UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March

Commission File Number 1-15096

Serono S.A.

(Translation of registrant’s name into English)

15 bis, Chemin des Mines
Case Postale 54
CH-1211 Geneva 20
Switzerland

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ý Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  Yes  o        No ý

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-        .

Serono Annual Report 2005

Contents

Financial highlights

1

2

Introduction

Serono is a global biotechnology company focused upon meeting unmet medical needs. We are dedicated to developing innovative treatments that improve the quality of life of our patients. This has been the underlying purpose of our company since it was founded.

In 2005, we made good progress in the continued implementation of our strategy, which has three main elements:

• Maximize the potential of our marketed products

• Bring to market novel therapies from our R&D pipeline

• In-license or acquire additional projects to which we can apply our development expertise.

Serono continued to deliver strong performance. We have again generated strong cash flows enabling us to advance and expand our product pipeline. We remain focused on maximizing the potential of our marketed products. Our grossmargin is one of the highest in the biotech sector, and we have focused upon seeking sustained improvement in operating margin.

2005 has been a year of opportunities and also of some challenges for our company. We again increased total revenues and product sales, with totals of $2.59 billion and $2.34 billion respectively, driven by strong performance in our therapeutic areas. Our lead products continue to do well.

Neurology

We are dedicated to developing the treatments of the future based upon our scientific understanding of neurological diseases.

In 2005, total neurology sales increased by 15.1% to $1,293 million, driven by Rebif®, which continued to extend its blockbuster status. Our efficacy message and the success of our patient support programs should continue to provide steady market share gains, taking Rebif® to global market leadership.

We remain focused on communicating that Rebif® provides excellent proven efficacy both now and in the long term, delaying the progression of disability in people with multiple sclerosis (MS). We also continue to express Rebif®’s well established safety profile. Our recent market research confirms that on all key measures of efficacy (MRI lesions and activity, relapse rates and disability progression). Rebif® 44 mcg is perceived to be the most efficacious of all the disease-modifying drugs currently on the market in relapsing MS. During the year we substantially increased our field force and nurse team presence to better support physicians and patients.

Serono is committed to people with MS, and this year we further developed our call center programs in terms of both number and extended geographical reach. Our call centers offer education, information and support to people with MS and their families, provided by MS certified nurses and relevant specialists. We now have18 call centers covering all major countries, including a very extensive and comprehensive program in the US.

3

“We are very well placed to develop the first MS oral treatment with cladribine.”

The MS market is forecast to grow from around $5 billion to approximately $7 billion by 2010. Serono is very well positioned in this therapeutic area, and we are committed to developing the new treatments of the future.

The first breakthrough in this respect is likely to be the development of oral treatments. We are very well placed to develop the first MS oral disease modifying treatment with theoral formulation of cladribine. Cladribine interferes with the behavior and proliferation of certain white blood cells, particularly lymphocytes, and the positive effect of low dose cladribine has been demonstrated in earlier clinical studies. We initiated enrollment in a 1,300 patient Phase 3 program designed to assess the effectiveness of the oral formulation of cladribine in people with relapsing forms of MS. Resultsare expected in 2008.

In early 2005, we completed patient enrollment in the multinational Rebif® versus Copaxone® comparative clinical trial named REGARD (Rebif® versus Glatiramer Acetate in Relapsing MS Disease), with over 700 patientsenrolled. This two-year trial is designed to compare the efficacy and safety of the two therapies in people with relapsing MS. The trial will provide comparative data that will support an evidence-based approach to treatment decisions, and we expect the results to support Rebif® as the foundation therapy for the treatment of MS. Results are expected early in 2007.

We are also continuing to further develop our neurology therapeutic area beyond the oral treatments of the future. For example, we have licensed technologies from Syntonix that may enable the development of an interferon therapy for MS that can be administered by inhalation.

Particularly noteworthy in a scientific context is the work we are doing on understanding the genetic basis of MS. We have achieved a major milestone in identifyingfor the first time many of the genes involved in MS. Our researchers have identified 80 genes that are involved in the inflammatory and neuro-degenerative pathways of MS, based upon a partial genome scan comparing the genetic profile of people with MS and healthy individuals. Our goal is to maintain this leadership in the field of MS genetics. In 2006, we will complete a higher density map of the genes involved in MS and will extend this work to primary progressive MS later in the year. This will lead to a comprehensive catalog of potential MS drug targets, thus providing a basis for the future development of innovative MS therapies.

The MS marketplace is likely to develop further over the next few years, with the entry of oral products and perhaps of follow-on biologics. Given its leading position, Serono is very well placed to extend our leadership position in this therapeutic area.

4

UNMET NEED

AN EFFECTIVE THERAPY FOR PEOPLE

WITH RELAPSING FORMS

OF MULTIPLE SCLEROSIS

REBIF® IS THE LEADING TREATMENT

FOR RELAPSING MS OUTSIDE THE US

IN TERMS OF SALES

UNMET NEED

EFFECTIVE EASY-TO-USE TREATMENTS

FOR MILLIONS OF COUPLES TRYING

TO CONCEIVE

SERONO IS THE ONLY COMPANY

WITH A FULL BIOTECH PORTFOLIO

OF FERTILITY PRODUCTS FOR

THE MAIN STAGES OF THE

REPRODUCTIVE CYCLE

“I am pleased to report that in December we achieved the milestone sale of the one millionthGonal-f® pen.”

Reproductive health

Serono continues to lead the world in the area of reproductive health with its unique and comprehensive portfolio. We are the only company to offer recombinant versions of the three hormones used in the treatment of infertility, including the most prescribed gonadotropin in the world: Gonal-f®.

We have successfully phased out the manufacture of urine-derived products worldwide. Gonal-f® is proceeding through the regulatory process in Japan, and in January 2006 we received the good news that Gonal-f® is approved for a type of male infertility (male hypogonadotrophic hypogonadism). We will now pursue the Japanese registration of Gonal-f® for other indications. We believe that urine-derived products are anachronistic in today’s world, due to the higher purity of recombinant products and their high consistency in terms of protein content.

