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annual report 2010 inspiring the future.

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transforming research into reality actelion today actelion is a team of more than 2,400 professionals we come to work each day to change someone s life our freedom to create generates inspirational medicines together we are defining our long-term future with the discoveries of today.

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contents actelion annual report 2010 actelion today business strategy and operations research and development 02 02 05 08 12 milestones 2010 letter to the shareholders financial summary creating long-term value 18 19 20 22 24 delivering on a global scale actelions products in the marketplace the products leadership in pah 28 29 30 34 36 driven by science the pipeline pipeline progress maximize the value of innovation corporate governance corporate social responsibility financial report 40 41 44 50 53 55 55 55 56 57 group structure shareholders board of directors management board compensation shareholdings loans shareholders participation rights changes of control defense measures auditors information policy further information 58 59 60 60 60 61 61 61 discovering medicines responsibly reaching for the highest standards environment access to medicines our work in communities research ethics clincal trial registry results database 62 64 68 97 98 102 104 114 116 consolidated financial statements notes to consolidated financial statements report of actelion management auditors reports holding company statements notes to the financial statements 2010 auditors report contacts actelion annual report 2010

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2 milestones strong revenue growth total net revenues of chf 1,929.0 million an increase of 13 in local currencies as compared to 2009 due to growing product sales employees per function managing the bottom line non-gaap ebit of chf 619.3 million an increase of 19 in local currencies as compared to 2009 ­ a result of strong revenue growth and continued commitment to managing the bottom line enhancing earnings per share the board of directors has authorized the repurchase of up to chf 800 million of the company s common stock over the next three years enhancing eps growth without sacrificing strategic flexibility tracleer ­ gold standard in pah treating pulmonary arterial hypertension with the target of improving symptoms to or maintaining patients at functional class ii employees per region tracleer ­ changing lives actelion s flagship product is currently being used to treat over 40,000 patients veletri ­ new product launch actelion s fourth product ­ veletri an improved formulation of i.v epoprostenol ­ has been launched in the us for the treatment of pah room temperature stability at most commonly used concentrations eliminates the need for ice packs actelion annual report 2010

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ventavis ­ improved convenience more than 70 of ventavis patients in the us are using the increased strength 20mcg/ml formulation launched in the second half of 2009 total net revenues chf million 1,772.6 1,317.4 945.7 1,473.5 macitentan ­ ahead of schedule early completion of enrollment into the large phase iii morbidity/mortality study in pah could result in data availability early in 2012 2006 2007 2008 2009 2010 selexipag ­ presented at ats phase ii results with selexipag currently enrolling patients into a large phase iii study in pah were presented at the american thoracic society ats 2010 international conference non-gaap ebit chf million option to acquire trophos actelion entered into a binding agreement with trophos sa thereby integrating the potential of a late-stage phase iii compound into actelion s pipeline olesoxime is currently being investigated in amyotrophic lateral sclerosis and is expected to report data in late 2011 567.9 471.4 320.4 476.8 advancing early-stage pipeline in total dose-finding studies for five compounds were initiated in 2010 broadening actelion s commitment to multiple therapeutic areas 2006 2007 2008 2009 multiple future opportunites by the end of 2010 actelion was analyzing six compounds in preclinical development with around 25 further projects in the drug discovery phase total product sales chf million 1,698.0 1,292.1 1,428.9 corporation of the year the pulmonary hypertension association named actelion the 2010 corporation of the year making actelion the first company to receive this award twice and demonstrating our ongoing commitment to improving the care of patients 924.1 2006 2007 2008 2009 actelion today business strategy operations r&d corporate governance corporate social responsibility financial report 3 1,929.0 619.3 2010 1,826.3 2010 actelion annual report 2010

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4 committed to profitability actelion annual report 2010

