Our development pipeline is among the best in the world, based on quality and productivity. Most promising are our novel compounds for patients with diabetes, hypertension, cancer and osteoporosis, and for transplantation medicine which will, if successful, significantly improve treatments and thus have an attractive commercial potential.

In 2003, we received first major market approvals for Certican and Myfortic for use in transplantation medicine, Stalevo for the treatment of Parkinson’s disease and Xolair for allergic asthma therapy in the US. Furthermore, Prexige, a new treatment for pain and osteoarthritis, was approved in the UK. Its approval in the US is as yet uncertain, pending results of additional trials.

To complement our own research activities, we have established several new collaborations with universities and biotechnology companies. The acquisition of 51% of the capital stock of Idenix Pharmaceuticals Inc., a biotechnology company based in Boston, Massachusetts, offers us rapid entry into anti-viral research, and access to development compounds for the treatment of hepatitis B and C. Additionally, we acquired the commercial rights for Lucentis outside the US, Canada and Mexico. In combination with our product Visudyne, this drug may improve the treatment options in age-related macular degeneration, a frequent cause of blindness in adults. We also obtained rights to a promising cancer drug, Gimatecan, from Sigma Tau and the drug Enablex/Emselex for the treatment of urinary incontinence from Pfizer.

Our market position improved in most countries, most notably in the US. This we achieved thanks to the success of our blood pressure-regulating medicines Diovan and Lotrel; our cancer drugs Gleevec/Glivec and Zometa;

Elidel, our eczema treatment; as well as to the attractive sales of Zelnorm/Zelmac, our irritable bowel treatment, to name just some of our most important products.

The dynamic growth of our Generics business is primarily based on the success of AmoxC, loratadine and omeprazole in the US market. The development of activities at Lek, a generics company we acquired in 2002, also exceeded expectations.

In light of the increasing age of our society, and the associated rise in healthcare expenditure, generics will play an even more important role as a cost effective therapeutic option. These cost savings can and should be used to provide patients with innovative, patent-protected medicines that have improved efficacy and safety profiles.

Unavoidably, governments, insurers and employers will continue to put pressure on the price of pharmaceuticals, despite the fact that the overall cost of drug therapies amounts to less than 20% of all healthcare-related costs in most countries. Also, medicines not only extend patients’ life expectancy, but also improve their quality of life and reduce their lost working hours and absence from work due to illness.

Increasingly, health is regarded as a fundamental right. The introduction of prescription drug coverage into the US Medicare insurance system for senior citizens must also be seen from this perspective.

The enlargement of the EU from 15 to 25 member states will not only improve the standard of living in the new member states, but also lead to demands for better health-related products and services. A similar trend can