of Zavesca in lipid storage disorders Building on the success of Zavesca (miglustat) in treating type 1 Gaucher disease, Clinical Development is moving forward on trials in related lipid storage diseases. The Phase IV trial MAINTENANCE was initiated in late This study will test the long-term efficacy and safety of Zavesca as maintenance therapy after a switch from enzyme replacement therapy (ERT) in adult type 1 Gaucher patients with stable disease. First interim results are expected in In 2005, Actelion also continued to evaluate the potential of Zavesca in lipid-storage disorders other than type 1 Gaucher disease: type 3 Gaucher disease (GD3), Niemann-Pick Type C (NP-C) and Late Onset Tay-Sachs (LOTS). Unlike ERT, which helps to degrade the excess of accumulated glycosphingolipids, Zavesca blocks the synthesis of glucosylceramide, the first intermediate in the synthesis of a large family of glycosphingolipids. In late 2005, analyses have been completed for three clinical programs, with a total of one-hundred adult and pediatric patients, evaluating the safety and efficacy of high-dose miglustat (Zavesca ) in lysosomal storage disorders with predominant neurological manifestations, namely NP-C, GD3 and LOTS. In NP-C, encouraging results have been seen at 12-months in adult and pediatric patients, with improvement or stabilization of key features of the disease such as saccadic eye movements, swallowing, cognition, and auditory function, underlying the ability of miglustat to work in the brain. After consultation with experts, Actelion has decided that these results warrant discussion with regulatory authorities. The NP-C study is continuing as planned until 24 months, as is the GD3 study, where the 12- month results were inconclusive. With respect to LOTS, the 24-month results in a group of severe, heterogeneous and advanced patients showed no change in the progression of the disease. In all three studies, the safety profile was consistent with earlier observations in patients with type 1 Gaucher disease, where only half the dose is being used. Clazosentan reduces vasospasm after subarachnoid hemorrhage Subarachnoid hemorrhage due to the rupture of an aneurysm (weakened blood vessel) occurs on average in 10 out of 100,000 people, with some 70 80,000 cases per year reported in North America and Europe. Of those people who survive, a large percentage will develop vasospasm (severe constriction of blood vessels), resulting in significant neurological damage and increased death rates. Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 21

22 Clinical Development In July 2005, a study published in the Journal of Neurosurgery concluded that the intravenous endothelin receptor antagonist clazosentan can reduce the number and severity of cases of vasospasm following aneurysmal subarachnoid hemorrhage (SAH). The Phase IIa study demonstrated that patients given clazosentan had significantly fewer and less severe cases of vasospasm compared to placebo. Furthermore, there were fewer patients with new cerebral infarcts in the clazosentan group. Infusions of clazosentan were generally well tolerated, with no clinically relevant effects on blood pressure or other vital signs. We have five innovative compounds in various stages of Clinical Development, several of which are being evaluated in multiple indications. We would like to get them all approved, of course, but if even just one or two are successful, it will have a major impact on Actelion s future growth. Isaac Kobrin Head of Clinical Development Following the study results and discussions with regulatory authorities, a comprehensive Phase IIb/III development program was launched for clazosentan. The multi-center, international, double-blind, randomized, placebo-controlled, parallel group, dose-finding study CONSCIOUS-1 will analyze the efficacy of three dose levels of clazosentan in preventing the occurrence of cerebral vasospasm following SAH, assessed by angiography. As a secondary endpoint, the study will also assess the ability of clazosentan to reduce the occurrence of early morbidity/mortality as well as overall safety and tolerability of the drug. In November 2005, CONSCIOUS-1 had recruited over 400 patients in 52 centers in 11 countries worldwide. Study results, expected in mid-2006, will determine the need and size of a Phase III study. Orexin antagonist: the promise of a more natural sleep One of the most interesting compounds under development at Actelion is an orexin receptor antagonist. This compound, starting Phase II in early 2006, has the potential to completely shift the paradigm for treating sleep disorders. Most products on the market, which focus on the GABA receptor, suffer from a major tradeoff: the greater the efficacy, the stronger the hangover effect the next day in terms of impaired mental and physical performance. Usually, sedatives decrease the length of the REM (rapid eye movement) sleep phase, which together with accompanying dream sequences is hypothesized to impact memory consolidation. In animal models, Actelion s orexin receptor antagonist has shown an increase of total sleep and REM sleep. In addition, preclinical results have revealed a reduction in the time needed to fall asleep. In animals there has been no evidence of tolerance and motor impairment. Phase I findings in healthy human subjects have shown that the compound is well tolerated, with quick absorption and disposition. A Phase II program with patients suffering from insomnia, the primary target indication, is scheduled to start early Phase II trials for undisclosed compound The compound known as Actelion-1, undisclosed for competitive reasons, was discovered in-house and has significant potential in several cardiovascular indications. Tests with healthy human subjects began in September 2004 and Phase I trials were completed in The pharmacodynamic findings showed that the compound is well tolerated, with the highest dose tolerated already identified, and is suitable for once-daily oral administration. A Phase IIa study started in