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dear shareholders the board and management are proud to report to you our shareholders that in 2010 actelion achieved strong financial results your company has also made significant progress in strengthening the pillars required for continued long-term success committed to profitability with a 2010 net profit of chf 390.6 million and fully diluted earnings per share of chf 3.22 actelion demonstrated its ongoing commitment to value creation for shareholders actelion grew its total revenues in 2010 by 13 in local currencies to reach chf 1,929.0 million product sales grew by 12 in local currencies to reach chf 1,826.3 million operating profit grew by 50 in local currencies to reach chf 457.3 million these results ­ the best in the 11 years since actelion became a public company ­ were achieved in a difficult economic environment for pharmaceuticals in general and specifically for swiss-based international companies exposed to the strong swiss currency committed to pah ­ today and tomorrow actelion is a highly profitable life science firm as a result of our leading franchise in pulmonary arterial hypertension pah where our three marketed products tracleer ventavis and veletri continue to bring significant value to patients in 2010 we continued to invest appropriately in supporting our existing product portfolio we also focused on two late-stage clinical compounds ­ macitentan and selexipag ­ both under investigation in pah the studies are designed to demonstrate that these two compounds significantly improve the outcome for patients by reducing morbidity/mortality the success of these two studies expected to report in early 2012 and 2013 respectively would result in further long-term value creation for patients and shareholders alike committed to innovation in medicine throughout 2010 we focused our attention on turning innovation into medicines one step at a time conscious of actelion today business strategy operations r&d corporate governance corporate social responsibility financial report 5 actelion annual report 2010

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6 robert e cawthorn the risks inherent in innovation the company broadened its preclinical and clinical activities while two late-stage clinical trials did not meet expectations and clinical development with almorexant was discontinued in january 2011 other projects moved forward consequently at the end of this reporting period actelion has 10 compounds in various stages of clinical development as a result of our high research and development productivity we will obtain important data during 2011 on four different projects in mid-stage clinical development in areas of high unmet medical need ­ clostridium difficile infection idiopathic pulmonary fibrosis autoimmune disorders and allergies committed to a global infrastructure in 2010 actelion also continued to strengthen its global reach and its global infrastructure actelion now has 29 operative affiliates and is thus present with sales marketing distribution regulatory and medical capabilities in all key pharmaceutical markets this is true even in japan where no other biotechnology company has built up its own presence from its inception we also continued to invest appropriately in the physical infrastructure required to provide our employees with a stimulating and productive working environment at the end of 2010 a new business center for central corporate functions was opened in allschwil just outside basel switzerland in the same location the company will expand its research and development facilities in 2011 this commitment to global presence and appropriate infrastructure levels will assure continued leverage going forward committed to value-enhancing partnerships our profitability our strong pah franchise our focus on an innovative pipeline and our global business organization make actelion an attractive in-licensing partner this is evidenced by the trophos agreement we entered into ­ with the option to acquire the company ­ in anticipation of positive results from their phase iii compound in actelion annual report 2010

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jean-paul clozel development for the rare disease amyotrophic lateral sclerosis this mortality study is expected to report before the end of 2011 the same assets also allow actelion to enter into individually tailored partnerships with companies that have the required capabilities to maximize value and manage risk for a number of our development projects committed to shareholders in view of the company s strong prospects the board of directors will ask shareholders at the upcoming annual general meeting to approve the cancellation of shares bought back as part of the ongoing share repurchase program the repurchase of up to chf 800 million of shares over a 3-year period utilizes part of our strong ongoing cash generation to enhance shareholder return the size of the repurchase program leaves the company with full strategic flexibility and an undiminished determination to seek innovation from external sources and internalize that potential when appropriate additionally the board of directors has decided to ask shareholder approval for an annual dividend payment of chf 0.80 per share committed to the future in the course of its regular meetings the board of directors has given much attention to directing and reviewing the company s strategy we are committed to continuing this and look forward to reporting to you on these efforts on a regular basis we are well aware that your support as shareholders has been and will remain fundamental to our ongoing success robert e cawthorn chairman of the board of directors actelion today business strategy operations r&d corporate governance corporate social responsibility financial report 7 jean-paul clozel chief executive officer actelion annual report 2010