In 2005, sales of Gonal-f® decreased4.5% to $547.0 million. This was due to the price discounting of a competitor product in the US. Excluding the US, sales grew by 10.4%to $401.8 million. The Gonal-f® pen, a more convenient way of administering Gonal-f®, has been launched in more than 50 countries, including the US and the major European countries, and I am pleased to report that in December we achieved the milestone sale of the one millionth Gonal-f® pen. In June, we entered into a strategic services agreement in the US with Priority Healthcare Corporation (subsequently acquired by Express Scripts, Inc. in October 2005), under which both companies offer the fertility marketplace expanded and unprecedented support to patients, healthcare providers and caregivers. As part of the agreement, Priority’s Freedom Drug, which is the largest fertility specialty pharmacy in the US, became the preferred specialty pharmacy for the distribution of Serono fertility products dispensed in the US. The two companies are also developing new fertility awareness and patient education programs.  Our overall services to patients and physicians have expanded significantly with the continued roll-out of fertility.com and fertilitylifelines.com. We now have 16 websites around the world and more to come.

There are still many couples who do not receive the treatments that can realize their dream of having a child, and we are working to increase patient awareness and the availability of treatment to people who could benefit from it. Our goal is to continue to be the leader in reproductive health.

Growth and metabolism

Serono continues to be an innovator in the field of growth and metabolism, where the global rollout of our patient-friendly delivery devices continues to drive our sales growth.

In January, we announced that Saizen® was approved by the FDA in the United States for use in the treatment of patients with adult growth hormone deficiency (AGHD), thus consolidatingour approval in four different indications of growth hormone use: growth disorders in children, growth hormone deficiency in adults, HIV-associated wasting and short bowel syndrome.

We also received a positive opinion for growth failure in short children born small for gestational age in Europe, and since then we have been working on the national approvals in the European countries in which Saizen® is already approved for other indications.

Sales of Saizen® increased by 13.4% to $206.5 million in 2005, and sales of Serostim® were $70.4 million.

We formed a strategic alliance with BioMarin for the development and commercialization of two product candidates, Phenoptin (sapropterin hydrochloride) and Phenylase (phenylalanine ammonia lyase). Both have potential in the treatment of phenylketonuria (PKU), and there is preliminary clinical evidence to suggest that the active ingredient in Phenoptin may also be useful

7

“… successful completion of a Phase 3 trial of recombinant growth hormone in the treatmentof HIV-associated adipose redistribution syndrome (HARS).”

in the treatment of other serious conditions, including diabetes and cardiovascular diseases.Phenoptin, an orally administered product, is currently in a Phase 3 trial for mild to moderate PKU, an inherited metabolic disease caused by a deficiency of the enzyme phenylalanine hydroxylase in the blood, which can result in serious neurological damage unless patients adhere to a very stringent and difficult diet. There is currently no drug approved to treat PKU, which affects at least 50,000 diagnosed patients under the age of 40 worldwide. Phenylase, an enzyme substitution therapy for the treatment of severe forms of PKU, is in early development.

Early in 2006, we announced the successful completion of a Phase 3 trial of recombinant growth hormone in the treatment of HIV-associated adipose redistribution syndrome (HARS), which met all pre-specified primary and major secondary endpoints. We plan to submit the registration file to the FDA in 2006. Growth hormone in HARS has received orphan drug designation from the FDA.

Serono continues to innovate with our unique delivery devices cool.click™ and one.click™, which are very well received by physicians and patients. In 2006 we intend to launch the first electronic device in this therapeutic area, bringing additional benefits to children with growth deficiencies.

Dermatology

In late 2004, Raptiva® was approved by the European Commission for the treatment of people with moderate to severe chronic plaque psoriasis, and we commenced our launch program. Raptiva® is the first product to offer effective and safe long-term control of psoriasis, with treatment on a continuous basis. People taking Raptiva® have the benefit of continued therapy with improved and sustained responses over time, thereby offering effective long-term control of their disease. Raptiva® is now approved in 49 countries and reimbursed at the same level in the major European markets. Sales of Raptiva® were $33.4 million.

To date, more than 3,500 patients with psoriasis have been included in 14 double-blind, placebo-controlled clinical trials in North America and Europe. Data from these studies hasdemonstrated that Raptiva® provides physicians and patients with sustained benefit and safety over the long term. Serono’s CLEAR (CLinical Experience Acquired with Raptiva®) study showed that Raptiva® can be useful in some patients with psoriasis who did not respond to standard therapies.

Oncology

We are committed to entering oncology as a new therapeutic area. In 2005 we continued to enter into a number of important collaborations and further extended our approach.

In August, we signed an agreement with Genmab granting Serono exclusive worldwide rights to develop and commercialize HuMax-CD4 (zanolimumab). HuMax-CD4 is a fully human monoclonal antibody in development for the treatment of cutaneous and non-cutaneous T-cell lymphomas. It is directed against the CD4 antigen and causes depletion of certain T-cells. It is currently being evaluated in a pivotal Phase 3 clinical trial for cutaneous T-cell lymphoma under the FDA’s special protocol assessment processand has fast track designation from the FDA. Outcome of the Phase 3 trial is expected in the first half of 2007.

In October, we signed an agreement with Rigel under which Serono has an exclusive license to develop and commercialize product candidates from Rigel’s Aurora kinase inhibitor program.This includes R763, for which Rigel filed an investigational new drug application with the FDA in December 2005. R763 is a highly potent, orally available multi-Aurora kinase inhibitor that has been shown to inhibit proliferation and kill cancer cells from a variety of organs, including the cervix, colon, lung, pancreas and prostate.

8

UNMET NEED

AN EASIER WAY TO TREAT

GROWTH HORMONE DEFICIENCY

IN THOUSANDS OF CHILDREN

THE SAIZEN® FAMILY OF DELIVERY

DEVICES PROVIDES THE BEST

SOLUTION FOR INDIVIDUAL

PATIENT’S NEEDS. SAIZEN® IS

IDENTICAL TO NATURAL GROWTH

HORMONE PRODUCED BY

THE BODY.

UNMET NEED

A NEW PSORIASIS TREATMENT

FOR PATIENTS WHO CANNOT

TAKE CONVENTIONAL THERAPIES

RAPTIVA® IS NOW APPROVED IN

49 COUNTRIES WORLDWIDE

“Our goal is to build a strong oncology pipeline and enter this therapeutic area with innovative products to fight cancer.”

