A new phase of dynamic growth Annual Report 2006

A new phase of dynamic growth Annual Report 2006

Actelion at a glance Actelion Ltd, founded in December 1997, 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. Actelion s flagship product, Tracleer, an orally available dual endothelin receptor antagonist, has been approved as a therapy for pulmonary arterial hypertension (PAH), a chronic, life-threatening disorder that severely compromises the functions of the lungs and heart. Ventavis, the only inhalable PAH therapy in the United States, was acquired in 2006. Zavesca, in-licensed from Oxford GlycoSciences, is the only approved oral treatment for type 1 Gaucher disease, a rare debilitating metabolic disorder. In 2006, Actelion was evaluating 8 compounds in various phases of clinical development and pursuing 25 projects in drug discovery that target cardiovascular, cardiopulmonary, immunological, and infectious diseases, as well as metabolic and central nervous system disorders. The over 1,200 Actelion employees strive to combine the innovation, entrepreneurial spirit and flexibility of a biotech firm with the financial, risk management, regulatory and commercial discipline of a large pharmaceutical company. Actelion s strategy of maintaining maximum value from scientific innovation is complemented by ongoing alliances with Merck in orally available renin inhibitors for cardiovascular indications and with Roche in S1P1 agonism in autoimmune disorders. Actelion has set a rapid pace in achieving commercial success. The first substantial product sales were generated during 2002, followed by a full-year net income in 2004. Actelion posted sales of CHF 945.7 million in 2006. Operating income was CHF 268.2 million and net income CHF 241.1 million. 2006 2005 2004 2003 2002 Total revenues 945.7 663.6 471.9 307.5 132.4 EBIT 268.2 152.3 85.6 (1.7) (32.0) Net profit 241.1 125.5 87.2 (9.9) (52.1) EPS non-diluted 10.64 5.62 3.96 (0.46) (2.45) Cash from operations 352.8 138.4 91.7 38.3 (35.8) Net equity 578.1 321.7 158.1 54.4 50.3 Employees (FTE equivalent) 1,252 1,028 854 660 412 CHF million except per share and employee data Includes discontinued operations

Content Letter from the Chairman 04 Interview with the CEO 06 Business Highlights 11 Patient Stories 14 Clinical Development 17 Drug Discovery 27 Inside Story 30 People 33 Letter from the CFO 34 Corporate Governance 38 Consolidated Financial Statements 47 Holding Company Statements 70 Shareholder Information 76 Contacts 78 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 03

Letter from the Chairman Leveraging our unique assets to drive the next cycle of growth In 2006, we achieved another year of outstanding business results, while simultaneously laying the foundation for future growth with key infrastructure investments, organizational expansion, substantial progress in pivotal clinical trials, a groundbreaking co-development deal and the largest acquisition in our history. Actelion s net revenue increased 43% over 2005 to a total of CHF 945.7 million, driven by the strong momentum of Tracleer in pulmonary arterial hypertension (PAH). Operating income rose 76% to CHF 268.2 million, and net income increased 92% to CHF 241.1 million. Robert E. Cawthorn Chairman of the Board In just over nine years of existence as a company, we have succeeded in launching two breakthrough therapies that are improving the lives of patients around the world. Our flagship product, Tracleer, is on track to exceed one billion Swiss francs in sales by the end of 2007 two years ahead of schedule. That is a truly remarkable achievement. Zavesca, our innovative oral therapy for rare lipid storage diseases, posted sales of CHF 25.4 million in 2006 almost doubling compared to 2005. Acquisition of CoTherix, co-development agreement with Roche In November 2006, we took the important step of acquiring the US-based biopharmaceutical company CoTherix, Inc. for USD 389 million the largest acquisition in our history. The excellent product fit will strengthen our leadership position in pulmonary arterial hypertension (PAH). Ventavis (iloprost), previously marketed by CoTherix, is the only approved inhalable PAH therapy in the United States. Actelion expects Ventavis sales to make a substantial contribution to product revenues in 2007. At Actelion, we are right at the cusp of a new cycle of dynamic growth in our evolution as a global biopharmaceutical company. Another highlight of 2006 was an exclusive agreement with the global pharmaceutical company Roche to co-develop and commercialize our S1P1 agonist, a novel immunomodulator with possible application in a number of diseases and the potential for once-a-day oral dosing. This agreement resulted in an upfront payment of USD 75 million to Actelion in 2006, and foresees additional payments of up to USD 555 million for the first compound as well as payments for further compounds. Actelion and Roche will share equally the costs of laterstage development and marketing, with future product revenues shared equally as well. In addition, Actelion will receive royalties on marketed products. State-of-the-art R&D infrastructure, global reach in Marketing and Sales In addition to acquisitions and agreements, Actelion is driving growth by making the most of our unique assets. In 2006, we moved into a customized, state-of-the-art Research Center at our headquarters in Allschwil that will facilitate drug discovery. At the beginning of 2007, we completed our new Clinical Development Center, where we are managing the ongoing trials that will generate our next wave of innovative products. For a company our size, it is unique to have a successful Marketing and Sales organization with global reach. This has been an integral part of our company strategy from the beginning in order to retain maximum value from our products. Our agreement with Roche illustrates the value of that strategy by allowing us to co-market, on an equal footing, products developed from our S1P1 agonist. 04

Another key asset of Actelion is financial independence. As a profitable company with a strong cash-generating ability, we are masters of our own destiny. We can and must pursue those projects that we believe have the most scientific merit and impact on patients quality of life. That philosophy is reflected in our passion for drug discovery and provides the base from which we turn innovation into value. One of the strongest pipelines in the biopharmaceutical industry In 2007, Actelion is aiming to pursue five Phase III clinical trials simultaneously. Our current growth engine, Tracleer, is about to start Phase III trials in idiopathic pulmonary fibrosis an indication that could double our current sales. Actelion-1, a potential successor drug to Tracleer with many times its potency, is about to go into Phase III in the enlarged indication of pulmonary hypertension. Our orexin receptor antagonist, which is scheduled to enter Phase III in late 2007, has the potential to completely transform the treatment paradigm in sleep-related disorders. Our endothelin receptor antagonist clazosentan achieved the primary endpoint of reducing cerebral vasospasm in patients with aneurismal subarachnoid hemorrhage, and we are now in discussions with the FDA on the methodology of a Phase III trial. Finally, we are planning to begin Phase III trials with tezosentan in patients undergoing cardiac surgery. Looking at the enormous potential of our late-stage compounds as well as earlier-stage projects such as our alliance with Merck to develop renin inhibitors and our collaboration with Roche in S1P1 agonism, it is easy to understand why Actelion s R&D pipeline is the envy of companies many times our size. SOX compliance is a milestone in world-class financial standards In 2006, Actelion reached another important milestone in its efforts to build a world-class biopharmaceutical company: compliance with the rules and regulations of the US Sarbanes-Oxley Act of 2002, Section 404, better known as SOX. We have undertaken this effort on a voluntary basis, as only companies listed at US stock exchanges are required to be SOX-compliant. This is an important sign to the international investment community that we are committed to adhering to the most demanding financial and corporate governance controls that exist today. Actelion s Strategic Plan makes our vision transparent and actionable At Actelion, we are right at the cusp of a new cycle of dynamic growth in our evolution as a global biopharmaceutical company. The key to our continued success lies in the creativity, energy and dedication of our people. In 2006, we not only continued to implement the initiatives outlined in our Strategic Plan, but we also undertook a company-wide effort to ensure that all employees fully understand the key initiatives and priorities as well as the demands and rewards of such a growth strategy. By aligning the whole company behind our core values innovation, results-driven behavior, open communication, and trust and teamwork the talents of our people will be transformed into scientific innovation and business results. Robert E. Cawthorn Chairman of the Board Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 05

Interview with the CEO Our company culture is a compass that guides us in our daily business decisions Jean-Paul Clozel Chief Executive Officer Why do you consider 2007 a turning point for Actelion? We are at a critical stage in the growth and evolution of our company. If we look back at our past successes and become complacent, we will remain a mid-size European biopharmaceutical company. If we grasp the new opportunities ahead of us and make the most of them, we have the potential to become the next Amgen or Genentech. Actelion has the necessary assets to make that leap: financial independence powered by an innovative product soon to exceed one billion Swiss francs in sales, a professional Marketing and Sales force with global reach, a pipeline that is one of the best in the industry, and newly built state-of-the-art R&D facilities at our headquarters. The most important asset, however, is the energy, commitment and creativity of our people. Is that why you recently visited the Actelion affiliates around the world? I wanted to make sure that our employees have a strategic view of where our company stands today, where we can go tomorrow, and why the contribution of each individual is critical to getting us there. I also wanted to reinforce the role of our company culture as the glue that holds all of us together whether it s in Allschwil, San Francisco, Sydney or Tokyo. Why do you put such emphasis on face-to-face communication? I believe that for an employee, there is nothing more credible than having someone from senior management speaking to you face to face and answering your questions. That kind of personal and open communication is a trademark of Actelion. During my visit to our affiliate in Greece, a new employee remarked that after 20 years in the pharmaceutical industry, this was the first time that he had seen a CEO in person. That speaks volumes about what sets us apart from other companies. Culture is something that can t be bought or created overnight it is the unique, intangible quality that distinguishes one company from another. What were the most frequently asked questions from employees? Many employees wanted to know how we can grow so quickly and still keep our culture intact. Another frequent question addressed whether Actelion will remain an independent company. On the first question, I emphasized our determination to remain true to our culture despite rapid growth. On the second, I underlined my commitment to shareholders and employees to preserve Actelion s independence. The best protection against possible takeovers, I pointed out, is to increase the value of the company through our daily work. In 2006, our efforts were rewarded by a 147% increase in the value of Actelion s shares over the previous year. 06

What makes company culture so important at this point in time? Culture is something that can t be bought or created overnight it is the unique, intangible quality that distinguishes one company from another. Actelion s culture is built on the pillars of innovation, open communication, trust and teamwork, and achieving results. During this period of rapid growth, our culture helps new employees many from larger pharmaceutical companies assimilate and contribute more effectively. Our company culture is also a compass that guides us in our daily business decisions. Is a potential product truly innovative? Does it address a real medical need? Which research approach would I choose if someone from my family had this particular disease? These are the kind of questions we ask ourselves. My experience as a doctor also influences my decisions and those of my colleagues patients aren t just numbers to me; they are names and faces. Is the acquisition of the American biopharmaceutical company CoTherix in 2006 an example of that cultural compass? Absolutely. The CoTherix licensed product Ventavis is the only inhalable therapy on the US market for pulmonary arterial hypertension (PAH), a disease with a medical prognosis worse than many forms of cancer. This therapy complements the mode of action of our flagship product Tracleer and our pipeline compound Actelion-1 as well as strengthening our overall leadership position in PAH. It is a perfect fit. How is Actelion s culture of innovation linked with value? Innovation without value is not sustainable. If researchers discover novel compounds and the company has no other option than to license them out, scientific innovation is not generating maximum value. That is why at Actelion we decided from the beginning to develop our own Marketing and Sales force. Today, we are one of the few biopharmaceutical companies with a truly global reach in getting our products to the marketplace. Our strategic co-development and co-marketing agreement with Roche in 2006 for our S1P1 agonist reflects these commercial capabilities. Innovation is also linked with risk, with journeying into the unknown. It s tempting to take shortcuts and go down the conventional path of metoo products, but that is not who we are as a company. It s tempting to go down the conventional path of me-too products, but that is not who we are as a company. Actelion s culture of innovation is not limited to the laboratories. Finding a more efficient way to conduct meetings, a fresh approach to organizing a medical congress or a higher quality way of running a clinical trial at comparable cost to others can also be innovative and create value. I constantly encourage people from all parts of the company to open their minds and try new ways of solving problems. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 07

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Interview with the CEO How does Actelion s culture need to further evolve to reach the company s ambitious goals? We have the necessary assets and cultural values in place. What we need now is hard work and professional execution. That may sound rather basic, but with the products on the market and five upcoming Phase III clinical trials as well as a multitude of earlier trials, it is of vital importance. We are now just beginning to climb a huge mountain of work. The key to success is steady determination one step at a time spurred on by the knowledge that when we reach the top, we will have a whole new magnitude of business opportunities and scientific perspectives. How do you see your own role as CEO in this context? I see my primary role as creating the necessary conditions for success. I serve the interests of the company by making sure that employees have the right tools to do their jobs, that information and ideas are shared effectively, that decision-making happens quickly without bureaucratic delays, and that we place the necessary resources behind our strategic priorities. I also want to energize our people by sharing my own deeply held convictions and enthusiasm for who we are, what we do, and how we can realize our potential. This is an exciting, unparalleled juncture in our young history as a company what we make of it depends on each and every one of us. My experience as a doctor also influences my decisions patients aren t just numbers to me; they are names and faces. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 09

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Business Highlights Strengthening a position of market leadership Actelion remained on a fast growth track in 2006 and continued to build on its market leadership in pulmonary arterial hypertension (PAH), with sales of CHF 898.7 million for Tracleer an increase of 42% over the previous year. Actelion s acquisition of the American company CoTherix in 2006 and its licensing rights to market the only inhalable PAH therapy in the United States is projected to add substantial revenues in 2007, on top of robust Tracleer sales. The strong performance of Actelion s flagship product has been driven by an expansion of the Marketing and Sales force during the past two years. Customer segmentation has allowed key account managers to maximize this added marketing muscle, increasing the number of sales calls and the overall share of voice in the marketplace. A strategic reorganization in the Marketing and Sales force provided additional momentum. Global Medical Marketing Leaders now work in tandem with Global Brand Leaders to ensure aligned product positioning worldwide and better integration of market demands into clinical trial design. Actelion s commitment to expand Tracleer into new indications where there is an unmet medical need will continue to broaden the company s foundation. Based on the results of the BREATHE-5 study, the approved label for Tracleer has been amended in several markets to include treatment for Eisenmenger s syndrome, a severe congenital heart defect. Strong data from the EARLY clinical trial in mildly symptomatic pulmonary arterial hypertension (NYHA modified functional class II), which represents a major advance in treating patients in the first stages of this disease, will be submitted in spring 2007 for review by regulatory authorities for possible label expansion. Actelion also expects to submit clinical data from the FUTURE-1 trial, which shows the benefits of a special formulation of Tracleer for children afflicted with PAH. As pulmonary arterial hypertension is still underreported and often misdiagnosed, education continues to be a pillar of the marketing strategy. At the World Congress of Cardiology in Barcelona in September 2006, Actelion launched the first-ever global PAH awareness campaign targeted at healthcare professionals. This campaign included the launch of an educational website (www.pah-info.com) to provide the medical community with up-to-date information on the disease and its diagnosis. The established position of Tracleer as the first-line, cornerstone therapy in PAH, a significant increase in our Marketing and Sales force, ongoing geographic expansion and a multi-pronged competitive strategy will keep us on track for continued strong growth and enable us to master the challenges of new entries to the market in 2007. Christian Chavy President of Business Operations Expanded global presence and accelerated US sales with Ventavis Geographic expansion was another driving force behind Actelion s success in 2006, with Tracleer now available in more than 30 countries. Some of the fastest sales growth rates were posted by Brazil, Eastern Europe, China and South Korea. These markets will contribute an increasing proportion of total revenue for Tracleer in the coming years. The acquisition of the American company CoTherix and its licensing rights for Ventavis (iloprost) in 2006 are considerably strengthening Actelion s franchise in pulmonary arterial hypertension in the United States. Ventavis, the only inhalable PAH therapy on the US market, has a mode of action that complements the mechanism of Tracleer as a dual endothelin receptor antagonist. Actelion will continue the VISION trial, initiated by CoTherix, which evaluates the safety and efficacy of Ventavis in combination with orally available therapies. In addition, Actelion is exploring ways to improve the inhalation device and formulations of Ventavis. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 11

Business Highlights In 2006, Actelion signed two landmark business deals. The codevelopment and comarketing agreement with Roche on our S1P1 agonist underscores the maturity of our scientific capabilities and our Marketing and Sales infrastructure. The acquisition of CoTherix and the licensing rights to Ventavis in the US will strengthen our leadership in PAH and boost our annual sales. Simon Buckingham President of Corporate and Business Development Zavesca continues steady sales growth as key clinical trial progresses Actelion s second product on the market, Zavesca (miglustat), achieved sales of CHF 25.4 million in 2006, almost doubling from the previous year. Zavesca, currently indicated for mild to moderate type 1 Gaucher patients unwilling or unable to undergo enzyme replacement therapy with Genzyme s Cerezyme (imiglucerase), combines a novel mode of action with a convenient oral form. The key to capturing a greater share of the current USD 900-million market is the MAINTENANCE study, which evaluates whether patients with type 1 Gaucher disease treated with imiglucerase remain stable after switching to Zavesca. Recently generated clinical data with Zavesca in another rare liposomal storage disease, Niemann Pick Type C, has led to a regulatory filing in the European Union to expand the label in this indication. Prepared to master new competitive challenges in the PAH market The position of Tracleer as the only approved endothelin receptor antagonist for PAH is ending as new competitors from the same class enter the market in 2007. Building on the established position of Tracleer as the first-line, cornerstone therapy for PAH backed by years of efficacy and safety patient data, Actelion is prepared to meet this challenge. Based on this strong data, the company s multi-pronged strategy includes a broad outreach program to find and treat undiagnosed patients through continued educational efforts, and intensive collaboration with prescribing physicians and key opinion leaders in the scientific community to expand existing therapeutic options. Pfizer s PAH therapy, Revatio, which contains the same active ingredient (sildenafil) as Viagra, was launched in the US in 2005 and in major EU countries in 2006. Marketing activities by the world s largest pharmaceutical company have increased awareness about pulmonary arterial hypertension and expanded the overall market. Revatio, which has a different mode of action than Tracleer, is often prescribed as a complementary therapy to Tracleer. To provide the necessary controlled clinical data for such an approach, Actelion has initiated several studies evaluating the safety and efficacy of combining these two agents. Making the most of external business opportunities in 2006 Actelion s Strategic Plan states that while the main engine of growth remains the discovery and development capabilities of Actelion s own scientists, seizing external opportunities offered by acquisitions, alliances and licensing are an integral part of attaining a long-term above-industry growth trajectory. The acquisition of CoTherix for USD 389 million in 2006 illustrates how these principles are translated into action. By acquiring the marketing rights in the US for Ventavis, Actelion not only strengthened its franchise in PAH but also gained a product that will significantly boost annual sales revenue. The co-development and co-marketing deal with Roche in 2006 on the S1P1 agonist demonstrates how strong alliance partners can accelerate value creation for shareholders. Value creation demands a complete understanding of the goals and challenges ahead. Accordingly, Actelion s management undertook a major communication effort in 2006 to align the organization behind its ambitious goal to become one of the world s leading biopharmaceutical companies. 12

Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 13

Patient Stories A passionate runner s comeback after Tracleer (bosentan) treatment Irene M. Lang, MD, Center of Vascular Medicine, General Hospital Vienna, Austria, and Eva O. Eva O., a 43-year-old medical technician, had always enjoyed running along the wooded trails in the countryside near Sankt Poelten, Austria. In the summer of 2003, she began to notice shortness of breath and an uncomfortable pressure in her chest during physical exercise, accompanied by sensations of nausea and dizziness. She went to her doctor for a check-up, and after a series of medical exams, was diagnosed with idiopathic pulmonary arterial hypertension (IPAH). Her cardiologist prescribed Tracleer according to the recommended treatment scheme. While Eva responded well to therapy, she belonged to a subgroup of patients who suffer from the side effect of elevated enzymes in the liver a condition that can result in lasting damage to this vital organ. Two months after it began, treatment had to be discontinued until liver function tests returned to an acceptable level. Eva s hopes for a therapy that would allow her to return to a normal life were crushed, and quickly the feelings of nausea and chest pressure returned, limiting her capacity for physical exercise. Three-and-a-half months later, Eva s cardiologist reinitiated Tracleer, first at 62.5 mg twice daily, then gradually increasing the dosage to 125 mg twice daily. This time, Eva did not develop elevated liver enzymes. Not only did she tolerate Tracleer well, but her clinical symptoms were clearly reduced over the following six months. Eva was overjoyed to be able to return to her favorite jogging trails. It was an incredible feeling to be able to run again, she said. I felt like I have been given a part of my life back. A life in balance with Zavesca (miglustat) Cynthia Tifft, MD, Children s National Medical Center, Washington DC, USA, and Marie B. Marie B. was always small for her age, and she often complained of terrible stomach pain, but what alarmed her parents most were the frequent bruises and bloody noses. After fruitless visits to the family doctor, Marie was referred to the City of Hope Medical Center in Los Angeles, California, where she was diagnosed with Gaucher disease. Doctors told Marie s parents that their five-year-old daughter had only 5-10 years to live and that her physical activities had to be limited to prevent rupturing an enlarged spleen. In the following years, little could be done to treat her aside from surgically removing her spleen. Marie continued to experience excruciating stomach pains, often putting her in the hospital, but she defied the doctors prognosis. As an adult, Marie participated in an NIH-conducted clinical trial with the enzyme replacement therapy imiglucerase for Gaucher disease. She received intravenous infusions for several hours every two weeks. Despite frequent travel in her job, Marie was able to continue these treatments for the next 12 years. Over time, Marie began to suffer from the effects of the intravenous infusions. Scar tissue developed over the infusion sites and the pain increased. It became increasingly difficult, even for her talented nurse, to access a vein. Marie happened to see an article about Zavesca (miglustat) capsules for the management of type I Gaucher disease. She consulted her healthcare providers, Cynthia Tifft MD and Sandra Yang at Children s National Medical Center in Washington DC. Due to issues with venous access, the team decided that Zavesca would be the best option for the management of her disease. Marie has been on Zavesca since 2005. Her disease is stable and her treatment is well tolerated. Thanks to Zavesca, Marie reports, my veins are healthier, my disease is controlled. 14

Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 15

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Clinical Development Accelerating the next wave of innovation Actelion s Clinical Development department advanced an impressive number of clinical trials in 2006, comprising 8 compounds in a total of 19 Phase I to Phase III studies. Clinical Development has two major priorities: enlarging the company s foundation of approved indications for Tracleer and Zavesca in areas of unmet medical need while simultaneously conducting trials with novel compounds promoted from Drug Discovery. Advancing the field of treatment in pulmonary arterial hypertension A major pillar of Actelion s Clinical Development strategy is to maximize the life cycle value of Tracleer (bosentan) by investigating new medical indications and label extensions. Tracleer is the only orally available dual receptor antagonist of endothelin, a potent vasoconstrictor that plays a major role in a number of diseases for which there is no adequate treatment. Actelion has pioneered the use of Tracleer in pulmonary arterial hypertension (PAH), a life-threatening disease that severely compromises the functions of the heart and lungs. TRAX PMS, a post-marketing surveillance study of 5,000 patients in Europe, confirmed the long-term safety of Tracleer and consolidated its position as the first-line, cornerstone therapy for PAH. Clinical Development efforts are strengthening Actelion s leadership position in the enlarged indication of pulmonary hypertension while shifting the treatment paradigm to an earlier stage of the disease and anticipating an increasing trend toward combination therapies. In December 2006, Actelion announced initial results from the double-blind, placebo-controlled, multicenter study EARLY for mildly symptomatic PAH patients (class II). Six months of treatment with Tracleer showed a very significant reduction in pulmonary vascular resistance, a strong trend toward improved exercise capacity and a significant delay in the time to clinical worsening. Actelion has submitted this new data to regulatory authorities for a possible label extension of Tracleer (currently approved for PAH class III and IV). This would represent a major improvement in patient care, as earlier treatment slows the progression of this debilitating disease. The Phase III study FUTURE-1 evaluated the safety and pharmacokinetics of a special pediatric formulation of Tracleer in children with PAH. In 2007, Actelion expects to approach regulatory authorities regarding its children s formulation, documented by the positive safety data from this open label trial. In parallel there is an ongoing open-label trial, FUTURE-2, with results expected in mid-2007. Establishing efficacy in PAH associated with other disease areas In 2006, the Tracleer label was updated in numerous markets to reflect the results of the multi-center, randomized, double-blind, placebo-controlled study BREATHE-5. This study evaluated the use of Tracleer in pulmonary arterial hypertension related to Eisenmenger s syndrome, a severe congenital heart defect. 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. Actelion s Lifecycle Management Projects Tracleer (bosentan) Indication Study Status Class II PAH EARLY Completed Pediatric PAH FUTURE-1 Completed FUTURE-2 Ongoing Combination COMPASS- Ongoing with silde- 1/-2/-3 nafil in PAH CTEPH BENEFIT Completed SCD-PH ASSET-1/-2 Ongoing Ventavis (iloprost) Indication Study Status Combination VISION Ongoing with Tracleer and sildenafil in PAH Zavesca (miglustat) Indication Study Status GD1 MAINTENANCE Ongoing NP-C 007 Completed Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 17

Clinical Development Actelion s Clinical Development team is also seeking to expand the benefits of Tracleer to other patient populations. Two Phase III trials are currently being conducted with Tracleer in PAH related to sickle cell disease, ASSET-1 and ASSET-2, with results expected early in 2008. Initial results from TRUST, a prospective, open-label trial in PAH patients with connective tissue disease, showed a 92% survival rate at 48 weeks for patients on Tracleer and a marked improvement in their quality of life. Clinical Development is collaborating with physicians on screening programs such as ItinérAIR in France and UNCOVER in the US to improve the chances of identifying and diagnosing PAH associated with these diseases. Clinical trials on the safety and efficacy of combination therapies in PAH Actelion is taking the lead in evaluating the combination of Tracleer with other PAH agents, with current trends showing that as many as 50% of PAH patients are already treated with more than one therapy. The COMPASS-1 open-label study in patients with PAH has demonstrated that single-dose sildenafil on top of Tracleer therapy results in significant improvements in pulmonary vascular resistance. The COMPASS-2 is a longer-term study with up to 600 patients to evaluate the combined safety and efficacy of Tracleer and sildenafil compared to sildenafil and placebo. McLaughlin V. et al. Randomized study of adding inhaled iloprost to existing bosentan in pulmonary arterial hypertension. Am J Respir Crit Care Med 174(11), 1257 63 (2006). After the acquisition of CoTherix, Actelion is also continuing the VISION program to evaluate the safety and efficacy of Ventavis (inhaled iloprost) in addition to either sildenafil or the combination of sildenafil and Tracleer. Efforts are also underway to improve the inhalation device as well as to evaluate different re-formulation efforts. Ventavis is a synthetic compound that is structurally similar to prostacyclins naturally occurring molecules that cause blood vessels to dilate. Ventavis is indicated for the treatment of pulmonary arterial hypertension (WHO Group I) in patients with NYHA Class III or IV symptoms. In controlled trials, Ventavis improved a composite endpoint consisting of exercise tolerance, symptoms and impact on clinical worsening. New indications for Tracleer beyond pulmonary arterial hypertension In March 2007, Actelion announced the initial results from the first-ever placebo-controlled study BENEFiT evaluating Tracleer in inoperable chronic thrombo-embolic pulmonary hypertension (CTEPH), caused by blockage of the main arteries leading from the heart to the lungs. The study met its primary objective of a significant reduction in pulmonary vascular resistance. There was also a significant reduction in breathlessness during exercise and a trend in favor of preventing clinical worsening, with a positive safety and tolerability profile. Actelion will discuss these findings with regulatory authorities worldwide. 18

Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 19

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Clinical Development The pivotal Phase III study BUILD-3 is evaluating the safety and efficacy of Tracleer in 390 patients suffering from idiopathic pulmonary fibrosis (IPF), a scarring or thickening of the alveoli (air sacs) in the lungs that result in a median survival rate of only three years. Enrollment is ongoing in this event-driven study carried out under a special protocol agreement from the US Food and Drug administration, and study results are expected in late 2009. In May 2006, Actelion presented evidence at the American Thoracic Society meeting in San Diego on BUILD-1, which provided a strong rationale for further clinical evaluation of Tracleer in IPF based on a positive trend for pre-defined morbidity/mortality endpoints especially in patients who had a lung biopsy as proof of IPF. RAPIDS-2 is a Phase III placebo-controlled, randomized study that evaluated Tracleer in patients with digital ulcerations associated with systemic sclerosis. The study confirmed the results of RAPIDS-1, showing a significant reduction in the number of new digital ulcers and a concomitant improvement in several hand functions, with the best results in those patients with the most severe form of digital ulcers. Discussions are underway with regulatory agencies in the EU and the US to expand the Tracleer label in this indication. 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 Actelion open-label trial at five centers in Australia, which has the world s highest incidence of this disease, showed that high doses of Tracleer were well tolerated and revealed preliminary positive signs. Initial results of a placebo-controlled randomized Phase II trial are expected early in 2008. Denton CP et al. Bosentan treatment for pulmonary arterial hypertension related to connective tissue disease: a subgroup analysis of the pivotal clinical trials and their open-label extensions. Ann Rheum Dis 65(10), 1336-40 (2006). Galiè N. et al. Bosentan therapy in patients with Eisenmenger syndrome. Circulation 114, 48-54 (2006). Hughes R.J. et al. The efficacy of bosentan in inoperable chronic thromboembolic pulmonary hypertension: a 1-year follow-up study. Eur Respir J 28, 1 6 (2006) Keogh A.K. et al. Quality of Life in pulmonary arterial hypertension: improvement and maintenance with bosentan. J Heart Lung Transplant 26,181 7 (2007). Provencher S. et al. Long-term outcome with first-line bosentan therapy in idiopathic pulmonary arterial hypertension. European Heart Journal 27, 589 95 (2006). Williams M.H. et al. Systemic sclerosis associated pulmonary hypertension: improved survival in the current era. Heart 92(7), 926-32 (2006). Actelion-1, potent successor to Tracleer, ready to begin Phase III trials In December 2006, Actelion disclosed clinical results of the first tissue-targeting dual endothelin receptor antagonist. A successful Phase II trial underlined the significance of this targeted approach. Actelion-1 showed robust results in hypertensive patients without side effects such as peripheral edema (e.g. fluid retention and swelling of the legs). Enrollment is now underway for Phase III trials for this highly potent successor compound for Tracleer, which is initially being developed in pulmonary hypertension, with other cardiopulmonary indications expected to follow. Zavesca : oral therapy for glycolipid storage disorders and beyond Zavesca (miglustat) is the only approved oral drug with wide tissue distribution and proven long-term efficacy in type 1 Gaucher disease, a genetic disorder that causes lipids to accumulate in the cells, resulting in enlarged liver and spleen, as well as bone manifestations (tissue and marrow). It has now become clear that clinical symptoms, such as bone pain or osteoporosis, and long-term Gaucher outcomes underscore unmet medical needs requiring an appropriate management strategy with the ultimate objective of improving patients daily quality of life. Clinical Development is moving ahead to improve and expand the existing label in type 1 Gaucher disease to offer new therapeutic options to patients and to contribute to a better understanding of the natural history of the disease. In addition, efforts are underway to obtain approval for a new indication in one neurological glycolipid storage disease. Giraldo P. et al. Short-term effect of miglustat in every day clinical use in treatment-naïve or previously treated patients with type 1 Gaucher s disease. Haematologica 91, 125 28 (2006). Pastores G.M. et al. Clinical benefits of miglustat on bone disease in adult patients with type I Gaucher disease: a meta-analysis. Poster presented at the annual conference of the American Society of Human Genetics, New Orleans, USA, abstract 2328 (2006). Treiber A. et al. The Pharmacokinetics and tissue distribution of the glucosylceramide synthase inhibitor miglustat in the rat. Xenobiotica 37 (2007). Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 21

Clinical Development The MAINTENANCE study, the largest open label, non-comparative, international study in type 1 Gaucher disease (GD1) patients, is currently testing Zavesca as a maintenance therapy by switching patients who have been stable on enzyme replacement therapy (ERT, Cerezyme ) to miglustat for at least two years. A valuable clinical insight has already been obtained from a preliminary study showing that in patients stabilized on ERT, switching to miglustat is compatible with successful maintenance of disease stability in a high proportion of cases. Our clinical trials are designed to advance the field of treatment in pulmonary arterial hypertension as well as to expand Tracleer into new indications beyond PAH. Isaac Kobrin Head of Clinical Development Recently, a meta-analysis of three Zavesca clinical trials with more than 70 GD1 patients revealed that 78% of these patients switched or treatment-naïve who received miglustat in monotherapy remained pain-free for two years. By comparison, approximately four out of five GD1 patients were already experiencing bone pain before they began therapy with Zavesca. None of the patients treated with miglustat reported clinical bone events such as bone crisis, pathologic fracture or avascular necrosis. In parallel, bone mineral density increased as early as six months, and bone marrow infiltration reduced; both are hallmarks of bone manifestations in Gaucher disease. With the Gaucher Natural History Study, Actelion s objective is to determine the prevalence and incidence (over two years) of peripheral neuropathy as an unrecognized clinical manifestation of the disease, and of other co-morbidities in adult GD1 patients. In an interim analysis conducted with the first 74 patients, 11% of them (treatment-naïve or on ERT) had a polyneuropathy as defined by combined abnormal electrophysiology, and signs and symptoms. For a non-gaucher population, the prevalence ranges between only 0.12% and 3.6%. No co-morbidities were identified. Niemann-Pick type C (NP-C) is an autosomal recessive genetic disease affecting children, juveniles and adults, characterized by progressive, severe and heterogeneous neurological manifestations, and reduced life expectancy. Glycolipid accumulation and impaired cholesterol trafficking in tissues is the underlying cause of the disease. There is currently no treatment approved for this disease. In a controlled Phase II trial, NP-C patients, including children, have received miglustat for two years. The analysis of the first year of treatment showed trends of improvement or stabilization in treated patients namely, eye movement velocity, swallowing capacity, ambulation and cognition. The results showed that 58% of Zavesca treated patients with moderate-to-severe disease at baseline remained at least stable, compared to 0% without treatment. The safety profile was comparable to that observed in GD1 patients with miglustat. The 24-month data is under evaluation. On the basis of the one-year results, Actelion has initiated a regulatory filing in the European Union, and orphan drug designation has already been granted. Clinical trials in both type 3 Gaucher disease and late onset Tay-Sachs did not generate significant results, and, therefore, no further studies are planned in these indications. Clazosentan to enter Phase III in aneurysmal subarachnoid hemorrhage Subarachnoid hemorrhage (cerebral bleeding) due to the rupture of an aneurysm occurs on average in 10 out of 100,000 people. Around 84,000 patients are diagnosed in North America, Europe and Japan each year. A large percentage of these develop vasospasm (severe constriction of blood vessels), resulting in significant neurological damage and lifelong disabilities. 22

In October 2006, an analysis of Actelion s dose-finding study CONSCIOUS-1 was presented at the Congress of Neurological Surgeons in Chicago. All three doses of intravenous clazosentan tested (1mg/h, 5mg/h and 15mg/h) reached statistical significance versus placebo for the primary endpoint: the reduction in the occurrence of moderate or severe cerebral vasospasm. The effect was dose-related and most significantly seen with the dose of 15 mg/hour, a relative risk reduction compared to placebo of 65% (p <0.0001). Detailed poshoc analysis also showed a trend in favor of reducing morbidity/mortality related to vasospasm. The safety profile is compatible with use in an intensive care unit environment. The parameters for the Phase III trial CONSCIOUS-2 are currently being discussed with regulatory authorities. Actelion expects this pivotal study to start by the end of 2007, enrolling up to 1,800 patients, with results expected in late 2009. Tezosentan moves into Phase III trials in acute cardiovascular care In 2007, Actelion will start recruitment in the first Phase III study evaluating the safety and efficacy of the intravenous endothelin receptor antagonist tezosentan. The targeted indication is the reduction of clinically relevant right ventricular failure associated with difficult separation from bypass in patients undergoing cardiac surgery with cardiopulmonary bypass. The first study will enroll up to 270 patients, with results expected in 2008. If the findings are positive, Actelion will perform a second pivotal study to compile a full registration dossier. Joint clinical development projects with Merck and Roche move forward In 2006, the renin alliance with Merck achieved its third clinical milestone, triggering a payment to Actelion of USD 7 million, as the project moved forward into Phase I trials. Actelion and Merck formed an exclusive worldwide alliance in December 2003 to discover, develop and market new classes of renin inhibitors for patients suffering from cardio-renal diseases. The two companies are jointly funding Phase II development, with Merck responsible for funding all Phase III and outcome studies. Renin plays a key role in the regulation of blood volume, sodium status, arterial pressure, and cardiac or vascular function. Therapeutic manipulation of the renin-angiotensin pathway is believed to hold considerable potential in treating hypertension and heart or renal failure. In July 2006, Actelion announced an exclusive worldwide collaboration with Roche to jointly develop and commercialize Actelion s selective S1P1 receptor agonist, an immunomodulator with the potential for once-a-day oral dosing. The compound is currently in Phase I development. The two companies plan to jointly develop and commercialize S1P1 agonists for multiple autoimmune disorders. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 23

Clinical Development Sphingosine-1-phosphate (S1P) is a phospholipid released by platelets, mast and other cells that leads to a variety of biological responses. At least five S1P receptors are known, affecting lymphocyte migration, endothelial cell function, blood vessel constriction, heart rate modulation and other physiological processes. Actelion s agonist selectively activates the S1P1 receptor sub-type, an approach that is expected to be a key differentiator to other novel immunomodulators under development, such as fingolimod from Novartis (see also Inside Story on p. 30). Orexin RA Brisbare-Roch C. et al. Promotion of sleep by targeting the orexin system in rats, dogs and humans. Nature Medicine 13, 150 55 (2007). Orexin antagonist: promising results in primary insomnia Actelion s orexin receptor antagonist has enormous potential as the first in a new class of sleep-enhancing agents. In the United States alone, a 2005 National Institutes of Health (NIH) state-of-science conference about chronic insomnia estimated that there were up to 80 million Americans suffering from sleeplessness, of which 25 million suffered from chronic insomnia. In February 2007, Actelion announced the results of a proof-of-concept study with its orexin receptor antagonist in patients with primary insomnia. The study met its primary endpoint, an improvement in sleep efficiency measured by polysomnography. This finding obtained in the per-protocol analysis from 39 patients receiving the starting dose in this multi-center, multiple-stage, double-blind, randomized, placebo-controlled clinical trial was highly statistically significant (p <0.0001). The clinical results in patients suffering from primary insomnia add to the understanding of the role of the orexin system, as described in the February 2007 edition of Nature Medicine. This publication presents data generated by Actelion in both animal models and healthy volunteers. The data, comprising the proof of concept study together with results of other ongoing pre-clinical and clinical activities, will define the final design of the upcoming Phase III program, expected to start before yearend 2007 and to last two to three years. For more extensive details on clinical trial results, visit www.actelion.com 24

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Drug Discovery A productive dynamo of scientific excellence Actelion s Drug Discovery team is one of the most productive on a per capita basis in the biopharmaceutical industry. The discoveries of the 240 in-house scientists, who filed 40 patent applications in 2006 alone, include a number of potential breakthroughs now in the pipeline: an S1P1 agonist for autoimmune disease, orally available renin inhibitors for cardiovascular indications, Actelion-1, a highly potent successor to bosentan for pulmonary hypertension and other cardiovascular indications, and an orexin receptor antagonist as a first-in-class sleep-enhancing agent. As these compounds are promoted to Clinical Development candidates, Drug Discovery focuses on a new set of targets that address further unmet medical needs. The 25 ongoing research projects cover indications in the cardiovascular field, oncology, central nervous system disorders, bacterial infections, immunology and allergies. Since the company s inception, Actelion s researchers have concentrated on two platforms of molecular targets, G-protein-coupled receptors and aspartyl proteases. Today, additional platforms are being added, for example, to find novel approaches in the battle against antibiotic-resistant bacteria. While these parameters provide the framework for scientific research, Actelion s researchers remain flexible enough to follow innovation wherever it leads. State-of-the-art Research Center built with future growth in mind In February 2006, Actelion completed its state-of-the-art Research Center at headquarters in Allschwil. This custom-built facility, designed to facilitate communication and crossfertilization of ideas, underlines Actelion s philosophy of concentrating research at one site. Built with continued expansion in mind, the Research Center is accommodating a steady increase in the number of employees in Pharmacology and Preclinical Development, Molecular Biology, Biochemistry and Chemistry. In 2006, Actelion researchers continued to make new scientific advances. Structural biologists used advanced photon-beam technology to solve more than 30 structures of different enzymes. Most of these were within the scope of the joint renin inhibitor project with Merck, helping to fine tune the most promising compounds for clinical trials. A process research chemistry group, newly formed in 2006, will help to eliminate potential bottlenecks in scaling up from small amounts of compounds in the laboratory to much larger amounts needed for toxicology studies and later on for clinical trials. In coping with the increasing amount of scientific data generated by experiments, in-house information technology experts and proprietary software played a vital role. With the property predication software, for example, Actelion s scientists can create chemical structures for new compounds on screen and obtain information such as molecular weight, toxicity, water solubility and drug-like properties. A novel anti-bacterial agent and an anti-allergic agent to enter clinical trials In researching a new generation of anti-bacterial agents, Actelion benefits from its evidence-based experience on the usefulness of dual blockade approaches. Addressing the increasingly alarming problem of bacterial resistance to current antibiotics, Actelion s sci- Compared to 2005, we have more than doubled the number of research projects. Our task is now to prioritize and promote the most promising ones for future development. Thomas Weller Head of Drug Discovery, Chemistry Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 27

Drug Discovery The steadily increasing number of compounds discovered in house that enter into pre-clinical trials every year demonstrates not only the productivity of Actelion s scientists but also the quality of the work. entists have developed novel modes of action that kill bacteria with double-warheads increasing efficacy and lowering the chance of cross-resistance. Actelion expects an antibacterial agent from Drug Discovery to begin Phase I trials in 2007: Actelion-9 (injectable), which has shown promising pre-clinical results against a broad spectrum of bacteria, is intended primarily for hospital use as a rescue therapy. Expertise on G-protein-coupled receptors has also helped Actelion s researchers to discover an anti-allergic agent designed to address the huge unmet medical need in treating allergic rhinitis and allergic asthma. This orally available compound, about to enter Phase I clinical trials, targets the amplification process in allergic reactions and probably also the onset of the inflammation cascade. If successful, it could be used as a replacement for or in conjunction with conventional therapies. Walter Fischli Head of Drug Discovery, Molecular Biology & Biochemistry As our research projects enter accelerated programs of clinical development, we continue to offer pre-clinical support, including further pharmacological characterization and selection of potential follow-up compounds. Martine Clozel Head of Drug Discovery, Pharmacology & Preclinical Development 28

Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 29

Inside Story S1P1 agonism: discovering an innovative way to modify the immune system The S1P1 project underscores Actelion s flexibility in recalibrating scientific goals to follow the best prospects for innovation and therapeutic value. Beat Steiner Deputy Head of Pharmacology and Pre-Clinical Development When Actelion was established in late 1997, the foundations of the company were built on science related to the endothelium, the inner lining of the blood vessels. Among other molecular targets, the S1P1 receptor (sphingosine-1-phosphate receptor-1, initially called Edg-1), a G-protein-coupled receptor expressed on the endothelium, seemed a logical target for Actelion s drug discovery team. This group is composed of Thomas Weller (Head of Drug Discovery, Chemistry), Walter Fischli (Head of Drug Discovery, Biology & Biochemistry), Martine Clozel (Head of Drug Discovery, Pharmacology and Preclinical Development), and their cross-functional scientific teams. Cloning, expression and highthroughput screening started in 1999 and identified several hits. Chemists then began synthesizing more potent compounds while the biologists and pharmacologists probed more deeply into the profiling of these first molecules. A turning point for Actelion s S1P1 project came in 2002, when a scientific paper was published on a new compound known as FTY720 that demonstrated a novel way of modulating the immune system by targeting the S1P receptor family. When we learnt about the effects of FTY720 on lymphocyte trafficking, said Martine Clozel, we hypothesized our S1P1 selective agonists might also be effective in this area. Furthermore, we believed the greater selectivity of our compound would hold a number of benefits. As scientists, we don t work in isolation in our labs, but integrate knowledge that is constantly evolving in the scientific community, explained Beat Steiner, Deputy Head of Pharmacology and Pre-Clinical Development. The S1P1 project underscores Actelion s flexibility in recalibrating scientific goals to follow the best prospects for innovation and therapeutic value. The selective mode of action of S1P1 agonists represents a significant advantage over a standard immunosuppressant such as cyclosporine, which eliminates or severely reduces functions that are important for the immune system. By contrast, an S1P1 agonist temporarily traps or sequesters most of the circulating lymphocytes in the lymph nodes, which offers potentially better resistance against opportunistic infections, and a quicker return to normal immune response upon stopping treatment. This controlled immunomodulation would give S1P1 agonists an edge in treating long-term autoimmune diseases such as multiple sclerosis and rheumatoid arthritis. S1P1 agonist has fewer side effects, faster steady state and rapid reversibility As the project progressed, the selectivity of Actelion s S1P1 agonists did prove to be a key differentiator. In animal models, the selective S1P1 agonist not only showed comparable efficacy to FTY720, but also demonstrated a more rapid onset of action and faster steadystate plateau in the bloodstream, as well as rapid reversibility after administering the last dose which allows a faster mobilization of the body s defenses against bacterial and viral pathogens if needed. Selectivity also could mean fewer side effects. 30

We initiated Phase I trials with our S1P1 agonist in human healthy subjects in 2006, explained Beat Steiner, and we are now starting preparation of Phase II clinical studies. Due to the unique mode of action, we can measure the number of circulating lymphocytes in the bloodstream. This functions as a biomarker, giving us a good indication of effectiveness of different oral doses of the S1P1 agonist at this early stage of development. The enormous potential of S1P1 agonists in autoimmune diseases was behind the groundbreaking co-development and co-marketing deal with the global pharmaceutical company F. Hoffmann-La Roche in July 2006. Actelion is responsible for developing the lead compound through Phase II in the first two clinical indications. All subsequent development and commercialization costs will be shared equally between Roche and Actelion. In addition to the lead compound, Actelion is working in parallel on a number of potential follow-up S1P1 agonists. As a scientist, you have to keep your emotions and hopes about a possible therapy in check and focus on the hard data at each step of a project, said Martine Clozel. As a medical doctor, you can t help but think about the human dimension of what you are working on. With our S1P1 project, we could make a positive impact on the lives of thousands of patients with longterm, debilitating diseases. That gives a strong sense of purpose to our work. With our S1P1 project, we could make a positive impact on the lives of thousands of patients. That gives a strong sense of purpose to our work. Martine Clozel Head of Drug Discovery, Pharmacology and Preclinical Development Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 31

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People Passion and expertise are key to our success A lot can be learned about a company by the way it is perceived during job interviews. Many candidates say they are attracted to Actelion because it is a small company that is science-driven, a place where each individual can have an impact. People comment on the strong sense of purpose at Actelion that comes from discovering and developing new medicines for high unmet medical needs. In 2006, an internal survey revealed how strongly Actelion s employees identify with the company. Compared to industry benchmarks, a significantly higher proportion of Actelion s employees would recommend their company as a place to work. The same survey also showed that employees believe in and strive to realize Actelion s core values: innovation, results-driven behavior, open communication, and trust and teamwork. Diverse, international and attractive working environment Located in a dynamic region where the borders of Switzerland, France and Germany meet, Actelion has been a diverse, multinational company from the beginning. Employees thrive in an international environment, with over 20 nationalities represented at headquarters in Allschwil. The company prides itself on gender diversity. Today, nearly 50% of researchers are women, and more female talent is recruited every year. At Actelion, we will continue to place a high priority on attracting, developing and retaining the best talent in our industry because we know that people with passion and expertise are the key to our present and future success. Christian Albrich Head of Global Human Resources Actelion is sensitive to employees needs and provides attractive benefits. Where job requirements allow, there are flexible working hours and selective opportunities to work from home. Benefits also include maternity leave above the legal requirements and parttime opportunities on a case-by-case basis for working mothers. In terms of compensation, Actelion offers packages that are competitive with industry standards, including monetary incentive schemes such as performance-based bonuses or stock options that allow employees to share in the success of the company. Personal and professional development of employees is incorporated into Actelion s Strategic Plan. Recently completed state-of-the-art Drug Discovery and Clinical Development facilities at headquarters underline the importance given to a well-resourced, attractive workplace. Actelion s business momentum is mirrored in the growing number of employees. In 2006, the ninth year since the founding of the company, headcount expanded to over 1,200, with affiliates in 22 countries. In 2007, continued growth is forecast, with 400 new positions to be added globally. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 33

Letter from the CFO Strengthening the base Dear Shareholders, The year 2006 has been very successful. Our financial performance can only be described as outstanding. At the same time, we have made the necessary investments into marketed products, development pipeline, research projects, infrastructure and Human Resources to strengthen the base necessary to facilitate long-term, above-industry average growth. Andrew J. Oakley Chief Financial Officer The 2006 operating income of CHF 268.2 million and a net income of CHF 241.1 million compares to an operating income for 2005 of CHF 152.3 million and a net income of CHF 125.5 million. In 2006, Actelion achieved a (non-us GAAP) cash EBIT of CHF 320.4 million, which compares to CHF 178.6 million in 2005. Tracleer continues its growth trajectory Net revenues for 2006 totaled CHF 945.7 million, compared to total net revenues in 2005 of CHF 663.6 million, an increase of CHF 282.1 million or 43%. Tracleer continues to provide the foundation for growth as we build on our position as market leader and continue to strengthen Tracleer as the cornerstone therapy in pulmonary arterial hypertension (PAH). With no material net price impact in 2006, growth came from a fundamental improvement in the paying patient base. At the end of 2006, Tracleer was commercially available in more than 30 countries and territories, including all major pharmaceutical markets worldwide. Zavesca sales in 2006 in a market which continues to be dominated by a competitor product providing a different mode of action, i.e. enzyme replacement therapy continued steadily, with sales increasing to CHF 25.4 million from CHF 14.4 million in 2005. Zavesca is commercially available in the US and in several markets in the European Union. Contract revenues were CHF 21.5 million, compared to CHF 16.0 million in 2005. Previously, most of this revenue stemmed from the global collaboration in the field of renin inhibition with Merck & Co, Inc.. During 2006, Actelion received a further milestone payment of USD 7 million from this partner, bringing the total 2006 contract revenue recognition from this effort to CHF 9.1 million. In July 2006, Actelion entered into a global collaboration with Roche in the field of S1P1 agonism. The first milestone under this agreement was received upon signing and resulted in the cash receipt of USD 75 million and contract revenue recognition in 2006 of CHF 5.6 million. Overall, we continued to see revenue growth in all markets in which we market our products. In 2006, 46% of our revenues were generated in the United States of America, unchanged from the previous year. As in previous years, we again benefited from a net positive price movement in the US relative to a net negative price movement in Europe. In 2006, we also benefited from an improvement in the US reimbursement environment. Despite pronounced currency movements throughout 2006, especially as far as the US dollar was concerned, the overall company performance in Swiss francs (+43%) was similar to that in local currencies (+41%). 34

Letter from the CFO Operating expenses fully funding future growth We announced early in 2006 that we have set ourselves five key priorities to deliver continuous long-term growth. These growth initiatives strengthening marketed products, expanding and prioritizing our research and development, pursuing external growth, expanding our geographical base and nurturing our corporate culture determine the priorities with which we invest. This translated into an increase in operating expenses from CHF 511.3 in 2005 to CHF 677.5 million in 2006, an increase of 33%. We have thereby set the base from which we can continue to grow profitability in absolute terms while investing in our pipeline to deliver innovative products that meet high unmet medical needs. Overall, this increase in expenses of 33% compares to a growth in revenues of 43%. In local currency terms, operating expenses grew by 32% compared to total revenue growth of 41%. Cost of sales in 2006 was CHF 90.6 million or approximately 10% of sales revenues. The absolute increase in cost of sales is attributable to the growth in sales revenues from both Tracleer and Zavesca. Additionally, the second generation manufacturing process for Tracleer came on line in 2006, which positively but marginally impacted our gross margin. Research and Development expenses in 2006 increased to CHF 211.8 million, from CHF 171.5 million, an increase of CHF 40.3 million or 23%. In the year under review, the company continued to expand the number of clinical projects. Compared to 2005, Actelion s clinical trials recruited 25% more patients. With the opening of Actelion s new Research Center, we expanded our innovation base that discovers firstin-class compounds at a rate rarely observed anywhere else. The R&D spend of 22.4% of total net revenues was below the 25 to 28% the company believes it should currently invest into new product opportunities. This relative underspending was the result of timing issues, with several projects starting to accelerate in 2007. Marketing and advertising expenses in 2006 increased to CHF 185.5 million from CHF 140.0 million in 2005, an increase of CHF 45.5 million. This increase is the result of Actelion continuing to invest in disease education, the key prerequisite to increase diagnosis and, consequently, product sales. Selling, general and administrative expenses in 2006 increased to CHF 185.1 million from CHF 132.1 million in 2005, an increase of 40%. Approximately two thirds of this increase was the result of a larger sales force, and the success of this expansion, in turn, resulted in both increased product sales and an increase in sales-related payments. To support long-term growth, Actelion also continues its investments into support infrastructure, including human resources. As of 1 July 2005, Actelion adopted as required under US GAAP the accounting standard FAS 123R, which resulted in a non-cash charge in 2006 of CHF 32.7 million compared to CHF 13.6 million in 2005. These non-cash expenses will continue to increase, not only as the number of employee s increase but also as a result of the 147% share price increase in 2006. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 35

Letter from the CFO Operating income and cash EBIT With net revenues growing at a faster rate than operating expenses, operating income for the year was CHF 268.2 million compared to CHF 152.3 million in 2005. This performance is especially satisfying as the company has strengthened the base from which further growth can be generated. In the future, Actelion expects that the company s results expressed in US-GAAP will be more and more disorted from economic realities by the size of non-cash items mandated by accounting standards. Accordingly, the company has chosen to also express its performance in a non-us GAAP metric, cash EBIT. Cash EBIT CHF mio 350 300 250 200 150 100 50 0 2003 2004 2005 2006 This metric is calculated by adding back to operating income non-cash expenses such as depreciation and amortization, IPRD charges and the cost of stock based compensation. In 2006, cash EBIT was CHF 320.4 million compared to CHF 178.6 million in 2005. Non-operating income Interest income in 2006 amounted to CHF 8.4 million compared to CHF 3.0 million in 2005 and interest expense was CHF 0.2 million, unchanged from 2005. The increase in income is attributable to both enhanced returns and higher amounts of invested cash. A full year s amortization of debt discount and bond issuance costs in 2006 resulted in a noncash expense of CHF 8.4 million, compared to CHF 7.8 million in 2005. Cash EBIT EBIT Other financial income in 2006 was CHF 10.7 million, compared to a loss of CHF 11.3 million in 2005. This income is mostly due to foreign exchange gains from hedging operations that the company has in place to protect operational cash flows. Income tax expense in 2006 was CHF 37.7 million, compared to CHF 10.5 million in 2005 mostly due to increased profitability across our operations. In 2005, our tax expense was lower due to the capitalization of tax losses in certain of our affiliate operations. Net income and earnings per share Net income for 2006 was CHF 241.1 million, compared to CHF 125.5 million in 2005. Basic earnings per share increased in 2006 to CHF 10.64 per share compared to CHF 5.62 in 2005. On a fully diluted basis, earnings per share in 2006 were CHF 10.25, despite a significant increase in the number of shares used in the calculation. Balance sheet improved working capital management With a strong operational performance in terms of net income and careful management of working capital, the major impact on the balance sheet was an improvement in net equity and a general strengthening of the financial position of the company. In addition, in November 2006 we raised CHF 460 million through a convertible bond issue. The very favorable terms achieved zero coupon, zero yield to maturity reflect both the favorable capital market environment as well as the growing maturity of the company. The proceeds of the convertible bond issue provided the funds necessary for the acquisition of CoTherix Inc., which was consummated on January 9, 2007. In addition, a part of the proceeds have been used to manage the dilution from the 2008 convertible bond the company issued in 2003 and which was called on January 18, 2007. 36

Overall in 2006, liquid funds increased markedly, as the company reported better operating results. Actelion also received additional milestone payments from Merck (USD 7 million) and Roche (USD 75 million). Trade and other receivables increased to CHF 217.4 million at the end of December 2006 from CHF 157.2 million at the end of December 2005. This increase is directly related to higher sales. Importantly, these higher sales did not result in any material increase in day s sales outstanding. Investment in property, plant and equipment was substantially higher in 2006, CHF 42.5 million compared to 24.8 million in 2005. This increase can be attributed to new infrastructure projects. In February 2006, the company was able to start operation in its new Research Center. By the end of the year, another new facility providing office space had almost reached completion. Continued cash generation at the operational level In 2006, the company generated cash from operations of CHF 352.8 million compared to CHF 138.4 million during 2005, an increase of CHF 214.4 million. This increase in cash generation is driven by both an increase in operational income and receipt of milestone payments. Effective internal controls over financial reporting As at December 31, 2006, Actelion and its auditors were able to certify as to the effectiveness of our internal controls over financial reporting. While Actelion is a Swiss company listed at the Swiss Stock Exchange SWX, we chose to certify ourselves according to the standards stipulated in the US known as the Sarbanes- Oxley Act, Section 404. Actelion underwent this certification process voluntarily so as to document our commitment to develop an infrastructure capable of adapting to the demands of rapid growth. I am particularly proud that we were able to achieve certification based on internal resources, and without the need for costly external facilitation. Concluding remarks and outlook As a Chief Financial Officer in a rapidly growing company, I am indeed extremely fortunate to be able to count on a very dedicated and highly professional finance and internal audit team. All Actelion employees share a commitment to stakeholder value creation. Innovative medicine for patients will create shareholder value if we carefully manage the resources deployed. The same commitment is shared by the Board of Actelion. Through their Finance and Audit Committee, they have provided substantial assistance and efforts. The same is true for our auditors, Ernst & Young. To all of you: Thank you. I am grateful that I can work together with you so that I can report again in one year from now about another successful year for Actelion. Andrew J. Oakley Chief Financial Officer Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 37

Corporate Governance Actelion s Articles of Incorporation, its By-Laws including the Charters of the Board Committees and its Policy on Ethical Conduct provide the basis for its principles of Corporate Governance. These documents can be found on http://www.actelion.com under Investors, Corporate Governance. 1. Group Structure and Shareholders 1.1 Group Structure 1.1.1 Description of Actelion s operational group structure Actelion Ltd is the holding and finance company of the Group. Actelion Pharmaceuticals Ltd, based in Allschwil, a 100% subsidiary of Actelion Ltd, is in charge of discovery, development, registration, production, quality assurance, safety, marketing coordination, group management and coordination. Actelion Pharmaceuticals Ltd further holds the intellectual property rights of the Group. Actelion Registration Ltd, based in London, a 100% subsidiary of Actelion Ltd, holds the marketing authorizations for products marketed by Actelion. Actelion Percurex AG, based in Allschwil, a 100% subsidiary of Actelion Ltd, performs research and development services on behalf of the Group. Actelion Clinical Operations, Inc. (re-named to Actelion Clinical Research, Inc. as of January 1, 2007), based in New Jersey, a 100 % subsidiary of Actelion Ltd on December 31, 2006; since January 1, 2007 a 100% subsidiary of Actelion US Holding Company, performs clinical operations on behalf of the Group. Actelion Pharmaceuticals Israel Ltd, based in Ramat-Gan, a 100% subsidiary of Actelion Ltd, performs clinical operations on behalf of the Group. Actelion Paris Organisation SAS, based in Paris, a 100% subsidiary of Actelion Ltd, performs administrative and marketing services in Europe for the Group. Actelion Finance SCA and Actelion Partners SNC, both based in Luxembourg, and Actelion Participation GmbH, based in Allschwil, all three 100% subsidiaries of Actelion Ltd, as well as Actelion Luxembourg SARL, based in Luxembourg, a 100% subsidiary of Actelion Participation GmbH, perform financing for the Group. Actelion US Holding Company, based in Wilmington, Delaware, a 100% subsidiary of Actelion Ltd, is the holding company of all Actelion companies in the United States since January 1, 2007. Curl Acquisition Subsidiary, Inc., based in Wilmington, Delaware, a 100% subsidiary of Actelion US Holding Company, serves for the sole purpose of being merged with CoTherix, Inc. This company was merged with CoTherix, Inc. on January 9, 2007. CoTherix, Inc., based in Wilmington, Delaware, a 100% subsidiary of Actelion US Holding Company, resulting from the merger with Curl Acquisition Subsidiary, Inc. as of January 9, 2007. 1.1.2 All listed companies belonging to the issuer s Group Actelion Ltd Gewerbestrasse 16 CH-4123 Allschwil Switzerland Listed on the SWX Swiss Exchange under the code ATLN ISIN CH0010532478 Market capitalization as of December 31, 2006: CHF 6,152,176,912. 1.1.3 The non-listed companies belonging to the issuer s consolidated entities See Financial Section, note 2, page 72 1.2 Significant shareholders See Financial Section, note 9, page 74 Shareholder structure There were 4,734 shareholders registered in the share register on December 31, 2006. The distribution of shareholdings is divided as follows: Number of shares Number of registered shareholders on December 31, 2006 1 to 100 2,332 101 to 1,000 2,057 1,001 to 10,000 249 10,001 to 100,000 77 100,001 to 1,000,000 16 More than 1,000,000 3 The shareholder body on December 31, 2006 was constituted as follows: Shareholder structure according to category of investors (number of shares) Private persons 20.0% Institutional shareholders 47.8% Not registered 32.2% Shareholder structure by country (number of shares) Not registered 32.2% Switzerland 25.0% United Kingdom 20.9% USA 6.1% Other 15.8% 1.3 Cross-shareholdings None The remaining Group companies serve as import, marketing and sales companies for the Group. 38