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8 financial summary financial results overview 2010 in chf million 2009 net revenues operating expenses operating income non-gaap ebit net income diluted eps in chf no of shares in calculation gross cash total assets cash from operations shareholder s equity treasury shares 1,929.0 1,471.7 457.3 619.3 390.6 3.22 121.394 1,445.9 2,921.0 316,4 1,795.2 10.458 1,772.6 1,433.2 339.4 567.9 311.3 2.53 122.880 1,343.6 2,664.9 424.2 1,407.7 9.757 9 3 35 9 25 27 ­ ­ ­ ­ ­ ­ tracleer continues to be the main driver of performance with growth continuing across all markets ventavis performed very well in the face of increasing competition and our latest product in the pah space veletri was launched successfully in the us zavesca sales growth was driven by the np-c indication in europe contract revenues for 2010 amounted to chf 102.6 million which represents an increase of 38 a substantial portion of this increase can be attributed to the final recognition of milestone payments received from roche in connection with the s1p1 collaboration chf 77.2 million the company also recognized chf 18.9 million from the glaxosmithkline almorexant collaboration as well as chf 6.5 million related to other contracts operating expenses total operating expenses for 2010 were chf 1,471.7 million compared to chf 1,433.2 million in the previous year this represents an increase of 3 in swiss francs and 4 in local currencies non-gaap operating expenses for the full year amount to chf 1,309.6 million an increase of 10 in local currencies compared to 2009 non-gaap operating expenses exclude all charges related to employee stock options as well as depreciation and amortization and other one-off items which would distort comparative analysis cost of sales amounted to chf 200.3 million or 11 of sales this represents a 0.5 decrease due to a usd 10 million payment made to bayer schering in 2009 research and development expenses increased by 4 to reach chf 484.3 million compared to chf 464.1 million during the prior year actelion s pipeline has 10 compounds in clinical development 3 of which are in phase iii and 6 projects in preclinical development the ratio of r&d spend to product sales is 27 which the company considers an appropriate level of spending non-gaap research and development expenses increased by 3 to reach chf 428.7 million net revenues during 2010 actelion not only continued to grow revenues and profit but also strengthened its infrastructure and generated strong cash flow enabling the company to continue investing for future growth as well as returning cash to shareholders in october 2010 actelion announced an chf 800 million share buyback that will enhance eps growth going forward without sacrificing strategic flexibility total net revenues grew to chf 1,929.0 million in 2010 an increase of 9 growth in local currencies lc ­ masked by the appreciation of the swiss franc ­ was even more pronounced at 13 year on year demand for all of actelion s products has remained strong but throughout the year the company observed an increasing impact of pricing pressure and healthcare austerity measures resulting in reduced healthcare utilization also a continued adverse currency market environment negatively impacted the results with the us dollar and the euro reaching new all-time lows against the swiss franc actelion annual report 2010

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selling general and administration sg&a expenses for 2010 amounted to chf 744.1 million a 15 increase the company continued to expand its geographic reach with emerging markets acting as a strong driver for rest-ofthe-world sales growth the expanded sales force in japan continues to deliver excellent results some of the main drivers of growth during 2010 were support for all our products in their respective markets and continued investment in education and disease awareness as well as the generation of new data in phase iv medical marketing trials and product registries although not apparent from the swiss franc numbers the company is pleased to report continued margin improvement within the commercial organization in addition to the impact of exchange rates this margin improvement is also masked by an increase in legal costs as announced previously legal costs have increased due to a lawsuit filed against actelion ltd and certain subsidiaries in a californian superior court in relation to the cotherix acquisition actelion has reviewed the claims disagrees with the factual and legal assertions and is preparing to defend itself against the claims in a jury trial which began in february 2011 another driver of the increase in general and administration portion is a continued investment in infrastructure to support the organization at the end of 2010 actelion employed 2,441 people worldwide of whom more than 1,000 are located in allschwil the company opened a new business center in december 2010 which will house 350 employees a new building for research and clinical development also in allschwil will be finished in late 2011 to house 380 scientists as of 2012 actelion continues to believe that having all its research efforts concentrated in one location is most beneficial as it greatly facilitates open and transparent communication between teams resulting in rapidly advancing projects non-gaap sg&a expenses increased to chf 680.6 million compared to chf 593.5 million during the same period last year gaap ebit chf million 371.4 268.2 339.4 142.6 2006 2007 2008 2009 in 2010 we have made signif icant investments to increase operational efficacy that will drive further margin expansion in 2011 andrew j oakley cfo earnings per share diluted chf per share 2.48 1.97 2.53 0.88 2006 2007 2008 2009 adjusted for the effect of application of asc 470-20 as of january 1 2009 actelion today business strategy operations r&d corporate governance corporate social responsibility financial report 9 457.3 2010 3.22 2010 actelion annual report 2010