We continue to collaborate with ZymoGenetics on TACI-Ig, currently in Phase 1b clinical testing as a potential treatment for B-cell malignancies and autoimmune diseases. We are also working with Micromet on adecatumumab, which has potential for the treatment of a broad range of tumors, including breast cancer, pancreatic cancer and some kinds of lung cancer.

During 2005, we identified a lead IKK2 inhibitor, which is now in preclinical development. There is increasing evidence that activation of NF-kappa-B, especially by the IKK2 mediated classical pathway, plays an important role in tumor development. NF-kappa-B is known to inhibit apoptosis.

Our goal is to build a strong oncology pipeline and enter this therapeutic area with innovative products that fulfill unmet medical needs.

Other developments

We continue to make good progress in other areas of our R&D. Supplementing our in-house R&D effort is a very active program in business development. Our focus includes new indications within therapeutic areas where we already have a presence, as well as targeting new therapeutic areas with high unmet medical needs such as autoimmune disease and oncology. Our goal is to find the right value-creating deals that complement our existing businesses and in-house projects and contribute to our long-term growth. In the last year we entered into a number of significant agreements and partnerships with other biotech companies.

A multi-center Phase 3 study of interferon beta-1a monotherapy for the treatment of chronic hepatitis C in Asian patients met its primary endpoint of sustained virological response. This is a large unmet medical need in Asia where the disease is currently underdiagnosed. Today the hepatitis C market is close to$1.2 billion. Results of a combination phase of this study in which interferon beta-1a is given in combination with ribavirin have recently becomeavailable and show a high rate of sustainable virological response six months after completion of just six months of therapy. Our clinical results can already be used for regulatory purposes in certain Asian countries, and the additional work to obtainapproval in other countries (such as Japan) is currently under evaluation.

In May, we signed an agreement with Genmab under which Serono acquired exclusive worldwide rights to develop HuMax-TAC. This product is a fully human monoclonal antibody targeting the TAC antigen - also known as CD25, or the interleukin-2 receptor alpha subunit - which is overexpressed on the surface of activated T-cells. By inhibiting the proliferation of T-cells, HuMax-TAC may have therapeutic potential in the treatment of T-cell mediated diseases, such as autoimmune diseases, inflammation, hyperproliferative skin disorders, as well as acute transplant rejection. HuMax-TAC is currently in preclinical development.

We have also signed an agreement with NovImmune that grants us exclusive worldwide rights to develop and commercialize two fully human monoclonal antibodies, NI-0401 and NI-0501, which may have therapeutic potential in a broad range of autoimmune diseases. NI-0401 targets the CD3 antigen present on T-cells and may therefore be useful in treating a variety of autoimmune diseases. NI-0501, which targets interferon-gamma, a key cytokine involved in inflammatory responses and over-expressed in autoimmune diseases. Both are currently in preclinical development.

The year also had its development challenges. We were disappointed that two products in our pipeline were discontinued: onercept in moderate to severe psoriasis, and Canvaxin™ in advanced melanoma. The decision to discontinue these Phase 3 clinical trials was based on the recommendations of the respective Independent Data and Safety Monitoring Boards.

11

“We are pioneering an approach to human genetics based on the whole genome scan.”

Serono is a leader in pharmacogenomics. We see genetics at the heart of much of our discovery work - from target validation to the interpretation of clinical trials. It moves us beyond cellular and animal models of pathology. It gives us a window on understanding the human basis of disease.

We are pioneering an approach to human genetics based on the whole genome scan. Using Affymetrix chip technology, we have been able to analyze 500,000 markers in our patients and look for those which correlate with disease. This approach will allow us to answer many questions in a variety of diseases, such as identifying which genes are linked to onset of a given disease, its severity and response to treatment. Since we announced the first whole genome scan for MS results in March, we have been using this information to test new molecules in pharmacological models of MS and to see how our genetics results correlate with gene expression in patients.

Beyond MS, we are studying the genetics of other autoimmune diseases such as lupus and psoriasis. We are studying the response to our psoriasis drug, Raptiva®, to investigate whether there is a correlation between genetic makeup of patients and their response to therapy. In the area of metabolic endocrinology, we are taking a more focused “candidate gene” approach to understand better the factors which lead to lack of a functional growth hormone response in children. We will be launching a pharmacogenomic studyin reproductive health in 2006.

I look forward to seeing the results of several of our more advanced clinical programs during 2006. The progress of internal programs as well as in-licensing activities have resulted in ten ongoing late-stage (Phase 2 and Phase 3) clinical development programs.

Overall performance

This year we announced the comprehensive final settlement of the US Serostim® investigation, which was part of an ongoing, industry-wide investigation by the states and the federal government of commercial practices. We tooka financial provision of $725.0 million to cover the settlement and related costs. As a result, we have reported a net loss of $106.1 million. If this settlement were excluded, the net income of our company would have been $554.4 million.

The activities described in the settlement were limited to marketing practices in one unit of Serono’s US operations. Serono has adopted a rigorous compliance program in the US to ensure our employees meet the highest ethical standards, and we are implementing similar programs throughout the rest of the group.The settlement concludes a four-year investigation, and we are pleased to put the matter behind us.

On April 25, 2006, the Board of Directors will propose to the Annual General Meeting a cash dividend of CHF10.0 per bearer share, CHF4.0 per registered share, and CHF0.25 per ADS, representing an increase of 11.1% over the 2004 dividend.

It has been a year where we have continued to invest in the future of our company, with a number of business development agreements in our current and new therapeutic areas.

Late in the year we confirmed that Goldman Sachs has been retained to explore various strategic alternatives for the company. These strategic alternatives could include the sale of the company. This processis ongoing. However, there is no assurance that any transaction will be consumated.

12

UNMET NEED

NOVEL TARGETED THERAPEUTICS

FOR CANCER

SERONO IS COMMITTED TO

EXPANDING ITS PORTFOLIO OF

INNOVATIVE CLINICAL-STAGE

PROJECTS THAT ADDRESS

SIGNIFICANT UNMET MEDICAL

NEEDS IN THE ONCOLOGY

THERAPEUTIC AREA

Our highest priority

R&D projects

Therapeutic areas

Our pipeline reflects our commitment to developing products that will address unmet medical needs

REGARD: Post registration Phase 4 head-to-head study.

r-hGH: On January 9, 2006, Serono announced the completion of this pivotal Phase 3 trial of its recombinant human growth hormone (r-hGH) in the treatment of HIV-associated adipose redistribution syndrome (HARS).

r-interferon beta: On February 6, 2006, Serono reported the positive outcome of the combination phase of this study evaluating the effect of interferon beta-1a with ribavirin for the treatment of chronic hepatitis C (HCV) in Asian patients.