2. Capital Structure 2.1 Capital See Financial Section, note 3, 4 and 5, page 73 2.2 Authorized and conditional capital in particular Conditional share capital See Financial Section, note 4, page 73, and Article 3a of the Articles of Incorporation Authorized share capital See Financial Section, note 5, page 73, and Article 3b of the Articles of Incorporation 2.3 Changes of capital See Financial Section, page 50 and 51, and Financial Section, page 48 and 49, of the Annual Report 2005 2.4 Shares and participation certificates Shares See Financial Section, note 3, page 73 Participation certificates None 2.5 Profit sharing certificates None 2.6 Limitation on transferability and nominee registrations 2.6.1 Limitations on transferability for each share category, along with an indication of statutory group clauses, if any, and Article 5 of the Articles of Incorporation rules on making exceptions. None 2.6.2 Reasons for making exceptions in the year under review. Not applicable 2.6.3 Admissibility of nominee registrations, along with an indication of percent clauses, if any, and registration conditions. Article 5 of the Articles of incorporation 2.6.4 Procedure and conditions for cancelling statutory privileges and limitations on transferability. Statutory privileges and limitations on transferability can be cancelled with a two-thirds majority of the votes represented at the General Meeting of Shareholders. 2.7 Convertible bonds and options Convertible bonds See Financial Section, note 15, page 60 Options The Standard Share Option Plan is intended to promote the interests of the Company by providing employees with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Company as an incentive for them to remain in the service of the Company and to help align the employees interests with those of the shareholders. Options are normally granted annually to employees who are already employed at the Company based on the function within the Company and on the achievement of defined performance criteria. Upon hiring, the Company may grant options depending on the future function at the Company. Grant levels are reviewed by the Compensation Committee and approved by the Board. Once options are granted, the Board is not entitled to materially increase the benefit accruing to the Optionee without the approval of the Actelion stockholders. For further information, see Financial Section, note 20, page 62 65 3. The Board of Directors 3.1. Members of the Board of Directors and 3.2. Other activities and functions of the members of the Board of Directors Robert E. Cawthorn Education: B.A. degree in agriculture, Cambridge University, England. Professional background: Managing Director of Global Health Partners, DLJ Merchant Banking Partners, 1997 to 2001; Chairman and CEO of Rhone-Poulenc- Rorer, Inc. (formerly Rorer Group), 1985 to 1996; President of Biogen Inc., 1979 to 1982; various executive positions at Pfizer International. Other activities and functions: Member of the Board of Directors of the following unlisted companies: The March Group, NextPharma Technologies, Leerink Swann & Co. André J. Mueller Education: Chartered Chemical Engineer, Superior Technical College, Geneva (1964); Licenciate in Business Economics, University of Geneva (1970), MBA, INSEAD Fontainbleau (1971). Professional background: Process Engineer with CIBA Ltd.; management positions in planning and finance at Sandoz (now Novartis) in Switzerland and the US; five years as the first Chief Financial Officer of Biogen; Co-Founder of Genevest venture capital group; member of the management consulting practice of Deloitte and Touche from 1993 to 1997; member of Founding Team of Actelion and Chief Financial Officer until 2003. Other activities and functions: Member of the Board of Directors of the listed company Synthes Inc. and of the following unlisted companies: Addex Pharmaceuticals (Chairman), an R&D company focusing on the treatment of central nervous system disorders, Cerenis Therapeutics, an R&D company focusing on the prevention and treatment of atherosclerosis. Jean-Paul Clozel Education: Medical degree in France; further training in pharmacology and physiology at the University of Montreal, Canada, and the University of California, San Francisco. Professional background: Practicing cardiologist for 11 years, 1974 to 1985; Head of Drug Discovery Group in the Cardiovascular Department of F. Hoffmann-La Roche for 12 years, 1985 to 1997; Founder and Chief Executive Officer of Actelion. Other activities and functions: None. Actelion Annual Report 2005 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 39

Corporate Governance Juhani Anttila Education: Master s degree in law at the University of Helsinki, Finland, 1978. Professional background: Managing Partner at CA Corporate Advisers, Zurich, 1981 to 1985; Managing Director of Nokia GmbH, Zurich, 1985 to 1988; Member of the Executive Board of Nokia Consumer Electronics Division, 1989 to 1995; Chairman of the Executive Board of Nokia (Deutschland) GmbH, Germany, 1990 to 1995; President and CEO of the Swisslog Holding Ltd, 1996 to 2002; CEO of Ascom Holding Ltd, 2003 to 2004. Other activities and functions: Member of the Board of Directors of the following listed company: Ascom Holding Ltd (Chairman), since 2002. Carl Feldbaum Education: Bachelor s degree in biology from Princeton University; law degree from the University of Pennsylvania Law School. Professional background: Assistant special prosecutor for the Watergate special prosecution force, 1973 to 1975; Inspector General for defense intelligence in the U.S. Department of Defense, 1976 to 1979; Assistant to the Secretary of Energy, 1979 to 1980; President and founder of the Palomar Corporation, 1980 to 1988; Chief of staff to Senator Arlen Specter (R-PA) of Pennsylvania, 1988 to 1993; President of the Biotechnology Industry Organization (BIO) in Washington, D.C., 1993 to 2005. Other activities and functions: Member of the Board of Directors of the following listed company: Exelexis, Inc., South San Francisco, CA (as of February 2007). Consultant, Biotechnology Industry Organization. Werner Henrich Education: Chemist and European Patent Attorney. Professional background: Former Head of Global Intellectual Property and Licensing, F. Hoffmann-La Roche Ltd, Basel. Other activities and functions: Member of the Board of Directors of the following listed company: Basilea Pharmaceutica (chairman), a biotechnology company involved in antibiotics, and of the following unlisted companies: Addex Pharmaceuticals, an R&D company focusing on the treatment of central nervous system disorders, TLT Medical (chairman), TET Systems and CEO of Pivalor AG, a consultant company. Armin Kessler Education: Degree in physics and chemistry from Pretoria University in South Africa, degree in chemical engineering from the University of Cape Town, South Africa and a juris doctorate from Seton Hall University; registered Patent Attorney at the U.S. Patent Office. Professional background: Chief Operating Officer of F. Hoffmann-La Roche Ltd, Basel, Switzerland, from 1990 to 1995. Prior to appointment as COO, senior management positions at Roche, including Head of the Diagnostics and Pharmaceutical divisions. Earlier positions included Director of Pharmaceutical Marketing Worldwide at Sandoz (now Novartis) and President of Sandoz KK in Tokyo. Other activities and functions: Member of the Board of Directors of the following listed companies: The Medines Co., Gen-Probe and PRA International and the following unlisted company: Medgenisis. Formerly on the Board of Syntex Chemicals, Genentech and F. Hoffmann-La Roche. Jean Malo Education: M.B.A. from ESSEC, Cergy Pontoise, France, in 1977. Professional background: Chartered Financial Analyst and a member of the Association for Investment Management and Research and the Houston Society of Financial Analysts. Chief Investment Officer for Vaughan Nelson Scarborough and McCullough, including managing several equity portfolios between 1997 and 2000. From 1989 to 1997, managed both equity and fixed income portfolios for Daniel Breen and Company in Houston. From 1978 to 1989, Corporate Banker for Banque Indosuez in Saudi Arabia, Houston and New York. Between 1977 and 1978, Financial Analyst at the French Embassy in Singapore. Other activities and functions: As of 2000, Senior Partner and Chief Investment Officer at Breen Investors L.P., a registered investment advisor. 3.3 Cross-involvement None 3.4 Elections and terms of office 3.4.1 Principles of the election procedure and limits of the terms of office According to Article 16 of the Articles of Incorporation, the 5 to 11 members of the Board of Directors are elected by the Annual General Meeting of the Shareholders for a term of office of three years. One year of office is understood to be the period from one ordinary meeting of shareholders to the next ordinary meeting of shareholders. In principle, the Board of Directors is renewed each year by one third. The respective elections are held individually. The term of office of newly elected members shall be fixed at the time of election under due consideration of the renewal cycle. In addition, the By-Laws currently foresee that members who have completed their seventy-fourth year of age shall retire as of the next ordinary meeting of shareholders. 3.4.2 Time of first election and remaining term of office for each member of the Board of Directors Name of Board member Executive member Nationality Birthdate Date of AGM of Date of AGM AGM of end first election of renewal of term of office Robert E. Cawthorn No British 28.09.1935 2000 2006 2009 André J. Mueller No Swiss 05.02.1944 2001 2006 2009 Jean-Paul Clozel Yes French 03.04.1955 2000 2005 2008 Juhani Anttila No Finnish 20.04.1954 2005 N/a 2008 Carl Feldbaum No USA 01.02.1944 2005 N/a 2008 Werner Henrich No French 03.11.1943 2000 2004 2007 Armin Kessler No Swiss 31.03.1938 2004 N/a 2007 Jean Malo No French 16.07.1954 2004 N/a 2007 40

3.5 Internal organizational structure 3.5.1 Allocation of tasks within the 3.5.2 Members list, tasks and area Name of Board member Board of Directors of responsibility of each committee of the Board of Directors Chairman Vice-Chairman Delegate Compensation Finance and Nominating Committee Audit Committee and Governance Committee Robert E. Cawthorn (Chairman) André J. Mueller (Chairman) Jean-Paul Clozel Juhani Anttila Carl Feldbaum Werner Henrich Armin Kessler (Chairman) Jean Malo The Compensation Committee reviews and approves the Company compensation philosophy and components and reviews general employee compensation, benefit policies and HR practices of the Company. This Committee also reviews global incentive plans and annual objectives and evaluates performance against these. It determines the compensation of the CEO and approves that of Senior Managers who report directly to the CEO. The management keeps the Compensation Committee informed of other global HR projects and policies, which are being implemented or considered. The Committee presents the Compensation Committee report to the Board. In 2006, the Compensation Committee met 4 times in person, approximately every quarter. Each meeting took on average 1 1 /2 to 2 hours. In general, the CEO, the Head of Corporate Services, and the Head of Global Human Resources are invited to attend the meetings. The compensation of the CEO is not discussed in his presence. The Finance and Audit Committee reviews the internal controls and finances of the Group in accordance with the Charter of the Finance and Audit Committee adopted on November 30, 2005. The Committee has the following tasks and duties: (i) Evaluate management s proposals and formulation of recommendations to the full Board in regards to financial planning; (ii) Review the proposed concepts of financial objectives; (iii) Review finance policy, operations and risk management framework in the areas of treasury, controlling, taxes, insurances, investments and acquisitions; (iv) Review the US GAAP and statutory financial statements prior to release and submission of annual financial statements to the Board of Directors; (v) Supervise the composition and activity of the Internal Audit (IA) function, assure implementation of IA recommendations, approve annual mission plans and review IA s cooperation with External Auditors; (vi) Evaluate, and propose to the Board, the External Auditors (EA) to be nominated for shareholder approval, evaluate the terms of engagement, compensation, performance and independence of the EA and review the audit process, discussing audit results with the EA; (vii) Oversee, in all material respects, the Company s compliance with applicable financial and securities laws. The Finance and Audit Committee reports to the full Board of Directors at regular intervals and submits proposals for Board resolutions, if necessary. In 2006, the Finance and Audit Committee met 8 times (either in person or by telephone conference). Each meeting took on average 3 to 4 hours. In general, the CFO and the Head of Internal Audit attend the meetings. At least once a year, a meeting is held with the External Auditors without the presence of the CFO, the Head of Internal Audit or the CEO. The Nominating and Governance Committee reviews considerations relating to Board composition, including size of the Board and criteria for membership on the Board of Directors, identifies, reviews, considers, recommends to the Board qualified candidates to serve as Board members and members of the various Committees of the Board. It further reviews directorships and consulting agreements of Board members for conflicts of interest, reviews and recommends Corporate Governance policies and principles for the Company, reviews quarterly reports of Actelion s Compliance Officer, annually oversees an evaluation of the Board of Directors, maintains an orientation program for new Board members and makes related recommendations to the Board. In 2006, the Nominating and Governance Committee met 3 times in person. Each meeting took on average 1 1 /2 to 2 hours. In general, the CEO and the General Counsel are invited to attend the meetings. The Committee can invite other management members as it deems fit. 3.5.3 Work methods of the Board of Directors and its Committees In 2006, the Board of Directors met 7 times (either in person or by telephone conference), and a majority (if not all) members were present at each Board meeting. Physical Board meetings took on average 7 to 8 hours. When the situation so warrants, the Board of Directors holds additional ad hoc meetings or telephone conferences to discuss specific issues. Any member can request a meeting. The CEO shall be entitled to attend every meeting of the Board of Directors and to participate in its debates and deliberations with the exception of executive sessions. However, he shall not be entitled to vote, unless he is a member of the Board of Directors. The management presents a status report and then the majority of the Board takes decisions on relevant issues. In the case of Committees, after the presentation of the issue by the management, the Committee takes a preliminary decision for approval to the full Board, which will be reported along with the details of the issue, to the entire Board, who will take the final decision. The Board delegates certain decisions to the Committees which are then formally approved by the full Board. An orientation program is provided for new members of the Board of Directors. Furthermore, the members of the Board of Directors are required to fill in a selfassessment form annually after a term of office of one year. Actelion Annual Report 2005 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 41

Corporate Governance 3.6 Definition of area of responsibility The Board of Directors has delegated the management of the Company s business to the CEO of the Company and to the Actelion Executive Committee and has granted the CEO the power to appoint the members of the Actelion Executive Committee. The Board of Directors carries out the tasks reserved to it by law. The Actelion Executive Committee takes all other management decisions. Management has set up a Scientific Advisory Board, with the task of reviewing the Company s progress in research and clinical development and evaluating new scientific perspectives alongside the Company s management. On December 31, 2006, the Scientific Advisory Board was composed of the following external experts of worldwide reputation: Professors Joël Ménard, Craig Pratt, Richard Tsien, David Shlaes, Hugo Kubinyi, Graeme Stewart. 3.7 Information and control instruments vis-à-vis the Management Board The Board of Directors receives monthly reports regarding the financial and business situation of the Company and quarterly reports presented by the CEO. Additionally, the Finance and Audit Committee receives and approves quarterly financial results before they are released to the public. Starting in 2005, the Company formally adopted a Company Compliance Framework, culminating in a positive attestation on effective internal controls over financial reporting, as at December 31, 2006, in line with requirements of the Sarbanes-Oxley Act of 2002, Section 404. In the financial area the Board is informed regularly of financial risks and the proposed actions to be taken. As the principal agent for corporate management, the Board of Directors has directed Internal Audit to oversee, during 2007, the re-assessment of the risk management systems of the Group, as required under Article 663b pt 12 (new) of the Swiss Code of Obligations. Currently, the risk management systems address the areas of, inter alia, production and development, sales and marketing and finance. In the production and development area, quality control ensures that the products achieve the required quality to be marketed, the internal review of clinical development ensures the safe development of the product and an extensive post marketing surveillance monitors the continuing safety of the marketed products. The global quality management system performs quality audits ensuring Good Clinical Practices within clinical development and therefore safe development of investigational medicinal products. A program of Internal Audit reviews provides a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes within the Group for review of the Board of Directors. The Board of Directors has access to Internal Audit reports on request from the Finance and Audit Committee. These reports detail risks arising in the areas of operations, compliance and internal control over financial reporting. 4. Management Board 4.1. Members of the Senior Management On December 31, 2006, the Actelion Executive Committee ( AEC ) was composed of: Jean-Paul Clozel Title and Function: Chief Executive Officer See Section 3, p. 39 Simon Buckingham Title and Function: President Corporate and Business Development Nationality: Australian Education: Bachelor of Veterinary Science (Honours), University of Sydney, Australia; Doctor of Philosophy, University of Melbourne, Australia; Graduate Management Qualification, Australian Graduate School of Management, University of New South Wales, Australia. Professional Background: President, North America and Asia Pacific, Actelion; President, Actelion US; Sales and Marketing Director, Parke-Davis US (a division of Warner Lambert), 1998 to 2000; Global Project Director, F. Hoffmann-La Roche, Switzerland, 1995 to 1997; Product Marketing Manager and Territory Manager, F. Hoffmann-La Roche, Australia Christian Chavy Title and Function: President Business Operations Nationality: French Education: ESSEC Business School (Ecole Supérieure des Sciences Economiques et Commerciales) in Paris; Master s Degree in Business Management from ICG (Institut de contrôle de Gestion) in Paris. Professional Background: Vice-President and Head of Global Therapeutic Area Reproductive Health at Serono International in Geneva; Managing Director of Serono France, 1992 to 2000; President of Rhone-Poulenc Rorer Canada Inc. and Managing Director of Rorer France, 1987 to 1992; Marketing Manager at Bristol- Myers France, Smith-Kline and Merck Sharp & Dohme. Louis de Lassence Title and Function: Vice President, Head of Corporate Services Nationality: French Education: Business School in Paris in 1976 and degrees in accounting. Professional Background: External auditor. From 1982 to 2000 worked for F. Hoffmann-La Roche, mainly in Finance and Administration; Internal auditor; Finance Manager of Roche, Brussels; Assistant to the Vice-Chairman of the Roche Group; Finance Manager of Pharma International. Roland Haefeli Title and Function: Vice President, Head of Investor Relations and Public Affairs Nationality: Swiss Education: Advanced degrees in contemporary history from the University of Bern (Switzerland) and University of North Carolina, Chapel Hill (USA) in political science. Professional Background: Stock market training program in a Swiss Private Bank; several years as a news writer, presenter and editor for several print and electronic media operations; two years as a Delegate for the International Committee of the Red Cross (ICRC) in Bosnia and Rwanda; Corporate spokesperson for F. Hoffmann-La Roche; Head of media relations for other companies, including Serono. 42

Isaac Kobrin Title and Function: Senior Vice President, Head of Clinical Development Nationality: Israeli Education: Internist educated in Israel with further training (Fullbright Fellowship) at Ochsner Medical Foundation in New Orleans; LA in the cardiovascular field. Professional Background: Senior physician and senior lecturer in Internal Medicine at Hadassah Hospital in Jerusalem, Israel. Group Leader of the Cardiovascular Clinical Development Group, F. Hoffmann-La Roche, 1997 to 1999. Andrew J. Oakley Title and Function: Vice President, Chief Financial Officer Nationality: Australian Education: Bachelor of Economics, Macquarie University; Australia, MBA from London Business School Professional Background: Member of the Australian Institute of Chartered Accountants, since 1987, following several years working for a major accounting firm. In his last position before joining Actelion, served in a senior finance capacity for the global holding companies of Accenture. Previously held executive positions in major multinational building material companies and spent several years as an equity analyst with banks in Australia, the United Kingdom and the United States. In addition to the above-mentioned persons of the AEC, on December 31, 2006 the Senior Management comprised the following individuals: Marian Borovsky Title and Function: Vice President, General Counsel & Corporate Secretary Nationality: Swiss Education: Doctor of Law (Dr.iur.) educated at the University of Basel and attorney at law admitted to the Bar in Switzerland. Professional Background: Started his professional career as an attorney at law with an insurance company and subsequently worked as a legal and tax advisor for PricewaterhouseCoopers. In addition, he completed a secondment to an international business law firm in London and is a qualified business mediator. Martine Clozel Title and Function: Senior Vice President, Head of Drug Discovery Pharmacology & Pre-Clinical Development, member of Founding Team of Actelion Nationality: French Education: Pediatrician specialized in neonatal intensive care, educated at the University of Nancy, France; Training in physiology and pharmacology at McGill University, Montreal, and at the University of California, San Francisco Professional Background: Scientific expert, Leader Drug Discovery Projects, F. Hoffmann-La Roche Walter Fischli Title and Function: Senior Vice President, Head of Drug Discovery, Molecular Biology & Biochemistry, Founder of Actelion Nationality: Swiss Education: Biochemist educated at the Swiss Institute of Technology (ETH) Zurich with further training in molecular biology and organic chemistry; Research fellowship at the Addiction Research Foundation, Stanford University Professional Background: Leader of Drug Discovery Projects at F. Hoffmann-La Roche, including development of new screening systems; Co-Founder of Actelion, including establishment of new Discovery units. Thomas Weller Title and Function: Vice President, Head of Drug Discovery, Chemistry Nationality: Swiss Education: Chemist educated at the Swiss Institute of Technology (ETH) Zurich with postdoctoral training in organic chemistry at Columbia University, New York, USA. Professional Background: Scientific expert, Leader Drug Discovery Projects, F. Hoffmann-La Roche. 4.2 Other activities and functions None 4.3 Management contracts None Actelion Annual Report 2005 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 43

Corporate Governance 5. Compensation, Shareholdings and Loans 5.1 Content and method of determining compensation and the shareholding programs The compensation of the Board of Directors and the Senior Management is determined by the Board of Directors upon recommendation of the Compensation Committee based on regular surveys regarding compensation of comparable companies and functions. Non-executive members of the Board of Directors receive a yearly fixed compensation (retainer) and meeting fees according to their individual attendance at Board and Committee meetings (either in person or by telephone conference) as well as an allotment of shares and/or stock options under the DSOP (Directors Stock Option Plan). Generally, the executive directors receive an allotment of shares and/or options from their directorship, and a cash compensation under their employment agreement. Management members receive (i) a fixed remuneration, determined according to the labour market following a survey, (ii) a cash bonus, according to certain criteria that include the Company s, unit s and individual s personal performance, as determined by the Board of Directors from time to time, and (iii) under the ESOP (Employee Stock Option Plan), stock options, the number of which is determined according to a grid agreed by the Board of Directors and which takes into account the function of the management member in question. 5.2 Compensation for acting members of governing bodies In 2006, in aggregate, the executive member of the Board of Directors and the members of the management have received a cash compensation of CHF 8,515,527.45 and a total of 55,550 (ESOP), 25,000 (DSOP) options (see Section 5.6 for details). In aggregate, the 7 non-executive members of the Board of Directors received in 2006 a cash compensation of CHF 373,500 and options and shares for a value of CHF 600,000. Each director can decide in which manner this last compensation should be paid (options or shares). 5.3 Compensation for former members of governing bodies No members of governing bodies gave up their function in 2006. 5.4 Share allotment Under Section 5.2 here above, a total of 1,875 shares have been consequently allotted to non-executive members of the Board of Directors. Moreover, 625 shares were transferred to one non-executive Board member in 2006. These shares were allotted to him in 2005 but could not be transferred during 2005 for technical reasons. 5.5 Share ownership As of December 31, 2006, the executive member of the Board of Directors and the members of the management held a total of 2,362,807 shares. As of December 31, 2006, the non-executive members of the Board of Directors held a total of 343,402 shares. 5.6 Options As of December 31, 2006, the executive member of the Board of Directors and the members of the management held a total of 310,160 (ESOP), 70,000 (DSOP) and 124,200 Challenge Award options. The allotment year and exercise price were as follows: Number of options Allotment year Exercise price 34,560 1999 7.50 5,760 2000 121.25 40,000 2000 137.50 13,568 2000 187.50 9,064 2001 42.00 13,403 2001 58.75 671 2002 42.00 14,396 2002 50.00 18,000 2002 62.00 3,828 2002 67.00 28,632 2003 62.00 5,975 2003 93.00 3,600 2003 122.00 2,256 2004 137.00 6,800 2004 139.00 10,800 2004 148.00 30,000 (DSOP) 2004 142.00 13,269 2005 117.00 3,600 2005 129.00 26,428 2005 133.00 15,000 (DSOP) 2005 128.00 124,200 (Challenge Award) 2005 286.00 55,550 2006 140.00 25,000 (DSOP) 2006 128.00 As of December 31, 2006, the non-executive members of the Board of Directors held a total of 26,915 (ESOP), 19,974 (DSOP) and 20,000 (Challenge Award) options. The allotment year, duration, and exercise price were as follows: Number of options Allotment year Exercise price 40 1998 0.15 10,625 2001 42.00 15,000 2002 62.00 1,250 2002 66.00 3,000 (DSOP) 2003 62.00 8,537 (DSOP) 2005 128.00 20,000 (Challenge Award) 2005 286.00 8,437 (DSOP) 2006 128.00 The subscription ratio for all options is 1/1 and the duration is generally 10 years as of the approval of the plan. 44

