Consolidated Financial Statements

Consolidated Statements of Operations

	Twelve Months Ended December 31
(in CHF thousands, except per share amounts)	2005	2004


Net revenue:
Product sales	647,556	455,346
Contract revenue	16,033	16,534
Total net revenue	663,589	471,880
Operating expenses (1)
Cost of sales	65,635	45,873
Research and development	171,469	136,288
Marketing and advertising	140,012	101,710
Selling, general and administration	132,087	95,703
Amortization of acquired intangible assets	2,018	1,721
Write-off of acquired in-process research and development	78	5,000
Total operating expense	511,299	386,295
Operating income	152,290	85,585
Interest income	2,989	1,036
Interest expense	(152)	(405)
Amortization of debt discount and issuance costs	(7,836)	(7,448)
Other financial income (expense), net	(11,294)	3,079
Income from continuing operations before income tax expense	135,997	81,847
Income tax expense	(10,459)	(4,276)
Income from continuing operations	125,538	77,571
Income from discontinued operations, net of tax and minority interest	-	9,648
Net income	125,538	87,219

Basic income per share
Continuing Operations	5.62	3.52
Discontinued Operations	-	0.44
Net income	5.62	3.96
Number of shares (in thousands) used in computation	22,329	22,018

Diluted income per share
Continuing Operations	5.54	3.36
Discontinued Operations	-	0.42
Net income	5.54	3.78
Number of shares and share options (in thousands) used in computation	22,662	23,051

(1) Includes stock-based compensation as follows:
Research and development	4,807	1,155
Marketing and advertising	3,726	1,272
Selling, general and administration	5,113	2,081
Total stock-based compensation	13,646	4,508

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Balance Sheets

(in CHF thousands, except share amounts)	December 31
	2005	2004


Assets

Current assets
Cash and cash equivalents	138,017	196,336
Short term deposits	244,900	104,000
Derivative instruments	1,303	2,422
Marketable securities	9,820	-
Trade and other receivables, net	157,220	109,649
Inventories	26,373	17,903
Other current assets	11,799	5,992
Total current assets	589,432	436,302

Property, plant and equipment, net	50,186	35,221
Other assets	8,131	7,014
Intangible assets, net	20,852	8,610
Goodwill, net	27,333	27,318
Deferred tax asset	16,508	5,256
Total assets	712,442	519,721

Liabilities and shareholders' equity

Current liabilities
Trade and other payables	67,543	42,821
Accrued expenses	86,088	53,438
Deferred revenue, current portion	15,209	17,399
Other current liabilities	6,364	33,024
Total current liabilities	175,204	146,682
Long-term financial debt	159,266	152,042
Deferred revenue, less current portion	52,648	60,233
Other non-current liabilities	3,337	2,678
Deferred tax liability	273	-
Total liabilities	390,728	361,635

Shareholders' equity
Common shares (par value CHF 2.50 per share, authorized
41,406,640 and 33,406,640 shares; issued 22,545,547
and 22,209,953 shares in 2005 and 2004, respectively)	56,364	55,525
Additional paid-in capital	348,011	316,844
Accumulated deficit	(84,469)	(210,007)
Unearned compensation	-	(2,256)
Treasury shares, at cost	(467)	(871)
Accumulated other comprehensive income (loss)	2,275	(1,149)
Total shareholders' equity	321,714	158,086
Total liabilities and shareholders' equity	712,442	519,721

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statements of Cash Flows

	Twelve Months Ended
	December 31
(in CHF thousands)	2005	2004

Cash flow from operating activities
Net income	125,538	87,219
Gain from discontinued operations, net of minority interest	-	(9,648)
Income from continuing operations	125,538	77,571
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization	12,634	9,925
Stock-based compensation	14,373	4,773
Excess tax benefits from share based payment arrangements	(2,435)	-
Gain on derivative instruments	6,845	143
Write-off of acquired in-process research and development	78	5,000
Amortization of debt discount and expense	7,836	7,448
Trade and other receivables	(42,890)	(44,970)
Inventories	(8,470)	3,552
Other current assets	(5,451)	(2,326)
Other assets	(11,895)	(4,086)
Trade and other payables	15,517	16,032
Accrued expenses	35,533	17,366
Deferred revenue	(9,775)	2,342
Other liabilities	942	(1,090)
Net cash flow provided by operating activities	138,380	91,680

Cash flow from investing activities
Purchase of short term deposits	(370,400)	(229,000)
Withdrawal of short term deposits	229,500	125,000
Purchase of property, plant and equipment	(24,756)	(24,643)
Purchase of marketable securities	(9,837)	-
Purchase of derivative instruments	(2,951)	(1,287)
Proceeds from sale of derivative instruments	2,836	1,311
Purchase of intangible assets	(5,651)	(6,575)
Proceeds from sale of subsidiary	-	9,242
Increase of investment	(32,494)	-
Net cash flow used in investing activities	(213,753)	(125,952)

Cash flows from financing activities
Payments on capital leases	(177)	(146)
Repayment of financial debt	-	(41,119)
Proceeds from exercise of stock options	14,371	13,661
Excess tax benefits from share based payment arrangements	2,435	-
Net cash flow provided by (used in) financing activities	16,629	(27,604)
Net effect of exchange rates on cash and cash equivalents	425	(558)
Net change in cash and cash equivalents	(58,319)	(62,434)
Cash and cash equivalents at beginning of period	196,336	258,770
Cash and cash equivalents at end of period	138,017	196,336
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	152	527
Taxes	12,645	962

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statements of Changes in Shareholders' Equity


(in CHF thousands, except share amounts)	Common Shares		Additional Paid-in-Capital	Accumulated Deficit	Unearned Compensation	Treasury Shares	Other Comprehensive Income (Loss)	Shareholders' Equity
	Shares	Amount
At January 1, 2004	21,737,648	54,378	302,817	(297,226)	(5,369)	(1,018)	845	54,427
Comprehensive income net of tax effect:
Net income				87,219				87,219
Other comprehensive result:								-
Currency translation adjustment							(1,994)	(1,994)
Comprehensive income								85,225
Exercise of stock options	458,805	1,147	12,514					13,661
Transactions in treasury shares	1,950		118			147		265
Stock-based compensation expense, net			1,556		2,952			4,508
Issuance of stock options			372		(372)			-
Stock options forfeitures and cancellations			(533)		533			-
At December 31, 2004	22,198,403	55,525	316,844	(210,007)	(2,256)	(871)	(1,149)	158,086
Comprehensive income net of tax effect:
Net income				125,538				125,538
Other comprehensive result:								-
Currency translation adjustment							3,441	3,441
Unrealized loss on marketable securities							(17)	(17)
Comprehensive income								128,962
Change in accounting principle			(1,374)		1,374			-
Excess tax benefit from share-based payment			5,922					5,922
Exercise of stock options	335,594	839	13,532					14,371
Transactions in treasury shares	5,353		323			404		727
Stock-based compensation expense, net			13,096		550			13,646
Stock option forfeitures and cancellations			(332)		332			-
At December 31, 2005	22,539,350	56,364	348,011	(84,469)	-	(467)	2,275	321,714
The accompanying notes form an integral part of these consolidated financial statements.