14

15

Highlights of the year

Innovation, strength and partnerships

We have initiated a 1,300 patient Phase 3 program to assess the effectiveness of the oral formulation of cladribine in people with relapsing MS. Results are expected in 2008.

The ready-to-use Gonal-f® pen for infertility treatment was launched in 2004 and this year has achieved the milestone sale of the one millionth pen.

16

TACI-Ig, a potential treatment for B-cell malignancies and autoimmune diseases continues to progress in clinical development.

We have agreements with Genmab to develop and commercialize HuMax-CD4 and HuMax-TAC in a range of indications, including cutaneous and non-cutaneous lymphomas and T-cell mediated diseases.

17

Raptiva® for moderate to severe psoriasis is now registered and launched in 49 countries worldwide.

We formed a strategic alliance with Biomarin for the development and commercialization of two product candidates, Phenoptin and Phenylase, which have potential in the treatment of phenylketonuria.

18

We are developing interferon beta-1a for the treatment of chronic hepatitis C in Asian patients, with promising results in Phase 3 from both monotherapy and in a combination with ribavirin.

We are working on the genetics of human diseases. We have announced the results of the first-ever whole genome scan in MS and are studying other autoimmune diseases.

19

Corporate responsibility

Committed to continuous improvement

Overview

Serono has been a member of the United Nations Global Compact (UNGC) since 2001 and is committed to continuous improvement in the area of corporate responsibility. As you will read below, Serono has taken a number of steps to monitor and implement the 10 UNGC Principles relating to protection of the environment, upholding of labor standards and respect of human rights.

These measures have resulted in continuous and significant improvements in our environmental performance, as well as enhanced awareness and learning with respect to social issues and the monitoring of social indicators. They have also led to the introduction of major initiatives in 2005, namely the ISO 14001 certification of our main manufacturing sites, adoption of a group-wide code of business conduct, introduction of formal rules and guidelines in key areas such as procurement, harassment and discrimination, and signing of a European partnership agreement to reduce use of laboratory animals.

Serono is very proud to have been recognized on several occasions this year for its corporate responsibility efforts. Serono was awarded the Swiss Prize of Ethics, the ASPAN-SO2005 Prize for our collaboration on an energy-saving project with the city of Geneva, and other industry awards.

This section of the Annual Report provides a description of the measures adopted during the year 2005 to enhance our environmental and social performance, together with a detailed account of quantitative results obtained during this period. Regularly updated information and performance indicators pertaining to our corporate governance, environmental management, social issues, stakeholder relations, products safety and business ethics can be found in Fact Sheets, which can be accessed from the Corporate Social Responsibility (CSR) section of our website (www.serono.com).

20

Environmental performance

Serono is a leading biotechnology company that specializes in the production of medicines and development of recombinant proteins and small molecules. Our activities have a very limited impact on the environment. It currently concerns water consumption, energy use for both heating and transportation (freight and personal), as well as carbon emission from the gray energy generated in the production of electricity and gas supplied to our sites from an energy facility.

Our research and manufacturing processes do not involve the production of genetically modified organisms for sale or release into the environment. They do not involve or generate, hazardous chemicals, heavy metals, carcinogenic substances or so-called persistent organic pollutants such as PCBs, dioxins or pesticides. Reactions are carried out in aqueous phase and, therefore, do not cause emissions of atmospheric pollutants or ozone-depleting substances. The proteins, hormones and other molecules that we produce are naturally occurring substances in living organisms. While genetic modifications are applied to the cells and microorganisms that synthesize these molecules so that they are obtained in required concentrations and purity, such cells and microorganisms are completely deactivated – in keeping with regulations – before they are released in waste effluents. Our research operations are regularly inspected by biological safety regulatory authorities and use Class 1 microorganisms that present no health or environmental hazard according to internationally recognized standards.

New developments and initiatives

ISO 14001 certification

Our main manufacturing sites, Serono’s Biotech Center in Corsier-sur-Vevey (Switzerland) and Industria Farmaceutica Serono in Bari (Italy), received ISO 14001:2004 certification in the first quarter of 2005. Together, these two sites represent 65% of Serono’s sales of therapeutic products. This measure will be extended in the future to other sites.

The ISO 14001 standardization procedure involves several steps, including an analysis of the company’s environmental impact and management system, verification of compliance with local/national legislation, elaboration ofprograms for the reduction of impact of relevant processes, assignment of environmental responsibilities within the company, definition of monitoring and control procedures, measures toensure transparency of internal and externalcommunication, and an external audit by an accredited expertise organization.

With the ISO 14001 certification procedure, Serono aims to improve its ability to manage energy and water consumption, as well as to motivate staff to care for the environment. We also recognize the key importance of this standardization tool to enhance our competitiveadvantage and relations with our stakeholders.

Group-wide coordination of environmental management

Serono organized an Environmental Management Seminar in April 2005 with a view to enhance coordination on environmental management issues within the group. This seminar was attended by representatives from all R&D and manufacturing sites. The main outcome was the initiation of action plans for a future harmonization of environmental management systems at the corporate level, internal and external communication, and identification and monitoring of key performance indicators. A follow-up meeting is planned in 2006.

Key trends in 2005 compared to previous year

Over the 2001 – 2005 period, remarkable progress was achieved in the reduction of our overall environmental footprint, through steady improvements in water and energy efficiency and reduction of waste and emissions. As alreadymentioned, our main manufacturing sites have now adopted ISO 14001 certification, a measure that will be extended in the future to other sites.

21

Both energy and water consumption decreased markedly in 2005, by nearly a quarter forenergy (–24%) and a third for water (–33%) on a per capita basis. Total carbon dioxide (CO2) emissions due to gas and fuel showed a moderate decrease on a per capita basis (–5.7%), although they increased by approximately 7.3% overall. We have started to monitor gray energy from generation and distribution of gas and electricity.