5.7 Additional fees and remunerations No honorarium or other remuneration exceeding half his ordinary remuneration has been billed to the Company by any other member of the Board of Directors or the management. 5.8 Loans granted by governing bodies None 5.9 Highest total compensation The member of the Board of Directors receiving the highest total compensation in 2006 has received: Cash compensation: CHF 1,639,235.60 Option allotment: 25,000 options (DSOP, exercise price: CHF 128.00). Share allotment: none 6. Shareholders Participation Rights 6.1 Voting rights restrictions and representation See Articles 5 + 11 of the Articles of Incorporation 6.2 Statutory quorums See Article 15 of the Articles of Incorporation and the relevant legal provisions. 6.3 Convening of General Meetings of Shareholders See Articles 9 + 13 of the Articles of Incorporation and the relevant legal provisions. 6.4 Agenda Shareholders holding more than CHF 1 million worth of shares are entitled to add items to the agenda of the Annual General Meeting of Shareholders. Proposals for the Annual General Meeting of Shareholders must be sent to the Company to arrive approximately 40 days prior to the date of the Annual General Meeting of Shareholders. The exact deadline for sending in proposals is made public approximately 2 months prior to the date of the Annual General Meeting of Shareholders. 7. Changes of Control and Defense Measures 7.1 Duty to make an offer There are no opting-out or opting-up provisions in the Articles of Incorporation. 7.2 Clauses on change of control There are addendums to the employee agreements of a certain number of employees in key positions providing for compensation in case of loss of position due to a change of control. Overall, 67 members of the Senior Management (including executive members of the Board of Directors) and of the other management as well as other key employees of the Actelion group worldwide have employment agreements with change of control clauses. Managerial positions are not necessarily congruent with key functions; therefore, it is unclear where to draw the line between other management and non-management functions. They may receive a severance payment equivalent to twice the yearly compensation. However, this severance payment would only be due if, within six (6) months prior to or two (2) years after the effective date of a change in control, the employing Actelion company terminates the employee's employment without Cause or the employee terminates his employment with Good Reason (Good Reason being either (a) a reduction in the Key Employee s salary, or (b) a material reduction or adverse or substantive change in the Key Employee's duties or responsibilities, or (c) the requirement that the Key Employee relocate to a worksite more than fifty (50) kilometres from the employing company s current principal office). The ESOP provides that in case of change of control all options vest and become exercisable immediately. 6.5 Registration in share register Only shareholders who are registered in the share register of the Company on the date falling 20 to 30 days prior to the Annual General Meeting of Shareholders are entitled to vote at the Annual General Meeting of Shareholders. The exact deadline for being registered in the share register is made public with the press release following the presentation of the financial statements to the public for the year-end December 31. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 45

Corporate Governance 8. Auditors 8.1 Duration of the mandate and term of office of Head Auditor Ernst & Young AG, Basel, was elected as the Head Auditor of the Company for the financial year 2006 by resolution of the shareholders of April 10, 2006. Mr. Jürg Zürcher was appointed as head auditor in 2006. 8.2 Auditing honorarium On an accruals basis, the auditing fees for the year under review are as follows: Audit fees Ernst & Young: CHF 1,384,179 Audit related fees Ernst & Young CHF 130,819 8.3 Additional honorarium In addition to the fees described above, aggregate fees of CHF 107,500 were billed by Ernst & Young during the year ending December 31, 2006, primarily for income tax compliance and related tax services. 8.4 Supervisory and control instruments vis-à-vis the auditors The Finance and Audit Committee deals with the review of the internal control of the accounts and finances of the Company via its supervisory activities over both external and internal audit functions (see Section 3.5.2). During 2006, this process has been further strengthened by increased transparency resulting from internal controls over financial reporting and the presence of the Head of Internal Audit at all Finance and Audit Committee meetings. The External Auditors meet with the Finance and Audit Committee to present their plan, scope, audit approach, compensation and audit results. The Finance and Audit Committee reviews these and evaluates the independence of the External Auditors from a risk analysis perspective. In addition, the auditors present their opinions based on an integrated audit, along with a management letter annually. The Company has ensured that the Auditor s partner in charge has unrestricted access to the Chairman of the Finance and Audit Committee and fulfils all independence criteria. In 2006, the External Auditors met several times with the Finance and Audit Committee. Regarding the selection of External Auditors, the Finance and Audit Committee will from time to time assess offers and presentations from several appropriate, independent external audit firms and the Finance and Audit Committee then will make a proposal to the full Board, based on present service level and quality criteria, as to the External Auditors to be recommended for election. The final approval of the External Auditors is made by the shareholders at the Annual General Meeting of Shareholders. 9. Information Policy The management issues statements regarding the Company s progress on a quarterly basis, at the same time as the financials are made public. The shareholders are regularly informed of Actelion s business via ad-hoc releases, internet announcements, road shows, major news agencies and the Swiss Official Commercial Gazette. The Investor Relations & Public Affairs department is available to respond to shareholders or potential investors queries. The Company s website can be accessed at http://www.actelion.com. The site contains information useful to investors, including media releases, financial statements and background information on marketed products as well as clinical and pre-clinical projects. 10. High Ethical Standards Actelion s Code of Ethical Conduct establishes corporate standards of behavior for all employees and sets out the Company s expectations for contractors, agents and representatives. The Code assigns employee responsibilities that enable Actelion to fulfill its commitment to the highest legal and ethical principles in business. The in-house training system ensures the rapid distribution of these standards to all associates and gives them the opportunity to raise questions. Over 90% of Actelion's associates have confirmed reading and understanding the Code of Ethical Conduct. Under Actelion s Whistleblower Policy, an associate who makes a report has a strict guarantee of non-retaliation. Violations of this right are not tolerated. The Corporate Compliance Office coordinates the business ethics and compliance programs and is a resource to assist employees with questions or interpretations of the Actelion Code of Ethical Conduct and related issues. It is also a resource for supervisors in managing compliance issues. Employees and other parties who become aware of violations of Actelion corporate principles can bring them to the attention of their managers or report them to the Compliance Officer Peter Herrmann (direct phone number +41 (0) 61 565 65 39). Actelion strives for a culture in which its associates recognize that acting honestly, respectfully and with integrity is expected and appreciated. Clinical trial protocol registry and Marketing and Sales guidelines Actelion is dedicated to enhancing the transparency of its clinical trials by means of public databases. The project Study MetADAta Registry (SMADAR) is designed to serve this goal (http://www.trials.actelion.com) by helping patients, caregivers and physicians find clinical trials that may be appropriate for them. Actelion has implemented a number of international guidelines relating to promotional material, websites and organizing events. These globally applicable rules ensure that advertising material complies with legally valid regulations. Actelion has implemented the marketing code of the European Federation of Pharmaceutical Industries' Association (EFPIA). In the United States, Actelion adheres strictly to the principles of the PhRMA code. 46

Consolidated Financial Statements Consolidated Income Statements Twelve Months Ended December 31 (in CHF thousands, except per share amounts) 2006 2005 Net revenue: Product sales 924,141 647,556 Contract revenue 21,532 16,033 Total net revenue 945,673 663,589 Operating expenses (1) Cost of sales 90,594 65,635 Research and development 211,814 171,547 Marketing and advertising 185,491 140,012 Selling, general and administration 185,075 132,087 Amortization of acquired intangible assets 4,510 2,018 Total operating expense 677,484 511,299 Operating income 268,189 152,290 Interest income 8,386 2,989 Interest expense (163) (152) Amortization of debt discount and issuance costs (8,410) (7,836) Other financial income (expense), net 10,724 (11,294) Income before income tax expense 278,726 135,997 Income tax expense (37,636) (10,459) Net income 241,090 125,538 Basic income per share 10.64 5.62 Number of shares (in thousands) used in computation 22,654 22,329 Diluted income per share 10.25 5.54 Number of shares and share options (in thousands) used in computation 24,325 22,662 (1) Includes stock-based compensation as follows: Research and development 11,328 4,807 Marketing and advertising 9,035 3,726 Selling, general and administration 12,298 5,113 Total stock-based compensation 32,661 13,646 The accompanying notes form an integral part of these consolidated financial statements. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 47

Consolidated Financial Statements Consolidated Balance Sheets December 31 (in CHF thousands, except share amounts) 2006 2005 Assets Current assets Cash and cash equivalents 926,137 138,017 Short-term deposits 189,098 244,900 Derivative instruments 3,667 1,303 Marketable securities 29,750 9,820 Trade and other receivables, net 217,376 157,220 Inventories 24,320 26,373 Other current assets 27,635 11,799 Deferred tax asset, current portion 4,518 5,940 Total current assets 1,422,501 595,372 Property, plant and equipment, net 81,970 50,186 Other assets 11,486 8,131 Intangible assets, net 19,159 20,852 Goodwill, net 27,385 27,333 Deferred tax asset 15,669 10,568 Total assets 1,578,170 712,442 Liabilities and Shareholders Equity Current liabilities Trade and other payables 67,297 67,543 Accrued expenses 130,894 86,088 Deferred revenue, current portion 27,314 15,209 Other current liabilities 1,649 6,364 Short-term financial debt 626,832 Total current liabilities 853,986 175,204 Long-term financial debt 159,266 Deferred revenue, less current portion 120,890 52,648 Other non-current liabilities 4,395 3,337 Pension liability 19,835 Deferred tax liability 932 273 Total liabilities 1,000,038 390,728 Shareholders Equity Common shares (par value CHF 2.50 per share, authorized 41,406,640 shares for both years; outstanding 22,955,884 and 22,545,547 shares in 2006 and 2005, respectively) 57,390 56,364 Additional paid-in capital 394,090 348,011 Accumulated profit (deficit) 156,621 (84,469) Treasury shares, at cost (11,118) (467) Accumulated other comprehensive income (loss) (18,851) 2,275 Total Shareholders Equity 578,132 321,714 Total Liabilities and Shareholders Equity 1,578,170 712,442 The accompanying notes form an integral part of these consolidated financial statements. 48

Consolidated Statements of Cash Flows Twelve Months Ended December 31 (in CHF thousands) 2006 2005 Cash flow from operating activities Net income 241,090 125,538 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 19,525 12,634 Stock-based compensation 32,979 14,373 Excess tax benefits from share-based payment arrangements (3,959) (2,435) (Gains) losses on derivative instruments (7,423) 6,845 Write-off of acquired in-process research and development 68 78 Amortization of debt discount and expense 8,410 7,836 Trade and other receivables (58,812) (42,890) Inventories 2,052 (8,470) Other current assets (4,914) (5,451) Other assets (11,547) (11,895) Trade and other payables 7,317 15,517 Accrued expenses 46,040 35,533 Deferred revenue 80,347 (9,775) Other liabilities 3,942 942 Changes in other cash flow items (2,358) Net cash flow provided by operating activities 352,757 138,380 Cash flow from investing activities Purchase of short-term deposits (323,157) (370,400) Withdrawal of short-term deposits 378,900 229,500 Purchase of property, plant and equipment (42,519) (24,756) Purchase of marketable securities (20,000) (9,837) Purchase of derivative instruments (1,434) (2,951) Proceeds from sale of derivative instruments 1,434 2,836 Purchase of intangible assets (11,124) (5,651) Increase of investment (32,494) Net cash flow used in investing activities (17,900) (213,753) Cash flow from financing activities Payments on capital leases (226) (177) Issuance of 2006 convertible bond 451,430 Proceeds from exercise of stock options 31,026 14,371 Purchase of treasury shares (10,839) Purchase of call option (20,562) Excess tax benefits from share-based payment arrangements 3,959 2,435 Net cash flow provided by financing activities 454,788 16,629 Net effect of exchange rates on cash and cash equivalents (1,525) 425 Net change in cash and cash equivalents 788,120 (58,319) Cash and cash equivalents at beginning of period 138,017 196,336 Cash and cash equivalents at end of period 926,137 138,017 Supplemental disclosures of cash flow information Cash paid during the year for: Interest 163 152 Taxes 11,997 12,645 The accompanying notes form an integral part of these consolidated financial statements. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 49

Consolidated Financial Statements Consolidated Statement of Changes in Shareholders Equity Additional Common Shares Paid-in Shares Amount Capital (in CHF thousands, except share amounts) At January 1, 2005 22,198,403 55,525 316,844 Comprehensive income net of tax effect: Net income Other comprehensive income: Currency translation adjustment Unrealized loss on marketable securities Comprehensive income Change in accounting principle (1,374) Excess tax benefit from share-based payment 5,922 Exercise of stock options 335,594 839 13,532 Transactions in treasury shares 5,353 323 Stock-based compensation expense, net 13,096 Stock options forfeitures and cancellations (332) At December 31, 2005 22,539,350 56,364 348,011 Comprehensive income net of tax effect: Net income Other comprehensive income: Currency translation adjustment Additional minimum pension liability Unrealized loss on marketable securities Comprehensive income Additional pension liability, adoption of SFAS 158 Excess tax benefit from share-based payment 3,850 Exercise of stock options 410,337 1,026 30,000 Transactions in treasury shares (49,500) 130 Options related to own shares (20,562) Stock-based compensation expense, net 32,661 At December 31, 2006 22,900,187 57,390 394,090 The accompanying notes form an integral part of these consolidated financial statements. 50

Accumulated Other Accumulated Unearned Treasury Comprehensive Shareholders Profit (Deficit) Compensation Shares Income (Loss) Equity (210,007) (2,256) (871) (1,149) 158,086 125,538 125,538 3,441 3,441 (17) (17) 128,962 1,374 5,922 14,371 404 727 550 13,646 332 (84,469) (467) 2,275 321,714 241,090 241,090 (3,071) (3,071) (2,332) (2,332) (70) (70) 235,617 (15,653) (15,653) 3,850 31,026 (10,651) (10,521) (20,562) 32,661 156,621 - (11,118) (18,851) 578,132 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 51

Consolidated Financial Statements Notes to the Consolidated Financial Statements (CHF thousands, except share and per share amounts) Note 1. Description of business and summary of significant accounting policies Actelion Ltd ( Actelion or the Group ), a biopharmaceutical company headquartered in Allschwil, Switzerland, discovers, develops and commercializes innovative low molecular weight drugs for high unmet medical needs. Basis of accounting The Group s consolidated financial statements have been prepared under United States Generally Accepted Accounting Principles ( US GAAP ). All amounts are presented in Swiss francs ( CHF ), unless otherwise indicated. Principles of consolidation The consolidated financial statements include the accounts of the Group and its wholly-owned, affiliated companies in which the Group has a controlling financial interest and exercises control over their operations as well as entities for which the Group has determined to be the primary beneficiary under the Financial Accounting Standards Board Interpretation No. 46(R), Consolidation of Variable Interest Entities ( VIE ), an interpretation of ARB No. 51 ( FIN 46(R) ). Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make judgments, assumptions and estimates that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. On an on-going basis, management evaluates its estimates, including those related to revenue recognition for contract revenue, allowance for doubtful accounts, stock-based compensation, purchase accounting, impairment of goodwill, provisions and income taxes. The Group bases its estimates on historical experience and on various other market-specific assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates. Reclassifications Certain prior year information has been reclassified to conform to the current year presentation. The Group changed its classification of a portion of deferred tax asset, previously classified as non-current, to current deferred tax asset. Revenue recognition Product sales The Group recognizes revenue from product sales when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectibility is reasonably assured. Allowances are established for estimated uncollectible amounts, product returns and discounts. Contract revenue Contract revenue includes license fees and milestone payments associated with collaborative agreements with third parties. The Group recognizes revenue from collaborative agreements when the services are performed and collectibility is reasonably assured, revenue from non-refundable, upfront license fees and performance milestones where the Group has continuing involvement is recognized over the estimated performance or agreement period, depending on the terms of the agreement. The recognition of revenue is prospectively adjusted for subsequent changes in the development or agreement period. Revenue associated with performance milestones where the Group has no continuing involvement or service obligation is recognized upon achievement of the milestone. Payments received in excess of amounts earned are classified as deferred revenue until earned. Shipping and handling costs The Group recognizes expenses relating to shipping and handling costs in cost of sales. Research and development Research and development expense consists primarily of compensation and other expenses related to research and development personnel; costs associated with pre-clinical testing and clinical trials of the Group s product candidates, including the costs of manufacturing the product candidates; expenses for research and services rendered under co-development agreements; and facilities expenses. All research and development costs are charged to expense when incurred. Payments made to acquire research and development assets, including those payments made under licensing agreements, that are deemed to have an alternative future use or are related to proven products are capitalized as intangible assets; otherwise, they are expensed as research and development costs. For further information on payments made under the Group s licensing agreements refer to Note 3, Licensing agreements. Advertising costs The Group expenses the costs of advertising, including promotional expenses, as incurred. Advertising expenses were CHF 98.6 million and CHF 71.9 million in 2006 and 2005, respectively. Patents and trademarks Costs associated with the filing and registration of patents and trademarks are expensed in the period in which they occur. Taxes The Group accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ( SFAS 109 ). Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rules and laws that will be in effect when differences are expected to reverse. The Group performs periodic evaluations of recorded tax assets and liabilities and maintains a valuation allowance if deemed necessary. Significant estimates are required in determining income tax expense and benefits. Various internal and external factors may have favorable or unfavorable effects on the future effective tax rate, which would directly impact the Group s financial position or results of operations. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, future levels of capital expenditures, and changes in overall levels of pre-tax earnings. Earnings per share In accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share ( SFAS 128 ), basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average common shares outstanding for the fiscal year. Diluted earnings per share reflects the maximum potential dilution that could occur if dilutive securities, such as share options or convertible debt, were exercised or converted into 52

common shares or resulted in the issuance of common shares that would participate in net income. Dividends The Group may declare dividends upon the recommendation of the Board of Directors and the approval of shareholders at their annual general meeting. Under Swiss corporate law, the Group s right to pay dividends may be limited in specific circumstances. The Group has not paid any cash dividends since inception and does not anticipate a dividend in the near to medium term. Cash and cash equivalents The Group considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Additionally, the Group includes all amounts held in money market funds as cash equivalents. Short-term deposits Short-term deposits with maturities greater than three months have been separated from cash and cash equivalents and are reported in a separate line in the consolidated balance sheet. Marketable securities The Group classifies marketable securities as either available-for-sale or held-to-maturity. Available-for-sale securities are carried at fair value with unrealized gains and losses recorded as a separate component of shareholders equity. Held-to-maturity securities are carried at amortized cost. Dividends and interest income are accrued as earned. Realized gains and losses are determined on an average cost basis. The Group reviews marketable securities for impairment whenever circumstances indicate that a decline in the fair value of the security below its amortized cost may be other than temporary. Securities with unrealized losses for more than six months are presumed to be impaired, absent compelling evidence to the contrary. In addition, securities with unrealized losses for less than six months may be deemed impaired in certain circumstances. Derivative instruments A significant portion of the Group s operations is denominated in foreign currencies, principally in US Dollar and Euro. These exposures may adversely impact the Group s net income and net assets. The Group uses derivatives to partially offset market exposure to fluctuations in foreign currencies. The Group records all derivatives on the balance sheet at fair value. The Group s derivative instruments, while providing effective economic hedges under the Group s policies, do not qualify for hedge accounting as defined by Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ( SFAS 133 ). Changes in the fair value of all derivative instruments are recognized immediately in other financial income (expense) in the consolidated income statements. See Note 8, Investments for further information on the Group s derivative positions. The Group does not regularly enter into agreements containing embedded derivatives. However, when such agreements are executed, an assessment is made of any embedded derivative based on the criteria set out in SFAS No. 133 to determine if the derivative is required to be bifurcated and accounted for as a stand alone derivative instrument. See Note 8, Investments for further information on the Group s embedded derivatives. Accounts receivable Accounts receivable are recorded at net realizable value after deducting an allowance for doubtful accounts. The Group maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Group s customers were to deteriorate, resulting in an impairment of their ability to make payments, an increase in the allowance might be required, which could affect future earnings. Inventories Inventories are stated at the lower of cost or market value with cost determined by the average-cost method. Inventories consist of semi-finished and finished products. If inventory costs exceed the expected market value due to obsolescence or non-marketability, a reserve is recorded for the difference between the cost and the market value. In 2006, the Group changed its accounting principle for inventories from the firstin first-out (FIFO) method to the average-cost method as preferable method with no material impact on prior and current periods. Property, plant and equipment Property, plant and equipment are recorded at historical cost less accumulated depreciation. Depreciation expense is recorded utilizing the straight-line method over the estimated useful life of the asset. Assets are written down to their estimated residual value. Leasehold improvements and assets acquired under capital leases are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Assets acquired under capital leases in which title transfers to the Group at the end of the agreement are recorded at their estimated fair value and amortized over the useful life of the asset. The estimated useful lives are as follows: Group of assets Computers Furniture and fixtures Laboratory equipment Leasehold improvements Buildings Useful life 3 years 5 years 5 years 5 to 10 years 40 years Impairment of long-lived assets Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Goodwill and intangible assets Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in a business combination. Pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangibles ( SFAS Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 53