23 Reevaluating potential indications for tezosentan Tezosentan (Veletri ) is an intravenous endothelin receptor antagonist that was originally developed for acute heart failure. Although the drug is well tolerated and had very clear hemodynamic effects, these were not translated into relevant clinical endpoints. As a result, this compound is now being reevaluated for a number of other acute vascular indications. Palosuran development put on hold pending further analysis In May 2005, Actelion announced preliminary results in the proof-of-concept program on the urotensin-ii receptor antagonist palosuran, identified by the company s researchers in Drug Discovery. The efficacy data in the indication diabetic nephropathy did not support the initiation of a full-fledged clinical development program. The company is further analyzing the data generated in three individual studies involving close to 100 patients and discussing the results with key medical experts. There were no safety findings that would preclude further development. As further scientific insights become available in this field, Actelion may re-initiate clinical development for palosuran. Actelion s drugs in Clinical Development Compound Study Phase I Phase II Phase III Bosentan EARLY FUTURE-1 BENEFIT Miglustat Clazosentan Actelion-1 Orexin-RA ASSET-1/-2 COMPASS-1/-2 BUILD-3 Melanoma MAINTENANCE NP-C GD3 CONSCIOUS-1 For more extensive details on clinical trials, visit Recently published articles in key scientific journals Clozel M. & Salloukh H. Role of endothelin in fibrosis and anti-fibrotic potential of bosentan. Annals of Medicine 37, 2-12 (2005). Pastores G.M. et al. An open-label, noncomparative study of miglustat in type 1 Gaucher Disease: Efficacy and tolerability over 24 months of treatment. Clinical Therapeutics 27(8), (2005). Rosenzweig E.B. et al. Effects of long-term bosentan in children with pulmonary arterial hypertension. JACC 46 (4) (2005). Vajkoczy P, Meyer B, Weidauer S et al. Clazosentan (AXV ), a selective endothelin A receptor antagonist, in the prevention of cerebral vasospasm following severe aneurysmal subarachnoid hemorrhage: a randomized, double-blind, placebo-controlled, multicenter, Phase IIa study. Journal of Neurosurgery 103, 9-17 (2005). Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 23

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25 Drug Discovery A discovery pipeline filled by innovative science Actelion began in late 1997 with a vision to discover and develop truly innovative medicines to address unmet medical needs. Building on the success of the first marketed drug, Tracleer, a breakthrough treatment for pulmonary arterial hypertension (PAH), the company s researchers have made tremendous progress in other therapeutic areas. A closer look at the current drug discovery pipeline shows that Actelion can be compared favorably to companies many times its size both in terms of the innovative science and the commercial potential of the products. Since its inception, Actelion has concentrated on two platforms of molecular targets, G-protein-coupled receptors and aspartyl proteases. A third platform was added in 2004 in antibacterial research to find novel approaches in the battle against antibiotic resistant bacteria (see Inside story on p. 28). Aspartyl proteases: Renin inhibitors and BACE-1 antagonists Renin is a critical enzyme at the beginning of a biochemical cascade involved in a number of widespread cardiovascular and kidney diseases. Drugs developed to act on targets further down the cascade, angiotensin-coverting enzyme (ACE) inhibitors and angiotensin II receptor blockers (ARBs), have become multi-billion-dollar blockbusters. Convinced that the best medical results can be achieved by attacking this problem at the source, Actelion s researchers have succeeded in developing the first orally highly available renin inhibitors, which are protected by over 30 priority patent applications. This led to an exclusive worldwide alliance in December 2003 with Merck, based on milestone payments and future royalties to Actelion. In 2005, a second milestone in this project was achieved when a highly bioavailable renin inhibitor was selected for full preclinical development, which is currently ongoing. An entry into man is planned by mid Our long experience with aspartyl proteases is producing results. Our orally available renin inhibitors, which we are developing in collaboration with Merck, could be a breakthrough in treating cardiovascular disease. Walter Fischli Head of Drug Discovery, Molecular Biology & Biochemistry Alzheimer s disease affects about 25 million people worldwide, with an increasing incidence as the global population ages. The beta-secretase (BACE) enzyme, essential in the formation of the amyloid beta peptide, is thought to be the trigger for the formation of cerebral plaques found in Alzheimer s patients. Actelion s scientists are working intensively to develop BACE- 1 inhibitors as a possible treatment for Alzheimer s. Substantial progress has been made in solving the molecular structure of beta-secretase and developing novel in-silico screening methods. However, no compound candidate has been identified to date. G-protein-coupled receptors: S1P1 agonists The sphingosine-1 phosphate receptor 1 (S1P1), which modulates the immune system, is located on endothelial cells an area of core expertise at Actelion. The company s researchers have developed a selective S1P1 agonist, protected by seven priority patent applications, that shows promise for treatment of autoimmune diseases. In animal models, Actelion s selective S1P1 agonist has shown potential advantages over competitor compound FTY720 from Novartis, now in late stage clinical development as the first orally available therapy for multiple sclerosis. Potential advantages include a better side-effect profile and a very rapid onset of action combined with very rapid reversibility upon cessation of treatment a critical concern when dealing with the immune system. The S1P1 agonist is Actelion Annual Report 2005 Chairman s Letter CEO Interview Marketing & Sales Patient Story Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 25