The production of chemical waste has been cut by more than 90% over the last three years – from 1,114 tons in 2002 to 100.5 tons in 2005 – due mainly to technology changes in manufacturing processes. The production of non-chemical waste increased in 2005 by 6.7% overall, but is down 15% on a per capita basis. We treat and recycle an increasing part of our waste on site – 65% of total waste generated in 2005, compared to 44% in 2003.

Key indicators

Environmental performance data

Environmental performance data is collected annually from all Serono’s manufacturing and R&D sites. The administrative headquarters office building (582 employees) was also surveyed in 2005. Overall, our data covers 12 sites witha total of 2,688 employees(1), or 57% of the total workforce. Given that the remaining sites are essentially decentralized sales units that makeup the rest of the company’s workforce,we assume with a reasonable degree ofconfidence that the data presented below is a good approximation of the company’s full environmental impact.

Water

Water is the main medium used by Serono in its research and manufacturing operations.Total water consumption decreased by 15.6%in 2005. This downward trend is related to the installation of a new energy-saving system of water condensate recovery in steam production and cooling at one of the manufacturing sites. Water efficiency in the company has more than doubled (+158%) since 2000.

Energy consumption, carbon dioxide emissions, and gray energy

Serono’s energy sources are composed of gas (49.6%), electricity (48.6%), and other fuels (1.7%). Total energy consumption decreased between 2004 and 2005 (–4.7%) and energy efficiency increased by 12.7%.

Energy-related carbon efficiency remained stable. Although in absolute terms CO2 emissions increased 7.3% last year, they have followed a decreasing trend since 2003 on a per capita basis (–21.5%) as a result of the company’s efficiency efforts and substitution of electricity with gas.

It should be stressed that our CO2 emissions data is calculated assuming that electricity generation for all sites is based on a typical European electricity mix. Although this is not factored into our statistics, the inclusion of a Swiss electricity mix for sites located in Switzerland would yield significantly lower CO2 emission levels overall, as electricity generation in Switzerland is almost entirely based on non-fossil fuel sources, such as hydroelectricity and nuclear energy.

Carbon emissions from gray energy are emissions generated in the production of electricity and gas supplied to our sites from an energy facility. These emissions amounted to 39.5kt in 2005, which is more than double the level ofCO2 emissions emitted through our operations(17.3kt). A trend comparison will be possible at a later stage, given that this is the first time we include an indicator for gray energy in our data. We need to point out, however, that the company’s influence on these gray energy emissions is minimal.

(1) The term “employee” in this section is used to mean persons working in the company irrespective of the nature (i.e. full-time or part-time)of their employment contract.

22

Consumption and emission trends

Eco-efficiency indicators

Per capita indicators

Waste recycling and treatment indicators

Waste

The total waste monitored at Serono’s R&D and manufacturing sites falls into two categories:

•                  Non-chemical waste, including recyclables such as paper, plastics, glass, aluminum, etc., old equipment, biological material and incinerated waste

•      Chemical waste, including solvents, chemicals and effluents.

The quantity of chemical waste was 100.5 tons in 2005, a 21% decrease compared to the previous year. This result can be attributed to the closing of two research and manufacturing sites. Non-chemical waste, on the other hand, increased 6.7%, due mainly to the inclusion this year of an administrative site that generates an appreciable amount of paper and various other non-chemical waste. This, however, needs to be considered in the context of a continuous growth in waste recycling and treatment capacity, which

23

allowed 65% of the total waste generated in 2005 to be recycled or processed through our own treatment facilities, compared to 59% the previous year. The remaining part is either incinerated or treated by public utilities. On a per capita basis, total waste produced has been decreasing at an average annual rate of 18% since 2003.

Chemical oxygen demand (COD)

Wastewater generated from manufacturing processes contains dissolved and suspended solids. Some of our manufacturing sites have their own waste treatment facilities, which allow the removal of organic pollutants by biological systemsor physical or chemical treatment. Other sites do not treat their own wastewater, but send it to a local publicly owned wastewater treatment facility.

The quality of the wastewater is assessed by measuring the oxygen required to oxidize organic compounds present in the water, an indicator called chemical oxygen demand (COD). This indicator is an indirect measure of water quality. Our 2005 result of 714mg/l isthe average value for seven sites.

Volatile organic compounds (VOC)

Serono’s manufacturing processes are carried out in aqueous phase. Chemical solvents are almost exclusively used in the form of ethanol for disinfecting and cleaning purposes. Therefore, the potential production of VOCs is insignificantcompared to levels typically observed in the chemical industry. Data collected on VOCs from sites where solvents are in use show that emissions levels dropped from 53 tons in 2004 to 39 tons in 2005.

Other indicators

Biodiversity and conservation design

Serono’s main impact on biodiversity is in the construction of new buildings or manufacturingsites, or the extension of existing sites. All our construction projects undergo environmental impact assessments. They also include planning to mitigate the impact of transportation and commuting. We are sensitive to the necessity of preservingvaluable natural functions of our sites when designing new plants and buildings. The proportion between the permeable (i.e. porous and covered with vegetation) and the non-permeable(buildings, driveways, walkways,parking lots, etc.) parts of the parcels on which our plants are operating is respectively 66% and 34% of the total land area. While recommended open space percentages vary between countries, regions, and even local communities, it is widelyrecognized that conservation design practices are beneficial to the natural environment, especially as concerns water quality, biodiversity and natural habitats, contribute to reducing flooding risks, and are essential to the quality of life of employees.

In Switzerland, environmental conservation organizations are systematically involved in a dialogue resulting in measures undertaken for the restoration of ecosystems or habitats when building or expanding our sites. The building of the new company headquarters was undertaken after complete decontamination of the area, and the choice of vegetation was made in cooperation with the Geneva’s Botanical Gardens.