Consolidated Financial Statements 142 ), goodwill is not amortized but rather tested annually for impairment and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Intangible assets with definitive lives consist primarily of acquired existing licenses and internal use software, which are amortized on a straight-line basis over the economic lives of the respective assets ranging from three to eleven years, and are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Stock-based compensation On July 1, 2005, the Group adopted Statement of Financial Accounting Standards No. 123(R), Share Based Payment Revised 2004 ( SFAS 123(R) ), using the modified prospective transition method. Under this method, stock-based compensation costs are recognized in net income using the fair-value based method for all new awards granted after July 1, 2005. Additionally, compensation costs for unvested stock options and awards that were outstanding at July 1, 2005, are recognized in net income over the requisite service period based on the grantdate fair value of those options and awards. Prior to the adoption of SFAS 123(R), the Group accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Group s unearned stock compensation balance of CHF 1.4 million as of June 30, 2005, which was accounted for under APB 25, was reclassified into the Group s additional paid-in capital upon the adoption of SFAS 123(R). Fair values of awards granted under the share option plans until December 2004 were estimated at grant or purchase dates using a Black-Scholes option pricing model. Fair value of awards granted after December 2004 were estimated by use of a Binomial Lattice option pricing model. The model input assumptions are determined based on available internal and external data sources. The risk free rate used in the model is based on the 10 year Swiss zero coupon rate. The probability of death is derived from data of the Swiss Federal Statistical Office. Expected volatility is based on equal weighting of historic and forward looking data which includes the Group s historic volatility, average peer group volatility and implied volatility on the longest outstanding convertible debt and traded warrants. Resignation, redundancy, retirement and early exercise behavior assumptions are based on the Group s historical headcount data and analyses of historical early exercises of the Group s employees, respectively. In 2005, the Binomial Lattice option pricing model had integrated a pre-vesting condition which was used for fair valuation of grants. In 2006, the Group modified its Binomial Lattice model to remove the pre-vesting condition in order to true up the difference in expenses based on estimated and actual forfeitures. The Group will continue to recognize compensation costs based on estimated future forfeitures and will adjust these estimates for actual forfeitures as differences occur. Amortization of total compensation costs for the standard share option plans is recognized on a straight-line basis over the requisite service period for the entire award. For the Challenge Award the Group has estimated an achievement date as of December 31, 2009 for the two conditions to be met and is recognizing related expenses ratably over the requisite service period for each separately vesting portion of the award. Stock-based compensation costs related to employees engaged in the production process generally are recognized in a manner similar to all other compensation paid to these employees and are capitalized as part of inventory. Due to the immateriality of such cost, no stockbased compensation cost was capitalized in the periods presented. Share option exercises are settled out of the reserved conditional capital. Pension accounting In December 2006, the Group adopted Statement of Financial Accounting Standards No. 158, Employer s Accounting for Defined Benefit Pension and Other Postretirement Plans ( SFAS 158 ), which requires the recognition of the funded status of plans in the Group s balance sheet. The Group recognized actuarial gains and losses in accumulated other comprehensive income. Comprehensive income (loss) Comprehensive income (loss) comprises of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains/losses on available-for-sale securities, currency translation adjustments and actuarial gains/losses resulting from defined benefit plans. Comprehensive income (loss) for the years ended December 31, 2006 and 2005 has been reflected in the consolidated statement of changes in shareholders equity. Foreign currency exposure Income, expense and cash flows of foreign subsidiaries are translated into the Group s reporting currency at monthly average exchange rates and the corresponding balance sheets translated at the period-end exchange rate. Exchange differences arising from the translation of the net investment in foreign subsidiaries and long-term internal financial debt are recorded, net of tax, in currency translation adjustment in shareholders equity. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the subsidiary s income statements in the corresponding period. Interest rate risk Interest rate risk arises from movements in interest rates, which could have adverse effects on the Group s net income or financial position. Changes in interest rates cause variations in interest income and expenses on interestbearing assets and liabilities. In addition, they can affect the market value of certain financial assets, liabilities and instruments. Segment information Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ( SFAS 131 ), establishes standards for reporting information on operating segments in interim and annual financial statements. The Group s chief operating decision-makers review the profit and loss of the Group on an aggregate basis and manage the operations of the Group as a single operating segment. Accordingly, the Group operates in one segment. Recent accounting pronouncements In February 2006, the Financial Accounting Standards Board ( FASB ) issued Statement on Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of ( FASB ) Statements No. 133 and 140 ( SFAS 155 ). Generally this statement would permit fair value measurement for financial instruments containing embedded derivatives, such as conversion or early prepayment options. The standard is effective for all financial 54

instruments acquired, issued, or subject to a re-measurement (new basis) event occurring after the beginning of an entity s first fiscal year that begins after September 15, 2006. The Group does not believe that the adoption of this standard will have a material effect on the consolidated financial position, results of operations or cash flows. In September 2006, the Financial Accounting Standards Board ( FASB ) issued Statement on Financial Accounting Standards No. 157, Fair Value Measurement ( SFAS 157 ). The standard provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. The standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Group does not believe that adoption of this standard will have a material effect on the consolidated financial position, results of operations or cash flows. In June 2006, the Financial Accounting Standards Board ( FASB ) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for Income Taxes ( FIN 48 ), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Group will adopt FIN 48 as of January 1, 2007, as required. The cumulative effect of adopting FIN 48 will be recorded in retained earnings. The Group does not expect that the adoption of FIN 48 will have a significant impact on the Group s financial position and results of operations. Note 2. Acquisitions Axovan On October 31, 2003, the Group acquired Axovan Ltd ( Axovan ), a privately-held biopharmaceutical company in Switzerland focused on the research and development of new compounds. The Group acquired all of the remaining common stock of Axovan for CHF 53 million. The Group acquired Axovan to gain access to Axovan s licenses and to expand the Group s research capacities. The acquisition was recorded as a business combination and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of the acquisition. Since the fair value of assets acquired and liabilities assumed exceeded the fair value of the consideration paid, the Group recorded a liability for contingent consideration for the difference. The Group agreed to pay additional amounts to the shareholders of Axovan upon achievement of future product development milestones. A milestone of CHF 32.5 million on initiation of a Phase IIb/III clinical trial was achieved in December 2004 and paid to former Axovan shareholders in January 2005. The payment offset the balance of contingent consideration with the remaining amount allocated to goodwill. The total additional value of remaining milestone payments could amount to CHF 146 million. The Group considers all milestone payments to be performance-related measures and as such, treats them as goodwill. CoTherix On December 8, 2006, the Group commenced a cash tender offer for all of the issued and outstanding shares (common stock) of CoTherix, Inc. (NASDAQ:CTRX) at a price of USD 13.50 per share. CoTherix is a biopharmaceutical company with its headquarters in Brisbane, California. CoTherix currently markets Ventavis (iloprost), the only approved inhaled therapy for the treatment of pulmonary arterial hypertension in the United States. On January 9, 2007, the acquisition was consummated for a total purchase price consideration of CHF 481 million (USD 389 million) excluding acquisition costs, and CoTherix became an indirect wholly owned subsidiary of Actelion Ltd. Note 3. Licensing agreements In conjunction with the acquisition of Axovan on October 31, 2003, the Group gained access to the license granted by Roche for clazosentan. No payments were made in 2006 and 2005. On November 22, 2002 the Group entered into a license agreement with Oxford GlycoSciences ( OGS ) for miglustat, the active ingredient of Zavesca. OGS has since been acquired by Celltech Group plc, which was subsequently acquired by UCB SA. In 1998, OGS in-licensed miglustat from G.D. Searle & Co. Under the Group s license agreement with OGS, the Group had been granted exclusive marketing rights to sell Zavesca in all countries except Israel and the adjacent West Bank and Gaza Strip territories. For the period from January 1, 2003 through November 17, 2005, the Group paid Celltech a royalty on net sales of Zavesca. On November 17, 2005, the Group replaced the existing license agreement and assumed full responsibility for manufacturing and supply chain, patent-related activities, clinical and pre-clinical activities of Zavesca. In addition, the Group will ensure the drug supply to Teva Pharmaceutical Industries Ltd., the license holder of Zavesca in Israel, and was assigned all UCB rights and obligations under the Searle License. Actelion made an upfront payment of EUR 7.5 million to UCB, which was capitalized as an intangible asset, in exchange for a single-digit royalty rate on future Zavesca sales in glycosphingolipid (GSL) storage disorders. The Group paid EUR 2 million (CHF 3.1 million) of this amount on signature of the agreement in 2005 and EUR 5.5 million (CHF 8.6 million) in 2006 following complete transfer of UCB technical information relating to the development, manufacture, use and sale of miglustat. On November 4, 1998, the Group entered into a license agreement with F. Hoffman-La Roche ( Roche ) for bosentan, the active ingredient in the Group s product, Tracleer. The license grants the Group the exclusive worldwide rights to develop, manufacture, sell any pharmaceutical product with bosentan as its active ingredient for any human therapeutic use, and grant sub-licenses to third parties. The agreement called for the Group to make an initial payment to Roche as well as payments upon the achievement of certain milestones. All payments made to Roche prior to receiving regulatory approval were expensed as acquired in-process research and development costs. Payments made to Roche subsequent to receiving regulatory approval were capitalized and are being amortized over the life of the agreement. As of December 31, 2006 and 2005, payments of CHF 9 million are included in intangible assets and are amortized over eleven years. The agreement also calls for the Group to pay a royalty to Roche based on a percentage of net sales of products with bosentan as the active ingredient. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 55

Consolidated Financial Statements On March 19, 1998, the Group entered into a license agreement with Roche for tezosentan. Under this agreement, Roche granted the Group an exclusive worldwide right to manufacture and sell any product with tezosentan as its active ingredient. The license covers any human therapeutic use of tezosentan except acute renal failure and subarachnoid hemorrhage. The Group may also grant sub-licenses to third parties. The agreement called for the Group to make an initial payment to Roche as well as payments upon the achievement of certain milestones. The Group will make milestone payments upon the filing and approval of new drug applications in the United States and the European Union. If the Group is successful in obtaining regulatory approval for tezosentan, the Group will pay a royalty to Roche based on a percentage of net sales of products with tezosentan as the active ingredient. No payments were made under this agreement during 2006 and 2005. Note 4. Collaborative agreements In July 2006, the Group entered into an agreement with Roche for joint development and commercialization of the Group s selective S1P1 receptor agonist. This collaboration enables the Group and Roche to combine their development and marketing capabilities to improve medical care for patients with autoimmune disorders. The S1P1 collaboration covers both the current selective S1P1 receptor agonist in Phase I as well as any other selective S1P1 receptor agonists resulting from the Group s research efforts in the field. Roche paid the Group an upfront payment of USD 75 million (CHF 92.8 million) in July 2006. In the case of future development and approval milestones being achieved, the Group will be eligible to receive payments of up to an additional USD 555 million for the first compound for all targeted indications. Further development and approval milestone payments are due for further compounds. On all product sales, Roche will pay the Group a royalty. For the current selective S1P1 receptor agonist, the Group will fully fund all development activities up to the end of Phase II for the first two indications. All subsequent development and commercialization costs will be shared equally between Roche and the Group. Both companies will copromote any product resulting from this collaboration and, in addition to the above mentioned milestones and royalty, equally share profit. The agreement shall continue in effect until the expiration of all royalty and/or profit sharing obligations. For the year ended December 31, 2006 the Group recognized revenue of CHF 5.6 million under this agreement. In December 2003, the Group and Merck & Co., Inc. ( Merck ), formed an exclusive worldwide alliance to discover, develop and market new classes of renin inhibitors. This alliance enables the Group and Merck to combine their discovery, development and marketing capabilities with the goal to efficiently provide innovative and better medicines to patients suffering from cardio-renal diseases. Development funding will be initially shared by both parties, with Merck fully responsible to fund pivotal Phase III and outcome studies. Merck will lead and fund commercialization, the Group retains a worldwide option to co-promote any product resulting from this alliance as a paid-for sales force. Merck made upfront payments of USD 25 million (CHF 31.5 million) following completion of technology transfer to Merck and, in March 2005, USD 5 million (CHF 5.8 million) on the selection of the first compound for full pre-clinical development. With the compound entering into man, a further USD 7 million (CHF 8.6 million) was paid by Merck to the Group in July 2006. In addition, the Group will be eligible to receive additional payments of up to USD 235 million for the successful commercialization of the first collaboration product. The Group will also be eligible to receive certain milestone payments for the successful commercialization of additional products. Merck will pay the Group substantial royalties on the sale of all products resulting from this alliance. For the years ended December 31, 2006 and 2005, the Group recognized revenue of CHF 9.1 million and CHF 9.3 million, respectively, under this agreement. In December 2000, the Group entered into an agreement with Genentech Inc. ( Genentech ) for the co-exclusive, royalty-bearing right and license to research, develop, manufacture and sell bosentan, the active ingredient in Tracleer, in the United States. Genentech receives a royalty on net sales of bosentan in the United States. Upon signing the contract the Group received an upfront payment of USD 35 million (CHF 56.4 million), a portion of which was refundable only if the Group did not complete Phase III trials for bosentan for use in the treatment of chronic heart failure. The non-refundable portion of the upfront payment is being recognized over the agreement period, which began in December 2000. In December 2001, the Group received FDA approval for bosentan in the United States for the treatment of pulmonary arterial hypertension and began paying Genentech a royalty on net sales. In January 2002, the Group completed Phase III trials for bosentan for the use in the treatment of chronic heart failure and received neutral results. Upon completion of Phase III trials and receipt of the neutral results, the Group began recognizing the refundable portion of the upfront payment over the life of the agreement, estimated to be twelve years. For each of the years ended December 31, 2006 and 2005 the Group recognized revenue of CHF 4.9 million related to this agreement. In February 2000, the Group entered into an agreement with Genentech for the co-exclusive, royaltybearing right and license to research, develop, manufacture and sell tezosentan in the United States. Genentech may elect to co-promote the drug for certain indications in the United States or receive a royalty on net sales of tezosentan in the United States. Upon signing the contract the Group received an upfront payment of USD 15 million (CHF 24.7 million), which is being recognized over the life of the agreement, estimated to be 17 years. For each of the years ended December 31, 2006 and 2005 the Group recognized revenue of CHF 1.5 million related to this agreement. Note 5. Income taxes The following table sets forth the income before taxes: For the Twelve Months Ended December 31 2006 2005 Switzerland 235,487 106,666 Foreign 43,239 29,331 Total income before taxes 278,726 135,997 The following table sets forth the current and deferred income tax expense: For the Twelve Months Ended December 31 2006 2005 Current tax expense: Switzerland 21,136 5,173 Foreign 14,742 9,626 Total current tax expense 35,878 14,799 Deferred tax (benefit) expense: Switzerland 757 2,260 Foreign 1,001 (6,600) Total deferred tax (benefit) expense 1,758 (4,340) Total income tax expense 37,636 10,459 56

Income taxes payable and accrued as of December 31, 2006 and 2005 amounted to CHF 30.6 million and CHF 9.1 million, respectively. Significant components of the Group s deferred tax assets as of December 31, 2006 and 2005 are shown below. As of December 31, 2006 and 2005 a valuation allowance of CHF 19.9 million and CHF 21.6 million, respectively, has been recognized for certain Group companies based on their historical cumulative operating losses. 2006 2005 Deferred tax assets: Net benefit from operating loss carry forwards 24,591 27,997 Deferred revenue 3,261 2,527 Fair value option expense 5,689 3,000 Accrued expenses 3,143 1,410 Other temporary differences 3,396 3,165 Total deferred tax assets 40,080 38,099 Valuation allowance for deferred tax assets (19,893) (21,591) Deferred tax assets 20,187 16,508 Deferred tax liabilities: Other temporary differences 932 273 Deferred tax liabilities 932 273 The gross value of unused tax loss carry forwards with their expiry dates is as follows: Not capitalized Capitalized Total 2006 One year Two years Three years 572 572 Four years 2,307 2,307 Five years 11,488 11,488 Six years 10,451 10,451 Seven years 1,910 1,910 More than seven years 34,234 13,794 48,028 Total 60,962 13,794 74,756 Reconciliation between the effective income tax expense and the Swiss statutory tax rate, which is 25%: 2006 2005 Tax at Swiss statutory tax rate of 25% 69,682 33,999 Non deductible expenses, non taxable income (2,835) (2,454) Different effective tax rates (30,173) (11,993) Utilization of unrecognized tax losses (1,904) (1,479) Change in valuation allowance (1,699) (6,540) Prior year adjustments and other items 4,565 (1,074) Effective income tax expense 37,636 10,459 Note 6. Earnings per share Earnings per basic and diluted share are based on weighted average common shares and exclude anti-dilutive shares relating to employee share options of 2,586,605 and 2,414,936 for the years ended December 31, 2006 and December 31, 2005, respectively. The following table sets forth the basic and diluted earnings per share calculation: 2006 2005 Basic Diluted Basic Diluted Numerator Income from continuing operations 241,090 241,090 125,538 125,538 Effect of assumed conversion of convertible debt 8,248 Net income available for earnings per share calculation 241,090 249,338 125,538 125,538 Denominator Weighted average shares 22,653,720 22,653,720 22,328,680 22,328,680 Incremental shares for assumed conversion: Convertible bonds 937,093 Share options 734,565 333,036 Total average equivalent shares 22,653,720 24,325,378 22,328,680 22,661,716 Net earnings per share 10.64 10.25 5.62 5.54 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 57

Consolidated Financial Statements Note 7. Cash and cash equivalents Cash and cash equivalents consisted of the following at December 31: 2006 2005 Cash 923,938 110,859 Short-term bank deposits 2,199 27,158 Total 926,137 138,017 Note 8. Investments Marketable Securities In June 2005, the Group purchased a structured product consisting of a straight bond and embedded derivative instruments linked to the performance of a basket of equity instruments for CHF 10.0 million. In accordance with US GAAP, the derivative instruments were required to be bifurcated and accounted for separately. The host instruments were categorized as available-for-sale securities, which were carried at fair value with unrealized gains and losses recorded in other comprehensive income. During 2006, the Group purchased structured debt instruments, consisting of a straight bond and an attached derivative instrument linked to the development of the CHF Libor interest rate, for CHF 20.0 million, which were classified as available-for-sale securities. The estimated fair values and components of gross unrealized gains and losses recorded in other comprehensive income are shown in the table below. 2006 2005 Available-for-sale marketable securities Fair value Unrealized gain Unrealized loss Fair value Unrealized gain Unrealized loss Debt securities 29,750 75 (145) 9,820 (17) Total 29,750 75 (145) 9,820 (17) There have been no sales of available-for-sale marketable securities during 2006 and 2005. The available-for-sale debt securities at December 31, 2006 have a contractual maturity within one year. Derivative Financial Instruments The following tables show the contract or underlying principal amounts and fair values of derivative financial instruments analyzed by type of contract as of December 31, 2006 and 2005. Contract or underlying principal amounts indicate the volume of business outstanding at the balance sheet date and do not represent amounts at risk. In December 2006, the Group entered into a forward foreign exchange rate contract to economically hedge the US Dollar currency exposure related to the anticipated acquisition of CoTherix. The forward contract was contingent on the consummation of the acquisition. Fair values are determined using external price quotations or standard pricing models at December 31, 2006 and 2005. Derivative financial instruments Contract or Positive Negative fair underlying principal amount fair values values 2006 Foreign currency options 211,890 1,425 984 Forward foreign exchange rate contract to manage foreign currency 510,321 2,119 exposure of anticipated acquisition of Cotherix Other contracts 123 Total 722,211 3,667 984 2005 Foreign currency options 185,220 1,213 6,042 Other contracts 90 Total 185,220 1,303 6,042 Changes in the fair value of these derivatives are recognized in other financial income (expense), as they do not meet the definition of a hedge. 58

