#8 Roche

Grenzacherstrasse 124, CH-4070 Basel, Switzerland
Tel: (41) 61 688 1111 Fax: (41) 61 691 9391
www.roche.com

Headcount	78,604
Year Established	1896
Pharma Revenues*	$21,998	+9%
Total Revenues*	$38,486	+9%
Net Income	$9,541	+35%
R&D Budget	$6,995	+12%

* See note about revenues after Top Selling Drugs below

 

Top Selling Drugs
Drug	Indication	Sales	(+/-%)
Herceptin*	breast cancer	$2,761	+45%
MabThera/Rituxan*	NHL	$2,317	+29%
NeoRecormon/Epogin	anemia	$1,747	-2%
Tamiflu	influenza	$1,739	-17%
CellCept	transplantation	$1,678	+14%
Pegasys/Copegus	hepatitis C	$1,366	+17%
Avastin*	oncology	$1,129	+82%
Xeloda	oncology	$960	+24%
Xenical	weight loss/weight management	$527	-5%

Account for 65% of total pharma sales, up from 63% in 2006.

* Drug revenues and sales figures for Roche do not include revenues for Genentech, which is 60% owned by Roche and with which it co-markets several major products. Revenues from Chugai, also 60% owned by Roche, are counted in Roche’s results.

PROFILE

Roche continues to blaze a singular trail in the pharma biz, posting strong results from its two (majority owned) strategic allies, Genentech and Chugai, while sticking to its philosophy that diagnostics and therapeutics are growing ever more intertwined.

The company gained a new chief executive officer in March 2008, with Severin Schwan replacing Franz Humer, who retained his role as chairman of Roche Holdings. Mr. Schwan, who is only four years older than me, was previously the chief executive of Roche’s Diagnostics unit. In that light, the company’s lengthy pursuit of Ventana Medical Systems makes plenty of sense. Roche made an initial offer of $3.0 billion ($75/share) for the cancer diagnostics company in June 2007. The public back-and-forth got ugly as Ventana held out for a $100/share offer. The companies eventually settled on $89.50/share ($3.4 billion, payable in cash) in February 2008.

The Lowe Down: Roche Now Roche is a quiet shop, at least compared to all the drama and fireworks going on in other parts of the industry. Must be because they’re so Swiss or something. Years ago they had a reputation as a place that indulged every so often in — gasp! — mass layoffs, but now that the rest of the pharma world has caught up, they don’t stand out, do they? Their portfolio looks pretty solid, and their pipeline, while not full of gigantic world-conquerors, is something that several other companies would be glad to have. But one of the main reasons that they’re so happy these days has been their tie-in with Genentech, and the main reason that’s been so beneficial has been the huge success of Avastin. So you could argue that the whole difference has been one drug — but on the other hand, how many do you need? If torcetrapib had worked, Pfizer’s outlook would be rather different, wouldn’t it? Still, you’d do well to think of Roche as a hybrid part-biologics company, for some time to come. —Derek Lowe

When the deal was first proposed, Mr. Schwan remarked, “Our combined company will be uniquely positioned to develop companion diagnostics which enable the identification of patient responses to treatments, thereby offering more cost-efficient, differentiated and targeted medicines to patients.” Given Roche’s position in oncology drugs, which includes a stable of powerhouse antibodies, the Ventana deal may pay for itself many times over, if its diagnostics enable the company to develop fine-tuned cancer treatments.

Roche’s cancer drugs continued to fuel company growth in 2007. Herceptin, MabThera/Rituxan and Avastin all posted huge gains last year, and label expansions are opening new areas for treatment. Avastin received approval in the EU to treat colon cancer, and got accelerated approval by the FDA to be added to chemotherapy for breast cancer.

The company also looks poised to expand its rheumatoid arthritis treatments with Actemra, a biologic picked up in the company’s acquisition of Chugai. Actemra is already on the market in Japan and is pending approval in the U.S., with an advisory committee meeting scheduled for July 2008.

Still, biologics weren’t Roche’s only big products. The company’s 2006 results were also boosted by huge government stockpiling of its flu treatment, Tamiflu. With those stockpiles filled and contracts winding down, Tamiflu’s 2007 numbers dragged and 2008 isn’t looking too snappy. However, all that ramped-up manufacturing capacity — remember when we were all going to die from H5N1 a few seasons ago? — isn’t so easy to ramp down.

To help moderate the ebb-and-flow of Tamiflu demand, Roche has undertaken a curious new program: the company is selling “reservations” of Tamiflu to U.S. corporations. According to Roche, a contract will guarantee delivery of a course of Tamiflu treatment within two days for each employee, at the prevailing wholesale price. The contract itself will cost $6 per employee covered, and will be renewable annually. I have no idea how the company will record revenue from this setup, but I doubt it’ll count toward Tamiflu sales directly.

IP Theft or Competition?

Roche may not be interested in following Swiss counterpart Novartis into the world of generics, but the company has invested a lot of time and money in Mircera, an erythropoietin stimulating agent (ESA) that the U.S. Patent and Trademark Office ruled is an infringement on several of Amgen’s biologic patents. Mircera received FDA approval in November 2007, but a judge’s injunction and the USPTO ruling in February 2008 put the brakes on Roche’s plans for getting Mircera into the U.S. market. Roche launched Mircera in the EU in late 2007.

Acquisition News Target: Piramed Ltd. Price: $160 million, plus milestones Announced: April 2008 What they said: “The integration of Piramed’s promising research and development reaffirms and further strengthens Roche’s leadership in oncology.” —William M. Burns, CEO, Roche Pharmaceuticals Target: Therapeutic Human Polyclonals, Inc. Price: $57 million Announced: April 2007

The courts may decide on a “fair” royalty rate and allow Mircera on the market, an action that Amgen considers tantamount to rewarding IP theft. Aranesp and Epogen, the infringed drugs, are having dosage and label problems (see Amgen’s profile for more info), but the two combined for $6.0 billion in 2007 sales for Amgen.

Unbroken

In a Financial Times article by Andrew Jack and Haig Simonian in July, Mr. Schwan sounded sanguine about the state of the pharma industry. He remarked, “I do wonder whether the pharma model is really broken. I fundamentally believe if you are able to come up with innovative medicines including diagnostics, there will be demand. [. . .] I don’t see a need to diversify into other businesses. I’m not saying this is the wrong strategy but this is not our strategy.”

A company with a couple of runaway bio-drugs (remember, the sales figures I quote don’t include Genentech’s reported sales of the products), Roche looks like it can walk the walk to back up Mr. Schwan’s talk.

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For the full profile, including pipeline and patent information, download the PDF.