24

Social performance

Employee Policy

Serono’s Employee Policy is dedicated to creating a working environment that attracts and nurtures the best talents from all cultures and enables them to excel, grow and innovate. Under the oversightof a member of the Executive ManagementBoard, it is geared towards:

•                  Implementing fair and competitive employee compensation and benefits programs

•                  Implementing recognition programs designed to reward excellence in contribution and performance

•                  Developing a safe, healthy and productive workplace

•                  Ensuring employees’ well-being and responding to their needs

•                  Encouraging mutual respect, diversity and teamwork

•                  Providing equal opportunities in the recruitment, development and promotion of employees

•                  Promoting active participation and interest of the employees in the company’s sustainable growth

During 2005, we engaged a leading global human resources consulting firm, to assess how Serono compared as an employer with best-of-breed organizations. Drawing on their extensive past research and an examination of Serono’s practices in 55 different areas, their conclusion was that “Serono’s employment offer and people practices are mostly in line with Best in Class Companies.” While welcoming this strong confirmation of the value of Serono’s employment offer, we will continue to work on further areas to improve in order to continue to offer a compelling package to attract, develop and retain the best talents in the biotech and pharmaceutical industry.

The impact and effectiveness of various aspects of our Employee Policy is monitored and assessed through regular employee surveys.

Occupational health and safety (OHS)

Serono’s OHS Policy aims to ensure a safe and healthy working environment for employees and focuses on the prevention of accidents, occupational diseases, exposure to hazardous or toxic substances, explosions and fires.

Each R&D, manufacturing and administrative site director is responsible for the establishment and implementation of the OHS Policy. All newly hired personnel are given an introductory training, and employee representatives are involved in OHS systems through a Safety Committee at each site. The site’s Safety Committee ensures that adequate measures are taken to protect employees from hazards, and that potential threats and risks are identified and addressed. Emergency procedures in case of incident or crisis are defined in site-specific safety guidelines.

As indicators of health and safety performance, we measure the number of occupational fatalities, accidents and illnesses, as well as the days that affected employees are unable to work due to these events. Accident and illness frequency rates are reported per 100 employees working 50 weeks annually and 40 hours a week (i.e. 200,000 hours), which is a standard base for such incidence rates.

In 2005, Serono’s operations registered no fatalities. There were 93 accidents registered for 12 sites, or 3.5 accidents for 100 workers. Although this rate is less than half of the Swiss national average of 7.4 accidents for 100 workers, it is important to stress that it is in all likelihood an overestimate, since data was collected from the sites with the highest risk of occupational accidents. There were 0.37 lost days per employee in 2005 as a result of accidents, which yields a lost-time injuries rate of 0.019.

Based on data collected from 10 Serono sites, there were on average 6.1 lost days per employee due to illness in 2005. The corresponding occupational illness frequency rate was 0.44. As we have introduced the monitoring of these indicators in 2005, we will be in a position to analyze trends in the future.

Occupational health and safety indicators

25

Staff turnover and employment contracts

During the year 2005, the total number of employees decreased 3.1% mainly due to the management buyout of a Serono facility and the closing of operations in a research center. Staff turnover excluding restructuring was 12.2%. The proportion of the workforce on part-time vs. full-time contracts in 2005 is different across gender lines. While 1.8% of men were on part-time employment, this proportion was 12.7% for women. On average, the proportion of employees on part-time contracts in the company is 7.4% (see workforce table).

Gender and workforce diversity

Our employees represent 71 nationalities worldwide and 38 at our headquarters in Geneva. This diversity contributes to the dynamism, flexibility and creativity of our company.

Serono employs slightly more women (51%) than men (49%) overall. The proportion of women in managerial positions is currently 20%, up from 18% in 2004.

Gender ratios in management

Discrimination and harassment

Serono’s corporate policy on harassment and discrimination aims to promote and maintain a work environment that is free from harassment. No discrimination on the basis of race, gender, color, national origin, ancestry, religion, physical or mental disability, sexual orientation or age tolerated by the company.

Procedures for complaint or third-party mediation are placed under the responsibility of the Human Resources Department, and all reported incidents are investigated with the appropriate level of confidentiality.

Redundancies

In 2005, research activities conducted at the Serono Genetics Institute (SGI) in Evry, France, were transferred to Geneva. Administrative employees, as well as scientists and laboratory technicians unwilling or unable to relocate to Geneva, received a redundancy plan that included:

•                  A competitive severance allowance

•                  Outplacement services for employees wishing to look for other opportunities

•                  Funding of training programs and health benefits

Scientists and laboratory technicians who decided to move to Geneva were offered full relocation assistance (logistics and financial).

At the end of 2005, Serono agreed to an amicable management buyout (MBO) with Bourn Hall Limited which is composed of Bourn Hall Clinic, the world’s first in-vitro fertilisation clinic, and LCG Bioscience, an organisation offering clinical research and development services to the biotechnology and pharmaceutical industry. All Bourn Hall Ltd contractual agreements remain unaffected as a result of this MBO and this includes continuity of service for employees.

Labor standards and employee benefits

The great majority (86%) of Serono’s employees work in countries or regions (Switzerland, Europe, North America) where employment standards are well developed. Specific employment

Workforce by gender and employment type

Workforce by region

26

arrangements vary from country to country, depending on legal provisions. Serono complies strictly with local legislation on such matters.

Over two-thirds (69%) of Serono’s workforce are employed in Switzerland and European countries where consultative arrangements between employees and management are based on collective agreements or recognition of trade unions. In these regions, labor councils, enterprise delegates and other workers consultation mechanisms are in place.

Serono has developed an Employee Share Purchase Plan, under which all its employees, where legally possible, have an opportunity to allocate a portion of their salary to buy the company’s shares at favorable terms. Shares can be sold immediately after theirpurchase. Employees who leave their shares in the Plan for a full year are eligible for a company matching share program.

Depending on location, part-time employees enjoy proportionately the same benefits as full-time staff in terms of wage rates and social benefits. Non-financial benefits to Serono’s employees include facilitated access to sports or other recreational activities that are beneficial to health and well-being. Temporary staff recruitedthrough external agencies receive social benefits through the relevant agency.

Remuneration and performance appraisal of employees

The remuneration of all employees is based on level of responsibility, competence and performance. Serono benchmarks external practices in order to ensure that its remuneration schemes are competitive. Appraisals are conducted twice a year on the basis of objectives and career development plans that are set and reviewed annually. The performance management system and its impact on compensation are supervised by compensation committees at board level, as well as by the management in each Serono affiliate and site.