Note 9. Trade and other receivables Trade and other receivables consisted of the following at December 31: 2006 2005 Trade receivables 208,980 145,347 Other receivables 9,235 12,541 Trade and other receivables, gross 218,215 157,888 Bad debt allowance (493) (263) Unamortized discount 1 (346) (405) Total trade and other receivables, net 217,376 157,220 1 The unamortized discount relates to Spanish trade receivables and is amortized as interest income over the expected payment terms. During 2006, the Group sold without recourse certain trade accounts receivables from its Italian subsidiary to a VIE, unrelated to the Group, in a one-time securitization program. The net book value of the receivables sold was EUR 4.1 million (CHF 6.4 million), which was received in cash. Loss on sale and fees paid were not material. This transaction was accounted for as a sale and consequently the related receivables have been excluded from the accompanying consolidated balance sheet. There is no continuing involvement of the Group with respect to the sold receivables. The VIE is not required to be consolidated in accordance with FIN 46(R). Note 10. Inventories Inventories consisted of the following at December 31: 2006 2005 Semi-finished products 13,040 17,717 Finished products 11,280 8,656 Total 24,320 26,373 Note 11. Other current assets Other current assets consisted of the following at December 31: 2006 2005 Unearned income 1,026 428 Prepaid expenses 16,791 11,371 Commission on convertible bond 9,818 Total 27,635 11,799 Note 12. Goodwill and intangible assets Changes in the net carrying amount of goodwill in 2006 are as follows: Balance Translation effects Additions Balance January 1 December 31 27,333 52 27,385 Intangible assets consisted of the following at December 31: 2006 2005 Gross Accumulated Net carrying Gross Accumulate Net carrying carrying amortization amount carrying amortization amount amount amount Acquired licenses 20,659 (5,616) 15,043 20,651 (3,172) 17,479 Acquired software and other 9,463 (5,347) 4,116 7,229 (3,856) 3,373 Total 30,122 (10,963) 19,159 27,880 (7,028) 20,852 Amortization expense of other intangible assets was CHF 4.5 million and CHF 2.0 million in 2006 and 2005, respectively. The expected future annual amortization expense of other intangible assets is as follows: For the year ending December 31, Amortization expense 2007 4,007 2008 3,790 2009 3,648 2010 2,446 2011 2,444 Thereafter 2,824 Total expected future amortization 19,159 Note 13. Property, plant and equipment Property, plant and equipment consisted of the following at December 31: 2006 2005 At cost: Land 7,471 7,371 Buildings 400 400 Furniture and fixtures and lab equipment 71,908 47,643 Computers 16,459 11,547 Other tangible assets 4,653 3,921 Less: accumulated depreciation (48,217) (34,180) Construction in progress 29,296 13,484 Property, plant and equipment, net 81,970 50,186 Depreciation expense of property plant and equipment was CHF 15.0 million and CHF 10.6 million in 2006 and 2005, respectively. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 59

Consolidated Financial Statements Note 14. Accrued expenses Accrued expenses consisted of the following at December 31: 2006 2005 Personnel and compensation costs 61,801 41,432 Accrued taxes 32,434 8,088 Rebates and allowances 10,050 8,182 Research and development 7,824 10,684 Marketing and royalties 6,968 6,514 Professional services 3,374 3,060 Process development 922 3,708 Other accrued expenses 7,521 4,420 Total 130,894 86,088 Note 15. Borrowings At December 31, 2006, the Group had a credit line, which could be used up to the sum of CHF 10 million as margin cover for over-the-counter trades as well as senior mortgage certificates (ISB and NSB) in the total amount of CHF 10.1 million. Both credit facilities were unused as of December 31, 2006. Convertible bonds At December 31, 2006, the aggregate amount of indebtedness is CHF 641.3 million of which CHF 181.3 million will mature on October 1, 2008 and CHF 460.0 million on November 22, 2011. Total book value of outstanding convertible bonds consisted of CHF 626.8 million and CHF 159.3 million as of December 31, 2006 and 2005, respectively. 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 270.84 per share, issue and redemption price were set at 100% and the 2006 convertible bond 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 shall initially be capped at 1,062,907 shares corresponding to the available conditional capital of the Group as of the issuance date of the convertible bond. Although the Group will seek authorization at its next annual general meeting and, in the event it is not approved, will undertake respective motions for additional conditional capital in any forthcoming annual general meeting during the whole life of the convertible bond until sufficient conditional capital has been authorized to enable the removal of the cap on share delivery, there is no assurance that additional conditional capital will indeed be created and the cap will be removed. The fair value at December 31, 2006 is 116.36 % of the principal amount (CHF 535.3 million). Debt issuance costs amounted to CHF 8.5 million, were recorded in other current assets and are being amortized using the effective interest method. Since the 2006 convertible bond can be converted after 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. 2003 convertible bond In October 2003, the Group issued CHF 143.8 million in convertible bonds ( 2003 convertible bond ). The convertible bond is convertible into shares of the Group up to October 1, 2008 and carries a zero coupon with a yield to maturity at the time of issuance of 4.75%. The conversion price is CHF 153.40 per share. If all bonds are converted into shares at this conversion price, the Group would issue an additional 937,093 shares, if not converted, the Group would pay a redemption price of 126.12% of the principal amount of the convertible bond. The fair value of the 2003 convertible bond at December 31, 2006 is 174.45% of the principal amount (CHF 250.8 million). Debt issuance costs amounting to CHF 3.2 million were recorded in other current assets and are being amortized using the effective interest method. On January 18, 2007 the Group exercised its right to call for an early redemption of the 2003 convertible bond due October 15, 2008. The redemption date will be February 19, 2007 with a redemption price of 116.79% of the principal amount. In view of the current price of the registered shares, the Group anticipates that the convertible bondholders will elect to convert their bonds into shares. The 2003 convertible bond is convertible into 937,093 shares. Bondholders may elect to convert the bonds into shares at any time until February 12, 2007. If no request for a conversion is made, repayment will take place on February 19, 2007. Note 16. Lease commitments Operating leases The Group has several operating leases for its office space, research and development facilities and various equipment. The leases expire between 2007 and 2020, most of them with options to extend for one to five years. The aggregate of the minimum annual operating lease payments are expensed on a straight-line basis over the term of the related lease. The amount by which straight-line rent expense differs from actual lease payments is recognized as either pre-paid rent or deferred rent liability and is reduced in later years. 60

Future minimum payments under non-cancelable operating and capital leases at December 31, 2006 are as follows: Year ended December 31, Operating Capital leases leases 2007 23,903 239 2008 23,671 180 2009 17,318 143 2010 16,271 67 2011 13,688 Thereafter 90,444 Total minimum payments 185,295 629 Less amounts representing interest (97) Present value of future lease payments 532 Less current portion of lease payments (185) Non-current portion of lease payments 347 Rent expense under operating leases was CHF 25.2 million and CHF 15.7 million for the years ended December 31, 2006 and 2005, respectively. In October 2003, the Group signed a lease agreement for a building which was completed and fully functional in early 2006. The agreement contains a committed lease period of fifteen years with an option to extend for another ten years or an option to buy the building at market rates after ten years within the committed lease period. Future payments under this lease agreement amount to a yearly lease expense of about CHF 6.8 million, which are included in the table above. Note 17. Commitments and guarantees The Group has entered into a rent-a-sales force agreement which represents a commitment at December 31, 2006 of CHF 4.0 million. The Group has entered into certain guarantee contracts and letters of credit that total CHF 4.7 million. The guarantees primarily relate to operating leases and credit lines for subsidiaries in foreign jurisdictions. Due to the nature of these arrangements and historical experience, the Group does not expect to be required to collateralize its obligations with cash. Note 18. Pension plans The Group maintains a pension plan (the Plan ) covering all of its employees in Switzerland. In addition to retirement benefits, the plan provides benefits on death or long-term disability of its employees. The Group and its employees pay retirement contributions, which are defined as a percentage of the employees covered salaries, to a collective pension fund operated by an insurance company. Interest is credited to the employees accounts at the minimum rate provided in the Plan, payment of which is guaranteed by an insurance contract, which represents the Plan s primary asset. Future benefit payments are managed by the insurance company. The Group has entered into this Plan with a third party insurance company to minimize the risk associated with a pension obligation. This investment strategy was adopted as a means to reduce the uncertainty and volatility of the Plan s assets for the Group. Fair value of the Plan s assets is the estimated cash surrender value at the respective balance sheet date. In addition, the Group maintains pension plans in France, Italy and Japan, which are insignificant to the Group. The Group uses a measurement date of December 31 for pension plans. Net periodic benefit costs for the Group s pension plans include the following components: 2006 2005 Service cost 6,681 5,860 Interest cost 2,047 1,458 Expected return on plan assets (2,144) (1,497) Amortization of unrecognized amounts (62) Net periodic pension cost 6,522 5,821 The following tables provide the weighted average assumptions used to develop net periodic benefit cost and the actuarial present value of projected benefit obligations: Weighted average discount rate 2.73% 3.50% Expected long-term rate of return on plan assets 3.50% 3.50% Rate of increase in compensation levels (salary) 2.77% 2.00% The following tables set forth the change in present value of obligations and change in fair value of plan assets at December 31, for the Group s pension plans: 2006 2005 Change in present value of obligations Present value of obligations beginning of year 56,782 41,649 Plan amendments 1,719 Service cost 6,681 5,860 Interest cost 2,047 1,458 Plan participant contributions 4,234 3,396 Actuarial loss (gain) 17,046 (162) Benefits paid (2,915) (2,515) Transfers in/out 6,579 7,096 Premiums paid (2,313) Foreign currency translation 35 Present value of obligations end of year 89,895 56,782 Change in fair value of plan assets Plan assets at fair value beginning of year 55,886 42,765 Actual return on plan assets 1,325 (767) Group contributions 6,592 5,911 Plan participant contributions 4,234 3,396 Benefits paid (2,915) (2,515) Premiums paid (2,313) Transfers in/out 7,251 7,096 Fair value of plan assets end of year 70,060 55,886 The movement in the net asset or liability and the amounts recognized in the balance sheet were as follows: 2006 2005 Present value of obligations (89,895) (56,782) Fair value of plan assets 70,060 55,886 Present value of net obligation (funded status) (19,835) (896) Unrecognized actuarial (losses)/gains 1,344 Net asset or (liability) in the balance sheet (19,835) 448 As of December 31, 2006, an amount of CHF 18.0 million net of tax related to the pension plans has been recognized in other comprehensive income. The liability/asset represents the difference between the cash surrender value of the insurance policy and the actuarially determined projected benefit obligation. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 61

Consolidated Financial Statements The accumulated benefit obligation consisted of CHF 72.6 million and CHF 54.3 million as of December 31, 2006 and 2005, respectively. The expected future cash flows to be paid by the Group in respect of the pension plans as of December 31, were as follows: Employer contributions 2007 (estimated) 7,333 Expected future benefit payments 2007 182 2008 559 2009 512 2010 692 2011 784 Next 5 years thereafter 18,010 Certain of the Group s subsidiaries sponsor defined contribution plans. Total expense of these defined contribution plans was CHF 2.5 million and CHF 3.7 million in 2006 and 2005, respectively. The amounts payable related to these contribution plans were CHF 150.5 thousand and CHF 882.1 thousand as of December 31, 2006 and 2005, respectively. Note 19. Shareholders equity Authorized capital The Annual General Meeting of April 14, 2005 authorized an increase in share capital to be used for strategic purposes. The Board of Directors is authorized to increase until April 14, 2007 the share capital to an amount of not more than CHF 27.5 million by issuance of not more than 11 million fully paid-in registered shares with a nominal value of CHF 2.50 per share. No modifications or additions were proposed at the Annual General Meeting on April 10, 2006. Conditional capital Since inception, the Group has created conditional capital for the establishment of share option plans and convertible bonds. At December 31, 2006, the Group has conditional capital of CHF 18.6 million of which CHF 13.6 million relate to share option plans and CHF 5.0 million to convertible bonds. Movements in conditional capital are as follows: January 1, 2005 17,991 Creation of conditional capital for employee share option plans 2,500 Exercise of options (838) December 31, 2005 19,653 Creation of conditional capital for employee share option plans Exercise of options (1,026) December 31, 2006 18,627 Treasury shares At December 31, 2006 the Group held 55,697 treasury shares, which were acquired at an average price of CHF 199.62. In the course fo the year, the Group acquired 52,000 of treasury shares at an average price of CHF 208.45. During 2006, members of the Board of Directors received 2,500 treasury shares at an average price of CHF 75.41 as compensation. Call spread In connection with the 2006 convertible bond, the Group used a portion of the proceeds to purchase call spread options on their own shares from an international financial institution to mitigate the exposure to potential dilution from conversion of the 2006 convertible bond. The total premium paid was CHF 20.6 million, which has been recorded as a reduction in additional paid-in capital. Note 20. Stock-based compensation Share-based payment arrangements The Group has two share-based payment plans for employees and members of the board, which are described below. Total compensation costs recognized in the consolidated financial statements with respect to these plans are CHF 32.7 million and CHF 13.6 million in 2006 and 2005, respectively. Total related tax benefits of CHF 3.8 million and CHF 1.5 million were recognized in 2006 and 2005, respectively. The following assumptions have been applied in the valuation model: Year ended December 31 2006 2005 Expected life in years 6 years 4 years Interest rate 2.47% 2.12% Volatility 44.3% 48.0% Expected dividend yield Standard Share Option Plan The Group granted standard share options to employees and directors, which generally vest over a four-year period with 25% of the options becoming exercisable each year. Options granted to members of the board out of the Group s Director Share Option Plan immediately vest. Each option entitles the holder to one share. Options generally expire ten years after the plan issuance date. In 2006, no additional conditional capital was created in connection with employee share option plans. At December 31, 2006, there were 869,411 conditional shares available for granting future share options. 62

The following table summarizes activities under the standard share option plan for the twelve months ended December 31: 2006 2005 Share Weighted Share Weighted options average options average exercise price exercise price Outstanding, beginning of year 2,538,392 94.89 2,526,412 82.68 Granted 540,147 140.52 457,451 129.64 Forfeited (86,857) 122.55 (109,877) 116.71 Exercised (410,337) 75.61 (335,594) 13.62 Outstanding, end of year 2,581,345 106.58 2,538,392 94.89 Exercisable, end of year 1,291,254 1,202,846 The following is a summary of standard share options outstanding and exercisable at December 31, 2006: Share options outstanding Share options exercisable Share options Weighted Weighted Share options Weighted Weighted outstanding average average exercisable average average remaining exercise price remaining exercise price contractual contractual life in years life in years Range of Exercise Prices 0 25.00 233,554 1.89 3.70 233,554 1.89 3.70 25.01 50.00 99,288 5.31 47.24 49,338 5.33 47.18 50.01 75.00 470,062 5.39 61.74 304,967 5.12 61.58 75.01 100.00 130,237 6.55 93.07 56,305 6.57 93.27 100.01 125.00 254,240 6.31 113.33 136,959 5.13 112.44 125.01 150.00 1,217,052 8.17 137.12 352,047 6.79 135.85 150.01 175.00 29,564 4.76 162.33 24,064 3.65 163.01 175.01 225.00 147,348 4.32 189.51 134,020 3.79 188.50 Total 2,581,345 1,291,254 The Group recorded stock-based compensation expense for the standard share option plans of CHF 25.8 million and CHF 10.8 million for the years ending December 31, 2006 and 2005, respectively, which is being amortized in accordance with SFAS 123(R) over the vesting periods of the related options, which is generally four years. The total intrinsic value of options exercised during the years ended December 31, 2006 and 2005 was CHF 42.0 million and CHF 30.6 million, respectively. The aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2006 was CHF 416.7 million and CHF 226.4 million, respectively. The fair value of options vested was CHF 24.4 million and CHF 22.2 million in 2006 and 2005, respectively. There were no expirations during the periods presented. The weighted average grant date fair values of options granted during the years ended December 31 were as follows: 2006 2005 Number of Weighted Number of Weighted share options average share options average grant-date grant-date fair values fair values Options whose exercise price is: Equal to the market price of the Group s shares at the grant date 540,147 62.31 428,911 45.35 Below the market price of the Group s shares at the grant date 7,200 37.66 Above the market price of the Group s shares at the grant date 21,340 25.28 Total 540,147 62.31 457,451 44.29 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 63

Consolidated Financial Statements A summary of the status of non-vested share options and changes during the year is presented below: 2006 Share Weighted options average grant-date fair values Outstanding non-vested, beginning of year 997,119 49.14 Granted 540,147 62.31 Forfeited (71,216) 60.56 Vested (477,118) 51.23 Outstanding non-vested, end of year 988,932 61.42 As of December 31, 2006, there was CHF 41.5 million of total unrecognized compensation cost related to non-vested options which is expected to be recognized over a weighted average period of 1.5 years. Challenge Award In 2004, the shareholders approved an increase in the total number of conditional shares by 2,000,000 to be used in connection with a special one-time incentive plan ( Challenge Award ) linked to specific achievements by the Group. Options may be granted to permanent employees and members of the board who have joined the Group by the end of 2006. Optionees under this plan are not eligible for any additional grants under this plan and no grants will be made after the achievement date. Options generally expire ten and a half years after the grant date. There were no expirations during the periods presented. The two conditions to be met are a) cumulative net revenues on four consecutive calendar quarters reach CHF 1 billion and b) the market share price equals at least CHF 286 and remains at an average of that level for at least twenty consecutive trading days. The conditions can be fulfilled in either order and need not be met simultaneously. The achievement date will be the first trading day following the day both conditions are fulfilled. On that date, the first quarter of the granted options is vested and becomes exercisable. Of the remaining three quarters, the first quarter is vested and becomes exercisable after six months, the second quarter after twelve months and the third quarter after eighteen months after the achievement date. At December 31, 2006, no options were vested under this plan. The following table summarizes activities under the Challenge Award for the years ended December 31: 2006 2005 Share Share options options Outstanding, beginning of year 1,531,210 Granted 197,360 1,615,560 Forfeited (149,130) (84,350) Exercised Outstanding, end of year 1,579,440 1,531,210 Exercisable, end of year Weighted average exercise price for options outstanding and forfeited in 2006 was CHF 286, weighted average remaining contractual life for options outstanding at December 31, 2006 was 8.69 years with a weighted average fair value of CHF 27.96 and CHF 18.87 as of December 31, 2006 and 2005, respectively. The Group recorded stock-based compensation expense for the Challenge Award of CHF 6.9 million for the year ending December 31, 2006, which is being amortized in accordance with SFAS 123(R) over the vesting periods of the related options. As of December 31, 2006, there was CHF 25.0 million of total unrecognized compensation cost related to non-vested options. That cost is expected to be recognized over a weighted average period of 2.02 years. Options granted in 2006 and 2005 had an exercise price of CHF 286 and a grant-date fair value of CHF 20.0 and CHF 18.87, respectively. In February 2007, the market condition of the Challenge Award was met. Pro forma disclosures Before the Group adopted SFAS 123(R) on July 1, 2005, the Group elected to follow APB No. 25 to account for employee share options. Fair values of awards granted under the standard share option plans until December 31, 2004 were estimated at grant or purchase dates using a Black-Scholes option pricing model. Awards granted after December 31, 2004 were estimated by use of a Binomial Lattice option pricing model. The exercise price of all options granted under the Challenge Award was set at the higher of either CHF 286 or the closing market price of the Group share on the trading day immediately previous to the grant date. In the event that the two conditions are not met before December 31, 2009, the Challenge Award will be cancelled and the CHF 5 million conditional capital will not be used. At December 31, 2006, there were 420,560 shares available for grant of future share options. 64

Six Months Ended June 30, 2005 Net income from continuing operations 65,925 Stock-based compensation cost included in the determination of net income from continuing operations, net of related taxes 550 Stock-based compensation cost that would have been included in the determination of net income from continuing operations if the fair value based method had been applied to all awards, net of related taxes (11,367) Pro forma net income from continuing operations as if the fair value based method had been applied to all awards 55,108 Basic net income per share of continuing operations 2.96 Diluted net income per share of continuing operations 2.85 Pro forma basic income per share from continuing operations as if the fair value based method had been applied to all awards 2.48 Pro forma diluted income per share from continuing operations as if the fair value based method had been applied to all awards 2.38 Note 21. Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) consists of the following for the years ending December 31: 2006 2005 Foreign currency translation adjustments (779) 2,292 Additional pension liabilities (17,985) Unrealized losses on available-for-sale securities (87) (17) Total accumulated other comprehensive income (loss) (18,851) 2,275 Note 22. Concentrations Cash and cash equivalents, marketable securities and accounts receivables are financial instruments, which potentially subject the Group to concentrations of credit risk. The Group has not experienced any significant credit losses and does not generally require collateral on receivables. For the years ended December 31, 2006 and 2005, three distributors accounted for approximately 43% and 46%, respectively, of total sales. At December 31, 2006 and 2005, CHF 25.1 million and CHF 18.0 million, respectively, of trade accounts receivable related to these distributors. Management believes other distributors could be identified which would purchase the Group s products on comparable terms; however, the establishment of new distributor relationships could take several months. The Group performs ongoing credit evaluations of its customers financial condition and extends credit, generally without collateral. In 2006 and 2005, the Group did not record any significant additions to, or losses against, its allowance for doubtful accounts. The Group is dependent upon toll manufacturers to manufacture its products. For the years ended December 31, 2006, one supplier accounted for approximately 25% of total purchases, while in 2005 another supplier accounted for approximately 31% of total purchases. Management believes other suppliers could provide similar products on comparable terms. A change in suppliers, however, could cause a delay in fulfillment of customer orders and a possible loss of sales, which could adversely affect operating results. Management believes that the Group maintains sufficient inventory levels to minimize the impact that a change in suppliers would have on operating results. Note 23. 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 for the treatment of pulmonary arterial hypertension and Zavesca for the treatment of Type I Gaucher s disease. Contract revenue is derived from collaboration and service agreements with third parties. Product revenue attributable to individual countries is based on the location of the customer. The Group s geographic information is as follows: December 31, 2006: Switzerland United States Europe Other Total Product revenue from external customers 14,716 422,201 392,680 94,544 924,141 Contract revenue from external customers 21,265 267 21,532 Long-lived assets 114,843 4,939 5,727 3,005 128,514 December 31, 2005: Switzerland United States Europe Other Total Product revenue from external customers 10,907 298,027 293,735 44,887 647,556 Contract revenue from external customers 15,774 259 16,033 Long-lived assets 86,795 4,420 4,281 2,875 98,371 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 65