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10 operating income and non-gaap operating income operating income for 2010 reached chf 457.3 million an increase of 35 compared to the full year 2009 non-gaap operating profit for 2010 amounted to chf 619.3 million compared to chf 567.9 million during 2009 this represents a 9 increase in swiss francs and a 19 increase in local currencies adjusted non-gaap diluted earnings per share amounted to chf 4.54 compared to chf 4.38 for 2009 non-operating income and tax interest income for the year 2010 amounted to chf 3.2 million compared to chf 4.4 million during 2009 the interest environment in switzerland continues to be supressed albeit at slightly higher levels than during 2009 especially during the last quarter of 2010 interest expense for the year amounted to chf 2.7 million compared to chf 7.5 million during the previous year as the company still does not carry any interest bearing debt this charge is mostly related to future payments for veletri the improved formulation of intravenous epoprostenol acquired in march 2009 amortization of debt discount for 2010 amounted to chf 18.7 million compared to chf 17.9 million in 2009 since 1 january 2009 actelion has adopted fsp apb 14-1 which bifurcates the convertible bond into debt and equity components and imputes a non-cash interest charge equivalent to market rates based on a company s individual circumstances this charge is related to the charge on the outstanding 2011 chf 460 million bond other financial income for the year amounted to chf 1.7 million compared to an income of chf 20.0 million in 2009 the current currency environment continues to add great volatility to both gains and losses on the company s hedge positions as well as on the valuation of intercompany receivables income tax expense for the period under review amounted to chf 50.3 million compared to chf 27.3 million during 2009 this translates into a tax rate of 11.4 compared to 8 for the previous year as previously announced the company expected this slight increase in the tax rate which is likely to stay around current levels for the near future net income and earnings per share net income for 2010 amounted to chf 390.6 million compared to chf 311.3 million in 2009 an increase of 25 basic earnings per share for the same period amounted to chf 3.28 compared to chf 2.62 in 2009 on a fully diluted basis eps in 2010 was chf 3.22 compared to chf 2.53 in 2009 during the first quarter of 2010 the company bought back 529,271 shares bringing the number of treasury shares held to 10.5 million in october 2010 the company in 2010 with operating income exceeding 450 million swiss francs we report on a diluted basis a 27 percent growth in earnings per share supporting the board s proposal of an annual dividend andrew j oakley cfo announced that the board of directors had authorized the repurchase of up to chf 800 million of the company s common stock over the next three years and subsequently purchased in the fourth quarter an additional 186,000 shares given the company s solid financial position and robust cash generation actelion s board of directors and senior management believe that the share repurchase program represents an appropriate use of the company s cash whilst maintaining sufficient flexibility for continued investments in research and development in-licensing and potential m&a opportunities at the 2011 and subsequent annual general meetings the board of directors will propose that the shares bought through this process be canceled and the issued share capital reduced accordingly actelion annual report 2010

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the buyback is being carried out via a second trading line on the six swiss exchange which was established for the purpose of the share repurchase the second trading line was opened following regulatory approval on 25 november 2010 and will be maintained until the end of october 2013 at the latest shares purchased on the second trading line are subject to the swiss federal withholding tax at the rate of 35 on the difference between the repurchase price of the actelion registered share and its nominal value of chf 0.50 this withholding tax can be reclaimed by eligible investors balance sheet and cash flow the company s operating activities continue to generate strong cash flows driven by continued top-line growth and careful management of working capital cash from operations for the period under review amounted to chf 316.4 million compared to chf 424.2 million in 2009 the company s gross cash position as per 31 december 2010 amounted to chf 1,445.9 million in addition the company also holds 10.5 million treasury shares the increase in product sales as well as a more challenging healthcare environment resulted in trade and other receivables rising to chf 520.0 million at the end of december compared to chf 469.6 million at the end of the previous year dso days sales outstanding increased to 91 days from 83 days in 2009 actelion continues to evaluate and actively pursue measures to improve cash collection that include factoring and/or securitization arrangements investment in property plant and equipment for 2010 was chf 127.6 million for the year compared to chf 132.5 million for the previous year a large proportion of this investment is due to the construction of a new headquarters building in allschwil switzerland as well as the construction of a new research and development building in the same area total property plant and equipment ppe as at year-end was chf 399.0 million compared to chf 281.2 million as at the end of 2009 in keeping with actelion`s commitment to maintaining a control infrastructure capable of supporting high-quality financial statements in the face of rapid growth for the fifth consecutive year actelion can announce internal controls over financial reporting certified as meeting the requirements of the sarbanes-oxley act 2002 section 404 sox 404 as at 31 december 2010 research development spending chf million 464.1 374.5 292.1 211.8 2006 2007 2008 2009 net income chf million 306.1 239.6 311.3 109.8 2006 2007 2008 2009 actelion today business strategy operations r&d corporate governance corporate social responsibility financial report 11 484.3 2010 390.6 2010 actelion annual report 2010

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creating long-term value.

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securing a successful future actelion has a track record of mastering research and development to generate sustainable value for patients and shareholders alike the company s rich pipeline broad business organization tailored partnerships strong leadership team and inspiring culture are the foundation of further growth and value creation actelion annual report 2010

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