“We Care – Well-being for our People” program and appointment of social advisor

A new program was introduced in 2005 that allows employees to choose their work schedule individually and provides better nutritional information and healthfoods in the company’s cafeterias. Under rules of complete confidentiality, a social advisor at Serono’s Geneva headquarters is tasked with helping staff with their needs and issues. The US affiliate has adopted an assistance program to support employees with personal issues. Serono’s work environment in Switzerland and the US is entirely non-smoking, with designated rooms for smokers in office buildings. Work/life balance initiatives can include summer schedules, flexible time, fitness facilities and/or yoga classes, depending on location. Childcare facilities in the new headquarters building will become operational in 2006.

Training and development

The continuous development needs of employees, managers and executives are nurtured and supported in the framework of Serono’s “Pillars of Excellence” program. Well-defined competency areas, namely effective leadership, management and business knowledge, interpersonal skills, cognitive skills and energy and drive, offer learning opportunities to assist and foster career progression and individual development. The training is delivered through external programs designed for Serono (partnership with MIT and Thunderbird University, for example), internal courses, facilitated workshops, personalized coaching sessions, individual or team assignments and recommended reading.

In 2005, Serono invested more than US$11 million in employee training, amounting to approximately US$2,300 per employee and per year. On a per capita basis, group-wide investment for training has remained fairly stable over the 2003-2005 triennium. Overall, Serono’s total cash compensation is above market median, and 10% above its targeted competitive position at the 65th percentile.

Investment in training (US$000)

* 2005 values are extrapolated from expenses recorded in the first seven months of the year.

27

Other developments and initiatives

Worldwide Code of Business Conduct

In a development aimed at ensuring the application of harmonized standards of integrity and compliance with the company’s core values throughout the group, a Worldwide Code of Business Conduct (WCBC) was adopted in 2005. This code prohibits insider trading as well as bribery and kickbacks. It defines rules and guidelines with respect to conflicts of interest and the behavior of employees who are in contact with public officials. Interaction with healthcare professionals is regulated in the US under the PhRMA Code and under the US-specific Code of Business Conduct, which addresses the ethical standards to be observed in such interactions, based on the principle that the care of a patient should be based on the patient’s medical needs and the healthcare professional’s medical knowledge and experience.

Reporting in case of non-compliance with the US Code is guided in the US by the company’s Whistleblower Policy. In other countries, it occurs through the Worldwide Code of Business Conduct and the European and International Compliance Officer. While responsibility for its implementation rests with every individual employee, proper enforcement is under the purview of Serono’s General Managers and The European and International Compliance Officer. Serono’s managers have been given the additional responsibility of leading by example and providing guidance and advice to employees on the implementation of the policy.

The WCBC is a publicly available document that can be accessed from the company’s website at www.serono.com/ company/pdf/seronoCofBC.pdf. The supplemental Code of Business Conduct for the USA is also publicly available from the company’s website at http://www.seronousa.com/ about/SCP_Code_05_final.pdf

Customer health and safety

Serono’s research, preclinical testing, clinical trials, facilities, manufacturing, labeling, pricing, and sales and marketing are subject to extensive regulation by numerous governmental authorities, including authorities in the European Union and Switzerland, as well as governmental authorities in the United States, such as the FDA. R&D activities are subject to laws regulating such things as laboratory practices and the use and disposal of potentially hazardous materials,including radioactive compounds and infectiousdisease agents.

Our Clinical Safety Policy, which applies to all Serono medical products and devices available for use under prescription, aims to ensure the highest level of protection to patients treated with our drugs, as well as subjects receiving our medical products and/or devices. This objective is pursued within the context of a highly regulated environment under Clinical Safety and Pharmacovigilance Standards and Regulations, as well as Good Manufacturing and Good Clinical Practices. The policy also applies to products undergoing clinical trial or post-marketing assessment, whether conducted by Serono, a local operating company, a contract research organization or a licensee.

Serono provides information on the safety of its medical products and devices in the form of patient leaflets, summary of product characteristics, product labels, scientific publications and periodic reports. Our Labeling Committee approves and monitors the labeling process, while the Safety and Ethics Committee ensures proper monitoring and reporting of product safety (see Corporate Governance Section 4.35 on page 122).

An internal procedure provides for the collection, documentation and processing of any safety information brought to the company’s attention, both during drug development and use of products. This includes information originating from healthcare professionals, patients, regulatory authorities or scientific literature. All clinical safety data gathered from clinical trials and post-marketing sources is regularly reviewed and analyzed by the company.

28

Customer relations

Customer services processes are geared to adapt to the needs of customers, and specific approaches are developed for pre-wholesalers, wholesalers, public hospitals, private hospitals and pharmacists. An ISO 9001 certified Quality Management System directed at customer satisfaction was awarded to Serono Iberia in 2005 and Serono Portugal in 2004.

Procurement guidelines and quality standards for suppliers

Serono is gradually implementing environmental, labor and human rights quality standards for its suppliers across the group, starting with Serono International’s Procurement Department. Clauses in Serono’s Procurement Policy Conditions require suppliers and contractors to take all necessary measures to ensure that the goods or services they supply to Serono are manufactured or provided, packaged and transported in a way that minimizes their environmental impact. They are also required to warrant that the manufacture of the goods sold to Serono does not infringe on internationally recognized labor or human rights of workers, and does not rely on child or forced labor. Suppliers in the company’s core areas of activity undergo a qualification audit and re-qualification audits based on industry specific Good Laboratory Practice, Good Clinical Practice and Good Manufacturing Practice.

Community engagement and sponsorship

Serono’s community engagement and support of charitable work aims at promoting projects that generate goodwill in the community and offer opportunity for employees’ participation. For example, 45 Serono employees took part in2005 in a skiing event that raised CHF100,000for schoolchildren in difficulty.

Our primary areas of focus are academic projects, charitable healthcare initiatives and socio-cultural events. In addition, the SeronoFoundation for the Advancement of MedicalScience (www.serono-foundation.org) supportsresearch and knowledge exchange activities in basic and clinical science.