Report of Actelion Management on Internal Control over Financial Reporting Actelion s Board of Directors and Management of the Group are responsible for establishing and maintaining adequate internal control over financial reporting. Actelion s internal control system was designed to provide reasonable assurance to Actelion s Management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Actelion Management assessed the effectiveness of the Group s internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria established within the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment Management has concluded that, as of December 31, 2006, Actelion s internal control over financial reporting is effective based on those criteria. Management s assessment, as well as the effectiveness of internal control over financial reporting as of December 31, 2006, have been audited by Ernst & Young AG, Switzerland, an independent public accounting firm who also audit our consolidated financial statements included in this Annual Report. Their audit report on internal control over financial reporting is included on page 67. Dr. Jean-Paul Clozel CEO Andrew J. Oakley CFO Allschwil, February 16, 2007 66

Report on Internal Control over Financial Reporting To the Board of Directors and Shareholders of Actelion Ltd and its subsidiaries We have audited management s assessment, included in the accompanying Management s Report on Internal Control over Financial Reporting, that Actelion Ltd and its subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Actelion Ltd and its subsidiaries Board of Directors and management are responsible for maintaining effective internal control over financial reporting and management is responsible for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management s assessment and an opinion on the effectiveness of the Company s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management s assessment that Actelion Ltd and its subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Actelion Ltd and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2006 consolidated financial statements of Actelion Ltd and its subsidiaries and our report dated February 16, 2007 expressed an unqualified opinion thereon. Ernst & Young AG Jürg Zürcher Swiss Certified Accountant (in charge of the audit) Robin A. Ginn Certified Public Accountant Basel, February 16, 2007 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 67

Report of the Group Auditors To the General Meeting of Actelion Ltd, Allschwil As group auditors, we have audited the accompanying consolidated balance sheet of Actelion Ltd and its subsidiaries as of December 31, 2006, and the related consolidated income statement, changes in shareholders equity and cash flows for the year then ended. These financial statements are the responsibility of the Company s Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits. We confirm that we meet the legal requirements concerning professional qualification and independence. The consolidated financial statements of Actelion Ltd as of December 31, 2005, were audited by other auditors whose report dated February 17, 2006, expressed an unqualified opinion on those statements. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Actelion Ltd and its subsidiaries at December 31, 2006, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles and comply with Swiss law. We recommend that the consolidated financial statements submitted to you be approved. As discussed in Note 18 to the consolidated financial statements, effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Actelion Ltd and its subsidiaries internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 16, 2007 expressed an unqualified opinion thereon. Ernst & Young AG Jürg Zürcher Swiss Certified Accountant (in charge of the audit) Robin A. Ginn Certified Public Accountant Basel, February 16, 2007 68

Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 69

Holding Company Statements Balance Sheets (in CHF thousands) December 31 2006 2005 Assets Current assets Cash and cash equivalents 281,397 131,888 Marketable securities 19,855 674 Derivative instruments 2,119 Other receivables 643 171 Other receivables with group companies 55,329 253 Prepayments and accrued income 1,038 333 Total current assets 360,381 133,319 Non-current assets Investments in subsidiaries 194,535 186,070 Derivative instruments 20,562 Treasury shares 11,118 Long-term loans to subsidiaries 156,981 115,273 Total non-current assets 383,196 301,343 Total assets 743,577 434,662 Liabilities and Shareholders Equity Current liabilities Trade and other payables 66 414 Trade and other payables with group companies 223 17,966 Accrued expenses 716 1,769 Other short-term liabilities 17,025 1,764 Total current liabilities 18,030 21,913 Non-current liabilities Other non-current liabilities with group companies 66,991 3,742 Total non-current liabilities 66,991 3,742 Total liabilities 85,021 25,655 Shareholders Equity Common shares (par value CHF 2.50 per share, authorized 41,406,640 for both years; issued 22,955,884 and 22,545,547 shares in 2006 and 2005, respectively) 57,390 56,364 Legal reserves share premium 343,543 303,983 Treasury shares reserve 11,118 467 Accumulated profit 246,505 48,193 Total Shareholders Equity 658,556 409,007 Total Liabilities and Shareholders Equity 743,577 434,662 70

Income Statements (in CHF thousands) Twelve Months Ended December 31 2006 2005 Financial income 222,472 61,225 Total income 222,472 61,225 Administrative expense (3,049) (4,038) Financial expense (21,111) (8,491) Amortization of incorporation cost (901) Total expense (24,160) (13,430) Income before and after taxes (net income) 198,312 47,795 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 71

Holding Company Statements Notes to the Financial Statements 2006 1. Accounting principles The financial statements of Actelion Ltd have been prepared in accordance with the accounting principles as prescribed by Swiss Company Law. 2. Material investments Company Country Location Ownership Consolidation Function Share capital Interest method Actelion Pharmaceuticals Australia Pty Ltd Australia Sydney 100% Full Sales AUD 2,016,667 Actelion Pharmaceuticals Austria GmbH Austria Vienna 100% Full Sales EUR 35,000 Actelion Pharmaceuticals do Brasil Ltda Brazil Rio de Janeiro 100% Full Sales BRL 6,632,430 Actelion Pharmaceuticals Canada Inc Canada Laval 100% Full Sales CAD 2,600,000 Actelion Pharmaceuticals France SAS France Paris 100% Full Sales EUR 200,000 Actelion Pharmaceuticals Deutschland GmbH Germany Freiburg 100% Full Sales EUR 1,000,000 Actelion Pharmaceuticals Hellas SA Greece Chalandri 100% Full Sales EUR 421,500 Actelion Pharmaceuticals Italia S r l Italy Milan 100% Full Sales EUR 15,000 Actelion Pharmaceuticals Japan Ltd Japan Tokyo 100% Full Sales JPY 95,000,000 Actelion Pharmaceuticals Nederland BV Netherlands Woerden 100% Full Sales EUR 602,122 Actelion Pharmaceuticals Espana SL Spain Barcelona 100% Full Sales EUR 127,100 Actelion Pharmaceuticals Sverige AB Sweden Danderyd 100% Full Sales SEK 1,000,000 Actelion Ilac Ticaret L.S Turkey Istanbul 100% Full Sales TRY 2,633,278 Actelion Pharmaceuticals Switzerland Allschwil 100% Full Research, CHF 614,610 Ltd (CH) Developm., Prod., Marketing, Sales Actelion Pharmaceuticals United Kingdom London 100% Full Sales GBP 250,000 UK Ltd Actelion Registration Ltd United Kingdom London 100% Full Holder marketing GBP 1 authorization EU Actelion Pharmaceuticals US Inc United States South San Francisco 100% Full Sales USD 5,000 Actelion Pharma Schweiz AG Switzerland Baden 100% Full Marketing CHF 100,000 Actelion Percurex AG Switzerland Basel 100% Full Research CHF 100,000 Actelion Paris Organisation SAS France Paris 100% Full Marketing EUR 200,000 Actelion Clinical Operations, Inc United States Cherry Hill, New Jersey 100% Full Clinical Research USD 1,000 Actelion Finance SCA Luxembourg Luxembourg 100% Full Financing CHF 62,000 Actelion Partners SNC Luxembourg Luxembourg 100% Full Financing USD 1,000 Actelion Lux. SARL Luxembourg Luxembourg 100% Full Financing EUR 12,500 Actelion Participation GmbH Switzerland Allschwil 100% Full Financing CHF 20,000 Actelion Pharmaceuticals Israel Ltd Israel Ramat-Gan 100% Full Development NIS 100 Actelion Pharmaceuticals Portugal Portugal Lissboa 100% Full Sales EUR 5,000 Actelion Pharmaceuticals Belgium NV Belgium Wilrijk 100% Full Sales EUR 600,000 Actelion Pharmaceuticals Korea Ltd South Korea Seoul 100% Full Sales KRW 100,000,000 Actelion US Holding Co. United States Delaware 100% Full US Holding USD 1 72

3. Share capital At December 31, 2006, the issued share capital amounts to CHF 57,389,710 and consists of 22,955,884 common shares (including 55,697 treasury shares) with a nominal value of CHF 2.50 each. The shares are registered and fully paid-up. Each share is entitled to one vote. 4. Conditional capital Since inception the Company has created conditional capital for the establishment of stock option plans, convertible bonds as well as for the potential issuance of shares in connection with certain credit facilities. At December 31, 2006, the Company has conditional capital of CHF 18.6 million. Movements in conditional capital are as follows (in CHF thousands): January 1, 2005 17,991 Creation of conditional capital for employee stock option plans 2,500 Exercise of options (838) December 31, 2005 19,653 Creation of conditional capital for employee stock option plans Exercise of options (1,026) December 31, 2006 18,627 5. Authorized capital The Annual General Meeting of April 14, 2005 authorized an increase in share capital to be used for strategic purposes. The Board of Directors is authorized to increase until April 14, 2007 the share capital to an amount of not more than CHF 27.5 million by issuance of not more than 11 million fully paid-in registered shares with a nominal value of CHF 2.50 per share. No modifications or additions were proposed on the Annual General Meeting of April 10, 2006. 6. Treasury shares At December 31, 2006, the Company held 55,697 treasury shares, which were acquired at an average price of CHF 199.62. In the cours of the years, the Company acquired 52,000 of treasury shares at an average price of CHF 208.45. During 2006, members of the Board of Directors received 2,500 treasury shares at an average price of CHF 75.41 as compensation. The treasury shares are considered as long-term investment and therefore valued at cost. 7. Long-term derivative instrument In connection with the 2006 convertible bond, Actelion Ltd used a portion of the proceeds to purchase call spread options on their own shares from an international financial institution to mitigate the exposure to potential dilution from conversion of the 2006 convertible bond. The total premium paid was CHF 20,562,000, which has been recorded as a long-term derivative instrument. 8. Guarantees In November 2006, Actelion Finance SCA issued a CHF 460 million convertible bond (the "Bond"). Under the guarantee agreement signed on November 22, 2006, Actelion Ltd unconditionally guarantees the due payment of the amounts payable by Actelion Finance SCA pursuant to the terms of the Bond, or, upon conversion of the bonds, the due delivery of the shares and/or cash payment for fractions. In 2006, Actelion Ltd has issued a first demand guarantee of up to USD 1,184,178 to Deutsche Bank Mortgage Capital, USA, for securing the rent obligations of Actelion Clinical Operations, USA. In 2005, Actelion Ltd issued a stand-by letter of credit of JPY 39,571,200 for securing office rent obligations of Actelion Pharmaceuticals Japan Ltd. In 2004, Actelion Ltd has issued a stand-by letter of credit of JPY 90,000,000 for securing the rent obligations of Actelion Pharmaceuticals Japan Ltd. In October 2003, Actelion Finance SCA issued a CHF 143.8 million convertible bond (the Bond ). Under the guarantee agreement signed on October 15, 2003, Actelion Ltd unconditionally guarantees the due payment of the amounts payable by Actelion Finance SCA pursuant to the terms of the Bond, or, upon conversion of the Bond, the due delivery of the shares and/or cash payment for fractions. In 2003, Actelion Ltd has issued a first demand guarantee of up to EUR 1,100,000 to Deutsche Bank for their credit facility with Actelion Pharmaceuticals Germany GmbH. In addition, as of December 31, 2006, other guarantees in the amount of CHF 467,421 exist. The Company belongs to the Swiss value-added tax (VAT) group of Actelion Pharmaceuticals Ltd, and thus carries joint liability to the Swiss federal tax authority for value-added tax. Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 73

Holding Company Statements 9. Significant shareholders According to the information available to the Board of Directors the following shareholders held a significant percentage of shares: 2006 2005 Name Percentage Percentage Percentage Percentage of share capital of voting rights of share capital of voting rights Management & Directors* >10.0% >10.0% >10.0% >10.0% Rudolf Maag >5.0% >5.0% >5.0% >5.0% MFS Investment Management >5.0% >5.0% BB Biotech Invest SA >5.0% >5.0% >5.0% >5.0% Fidelity Management & Research Co. >10.0% >10.0% >5.0% 5.0% *No individual has a holding exceeding 5% 10. Proposed appropriation of available earnings 2006 2005 Retained earnings at beginning of the year 48,193 398 Net income for the year 198,312 47,795 Total available earnings carried forward 246,505 48,193 Balance to be carried forward 246,505 48,193 74

Holding Company Statements Report of the Statutory Auditors Report of the statutory auditors to the general meeting of Actelion Ltd Allschwil, Switzerland As statutory auditors, we have audited the accounting records and the financial statements (balance sheet, income statement and notes, pages 70 to 74) of Actelion Ltd for the year ended December 31, 2006. The financial statements of the Company as of December 31, 2005, were audited by another auditor. The report dated February 17, 2006, expressed an unqualified opinion. These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with Swiss law and the Company s articles of incorporation. We recommend that the financial statements submitted to you be approved. Ernst & Young AG Jürg Zürcher Swiss Certified Accountant (in charge of the audit) Robin A. Ginn Certified Public Accountant Basel, February 16, 2007 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 75

Shareholder Information Share price The following table shows the reported high and low quarterly closing share price of the Actelion shares on the SWX Main Market during the year 2006. High Low First quarter 131.20 108.10 Second quarter 149.70 120.00 Third quarter 179.40 124.00 Fourth quarter 271.75 179.50 On December 31, 2006 the last reported closing share price was CHF 268.0 and the market capitalization of Actelion Ltd was CHF 6.15 billion, compared with a share price of CHF 108.7 and market capitalization of CHF 2.45 billion the previous year. The total number of registered shareholders on December 31, 2006 was 4,734. Listing Actelion Ltd is organized under Swiss law and is the holding company of the Actelion Group. The Company s initial equity funding was provided in 1998 and 1999 in two separate rounds of financing totaling CHF 66 million. The registered shares of Actelion Ltd have been listed on the SWX New Market since April 6, 2000 (symbol: ATLN). A total of 1,000,000 primary shares were placed at the Company s Initial Public Offering at the price of CHF 260 per share raising CHF 246.1 million. On June 20, 2001, Actelion Ltd announced a 4:1 split in its shares. On September 9, 2002 Actelion listed the Company s registered shares on the SWX Main Market. The SWX Swiss Exchange waived the requirement for a listing prospectus. The trading symbol remains the same and the Company will continue to report full quarterly figures. 76

Board of Directors Robert E. Cawthorn Chairman, Retired Chairman and CEO, Rhône-Poulenc-Rorer André J. Mueller Vice-Chairman, Former Chief Financial Officer Jean-Paul Clozel Founder, Chief Executive Officer Juhani Anttila Chairman, Ascom Holding Ltd. Carl Feldbaum Former President of the Biotechnology Industry Organisation (BIO) Werner Henrich Chairman, Basilea Pharmaceutica Ltd. Armin Kessler Former Chief Operating Officer, F. Hoffmann-La Roche Jean Malo Chief Investment Officer, Breen Investors L.P. Scientific Advisory Board Joël Ménard Professor of Public Health, Faculty of Medicine René Descartes, Paris 5, France Hugo Kubinyi Professor of Pharmaceutical Chemistry, University of Heidelberg, Germany Craig M. Pratt Director of Research, The Methodist DeBakey Heart Center, Houston, Texas, USA David Shlaes Anti-Infectives Consulting, Stonington, CT, USA Graeme Stewart Professor of Medicine, Westmead Hospital, Sydney, Australia Richard Tsien Professor of Molecular & Genetic Medicine, Stanford University, California, USA Actelion Executive Committee Jean-Paul Clozel Founder, Chief Executive Officer Simon Buckingham President, Global Corporate and Business Development Christian Chavy President, Business Operations Roland Haefeli Vice President, Head of Investor Relations and Public Affairs Isaac Kobrin Senior Vice President, Head of Clinical Development Andrew J. Oakley Vice President, Chief Financial Officer Louis de Lassence Vice President, Head of Corporate Services Senior Management Marian Borovsky Vice President, General Counsel & Corporate Secretary Martine Clozel Senior Vice President, Head of Drug Discovery, Pharmacology & Preclinical Development Walter Fischli Founder, Senior Vice President, Head of Drug Discovery, Molecular Biology & Biochemistry Thomas Weller Vice President, Head of Drug Discovery, Chemistry Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts 77

Contacts Actelion Pharmaceuticals Ltd./Actelion Ltd. Gewerbestrasse 16 CH-4123 Allschwil Switzerland phone +41-61-565 65 65 fax +41-61-565 65 00 Actelion Pharma Schweiz AG (Switzerland) Stadtturmstrasse 10 CH-5400 Baden Switzerland phone +41-56-200 29 40 fax +41-56-200 29 41 Actelion Pharmaceuticals Australia Pty Ltd PO Box 372 Frenchs Forest NSW 1640 Australia phone +61-2-94 86 46 00 fax +61-2-99 86 13 44 Actelion Pharmaceuticals Austria GmbH Bösendorferstrasse 4/Top 23 1010 Wien Austria phone +43-1-505 45 27 fax +43-1-505 45 62 Actelion Pharmaceuticals Belgium NV Regus Pegasus Park Pegasuslaan 5 1831 Diegem Belgium phone +32-2-709 21 60 fax +32-2-709 22 22 Actelion Pharmaceuticals do Brasil Ltda. Praia de Botafogo 501 1 Andar Bloco Corcovado 22250-040 Rio de Janeiro - RJ Brazil phone +55-21-3266 6200 fax +55-21-3266 6213 Actelion Pharmaceuticals Canada Inc 2550 Daniel-Johnson Blvd. Suite 701 Laval Quebec H7T 2L1 Canada phone +1-450-681 16 64 fax +1-450-681 95 45 Actelion Pharmaceuticals Ltd (Branch Office) Belgicka 40 120 00 Prague 2 Czech Republic phone +420-2-341 38 150 fax +420-2-341 38 154 Actelion Pharmaceuticals España, S.L. Via Augusta 281, 3º B 08017 Barcelona Spain phone +34-93-253 10 64 fax +34-93-418 6097 Actelion Pharmaceuticals Deutschland GmbH Basler Strasse 63 65 79100 Freiburg Germany phone +49-761-45 640 fax +49-761-45 64 45 Actelion Pharmaceuticals Italia Srl Via Provinciale Selice, 50 40026 Imola (Bologna) Italy phone +39-0542-64 87 11 fax +39-0542-64 87 34 Actelion Pharmaceuticals Japan Ltd Ebisu Prime Square Tower 1-1-39 Hiroo, Shibuya-Ku Tokyo 150-0012 Japan phone +81-3-57 74 41 51 fax +81-3-57 74 51 14 Actelion Pharmaceuticals Korea Ltd Star Tower 29F 737 Yeoksam - dong Gangnam-gu Seoul Korea phone +82-2-2112 2833 fax +82-2-2112 2835 Actelion Pharmaceuticals Nederland B.V. Beneluxlaan 2B 3446 GR Woerden The Netherlands phone +31-348-43 59 55 fax +31-348-42 09 04 Actelion Pharmaceuticals Portugal Praça Marquês de Pombal, 15-8 1250-163 Lisboa Portugal phone +351-21-358 61 20 fax +351-21-358 61 29 Actelion Pharmaceuticals Sverige AB Svärdvägen 3 182 33 Danderyd Sweden phone +46-8-54 49 82 50 fax +46-8-54 49 82 68 Actelion Pharmaceuticals France SAS 21, boulevard de la Madeleine 75001 Paris France phone +33-1-58 62 32 32 fax +33-1-58 62 32 22 Actelion Ilaç Ltd. Sti. Yildizcicegi Sokak, No:21 Etiler 34337 Istanbul Turkey phone +90-212-257 77 84 fax +90-212-257 77 39 Actelion Pharmaceuticals UK Ltd BSI Building 13 th Floor 389 Chiswick High Road Chiswick London W4 4AL UK phone +44-20-89 87 33 33 fax +44-20-89 87 33 22 Actelion Pharmaceuticals US, Inc. 5000 Shoreline Court Suite 200 South San Francisco, CA 94080 USA phone +1-650-624 69 00 fax +1-650-589 15 01 Actelion Pharmaceuticals Hellas S.A. 7, Paleologou str, 152 32, Chalandri Athens Greece phone +30-210-675 25 00 fax +30-210-675 25 31 78 Actelion Annual Report 2006 Chairman s Letter CEO Interview Business Highlights Patient Stories Clinical Development Drug Discovery Inside Story People CFO s Letter Corporate Governance Financial Statements Shareholder Information Contacts

Imprint Publisher Actelion Ltd Investor Relations & Public Affairs Allschwil Switzerland Concept & Design gruner brenneisen communications Basel Switzerland Editor FrontLine Communications Lugano Switzerland Photographs Martin Friedli Basel Switzerland Chester Simpson Alexandria, V.A. USA Medical University of Vienna Austria Litho LAC AG Basel Print Werner Druck Basel Switzerland

Actelion Ltd (Headquarters) Gewerbestrasse 16 CH-4123 Allschwil Switzerland Phone +41 61 565 65 65 Fax +41 61 565 65 00 www.actelion.com info@actelion.com