Projects supported or initiated as part of our community engagement in 2005 include:

•                  The creation, with the Paris-based Pasteur Institute, of a joint research unit and professorial chair in the area of genetic aspects of infectious diseases

•                  A partnership with the Universities of Geneva and Lausanne to create a regional research center for reproductive endocrinology

•                  The support, in response to the earthquake and tsunami that struck South Asia at the end of 2004, of a Terre des Hommes project in favor of the health of mother and child in Sri Lanka

•                  The sponsorship of various activities and special days that aim at raising funds for the treatment of multiple sclerosis, psoriasis and cancer

Serono’s US affiliate launched a Community Service Council in 2005, comprised of individuals throughout the organization who bring energy, commitment, and passion to support and drive the implementation of programs such as supporting local elementary schools, working with charities, providing aid to low income individuals and families, and providing a 100% match on all employee donations to the American Red Cross. In the wake of Hurricane Katrina, a number of actions were implemented to support the rebuilding process.

The promotion of science and biotech education is also a priority for Serono. In this context, Serono Inc. in the US is a major sponsor of a program called BioTeach that fosters a better understanding of biotechnology in high schools around Massachusetts. A collaborative program with the Biotechnology Institute provides teachers with skills, strategies and knowledge to spread awareness of biotechnology to their students and educate their peers to do the same.

In Spain, an agreement with Queen Sofia’s Foundation, which aims to support people suffering from Alzheimer’s disease, will lead to the equipment of a R&D laboratory for research in the treatment of Alzheimer’s. Another project conducted with Fundación Aprocor assisted in the decoration and equipment of the living quarters of mentally-disabled young people. All employees from Serono Spain took part in their inauguration.

29

A detailed description of sponsored projects is publicly available from our website at thefollowing address: www.serono.com/company/pdf/serono_sponsoring_2005.pdf.

3Rs* initiative on animal research

Animal testing is required under the animal studies regulation for predicting human safety of pharmaceuticals in the development of cures, therapies and treatments for diseases. Serono is committed to ensuring that animal research is only performed when no equally predictive alternative methods accepted by regulatory bodies are available. All of our testing for new cures and treatments is covered by stringent regulations and inspections.

In November 2005, in keeping with our commitment to reduce the use of animals in researching new medicines, Serono and other companies in biotechnology, chemicals, pharmaceuticals, cosmetics and agrochemicals have adopted the “European Partnership to Promote Alternative Approaches to Animal Testing – 3Rs Declaration.”

This Declaration supports the development, validation and acceptance of alternative approaches to replace, reduce, and refine animal use and apply advanced methodology from biosciences and medicine to develop novel approaches.

This new 3Rs partnership initiative was launched in Brussels at a conference hosted by the European Commission’s Enterprise and Research Departments. An action plan will be published in 2006, with yearly progress reports thereafter.

Awards

Swiss Ethics Prize

As a result of special efforts made in the improvement of environmental management and the adoption of an advanced occupational health and security framework, Serono’s main Biotechnology Center was rewarded in November 2005 with the Swiss Ethics Prize, delivered by the Vaud Canton’s School of Management. According to the Chairman of the Examiners Board, Pierre Zumwald, this Prize was a “reward for special efforts carried out in Switzerland by a Swiss company in the area of Corporate Social Responsibility and Sustainable Development.” It was also aimed at “reminding the business community that taking into account the ethical dimension allows an organization to generate high added value.”

Prize for Serono’s Worldwide Research Center and Headquarters

In April 2005, Serono and the City of Geneva received the ASPAN-SO2005 Prize for their collaboration on an energy conservation project for Serono’s new Global Research Center and Group Headquarters. This Prize was given in recognition of this exemplary public-private partnership by the Swiss Association for Town and Country Planning.

The building is currently under construction in Geneva, Switzerland, and includes energy conservation and management concerns as core elements of its design. It is located at walking distance from the railway station and linked to a RER commuter train stop. Thermally treated and tiled glass panels will constitute the façade’s envelope, serving as thermal insulation, an intrinsic element of the building’s decentralized temperature regulation system. Additional heating and cooling capacity will rely on thermal energy extracted from Lake Geneva’s water, which will be pumped from a depth of 35 meters where the water temperature is stable. Compared to traditional heating and cooling techniques, this system will yield savings of approximately 60% in carbon dioxide emissions.

*       3Rs stand for replacement, refinement and reduction.

30

Half of the building’s energy needs will be met by the pumping of lake water, and another 20% by hydroelectric power, making the building 70% reliant on renewable energies. Operating costs of the cooling system will be reduced by 50% compared to conventional technologies.

Other awards

In addition to these prizes, our US affiliate received several awards:

•       The 2005 Top Biotech and Pharma Employers survey conducted by Science ranked Serono among the top 20 employers. This survey sought to identify companies with the best reputation as employers based on responses from readers of Science and other selected respondents. 80% of the respondents came from the US, the rest primarily from Western Europe, and 83% were from private industry. Rankings were given on the basis of whether companies treat employees with respect and work-culture values align with employees’ personal values, amongst other factors

•       A recognition that rewards the best healthcare marketing and communications (Medical Marketing & Media Award in the category of Best Use of Digital Marketing to Consumers for Fertility LifeLines)

•       An award that highlights the Internet’s role in achieving an organization’s business objectives and recognizes the work that has gone into creating outstanding healthcare websites (Platinum eHealthcare Leadership Award for Best Special Effects for CoolLearnings website)

•       The Corporate Sponsor of the Year Award from the National Multiple Sclerosis Society in the US

•       The 2005 Cardinal Health Supplier Quality Award in recognition of outstanding quality performance in the following areas: Supply Chain Efficiency, Supply Chain Services, Value Added Best Practices and Supply Chain Management Opportunities. This is the first time Serono, Inc. received this recognition, scoring 64 out of a possible 65 points

R&D on diseases in developing countries

Serono products are developed for the treatment of conditions that are mainly known in the developed world (such as infertility and MS). Only a small percentage of Serono’s products are distributed in developing countries. Nevertheless, Serono routinely sends useful scientific reagents to a wide variety of laboratories in developing countries as a way of sharing knowledge on the molecular basis of infectious diseases.

In addition, we are currently collaborating with the World Health Organization on an innovative training program, in which a scientistfrom Brazil and a clinician from Cameroonwere trained in the science of drug discoveryaccording to Serono’s quality standards. Within a very short time span, the program led to the development of various screening assays and the identification of potent inhibitors of a protein defined as key in the development of tropical diseases. These two scientists will continueto work on diseases in the developing world.

31

Contents

33

Five-year financial overview

34

Calculation of key ratios and definitions