A sustainable business model based on innovation and

Roche
A sustainable business model based on innovation and
productivity gains
Karl Mahler, Head of Investor Relations
1
This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as “believes”,
“expects”, “anticipates”, “projects”, “intends”, “should”, “seeks”, “estimates”, “future” or similar expressions or by discussion of, among other things,
strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking
statements contained in this document, including among others:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
pricing and product initiatives of competitors;
legislative and regulatory developments and economic conditions;
delay or inability in obtaining regulatory approvals or bringing products to market;
developments in financial market conditions, including the market for acquisition financing and other capital markets and fluctuations in
currency exchange rates;
uncertainties in the discovery, development or marketing of new products or new uses of existing products, including without limitation
negative results of clinical trials or research projects and unexpected side-effects of pipeline or marketed products;
increased government pricing pressures or changes in third party reimbursement rates;
interruptions in production;
loss of or inability to obtain adequate protection for intellectual property rights;
Litigation;
the inherent uncertainties involved in negotiations with the special committee of Genentech and that there can be no assurances that a
negotiated transaction will ultimately be agreed to or consummated;
potential difficulties in integrating the businesses of Genentech and Roche, and that some or all of the anticipated benefits of the
proposed transaction may not be realized on the schedule contemplated or at all;
that future dividends are subject to the discretion of the board of directors of Roche and a number of other factors, some of which are
beyond the control of Roche;
the ability of Roche to generate cash flow to, among other things, repay acquisition-related debt as currently contemplated;
loss of key executives or other employees; and
adverse publicity and news coverage.
The directors of Genentech who are also employees of Roche will not take part in the consideration of the proposed transaction by the
Genentech board and accordingly are not permitted to comment or respond to questions regarding the transaction as representatives of
Genentech.
For marketed products discussed in this presentation, please see full prescribing information on our website – www.roche.com
All mentioned trademarks are legally protected.
2
Performance up-date
Strategy
Main trends influencing long term value propositions
Summary
3
Q1 2009: High single-digit growth for both divisions
Well above world market
CHF bn
% change in
CHF
local
Q1’08
Q1’09
Pharmaceuticals
8.6
9.2
8
8
Diagnostics
2.3
2.4
3
8
Roche Group
10.9
11.6
7
8
4
Performance up-date
Our Strategy and the changing environment
Main trends influencing long term value propositions
Summary
5
Roche’s unique window of opportunity
Stability of
business model
Roche’s unique position
Peers
Roche
Bridging the cliffs,
Cost-cutting,
Diversification
Growth
2007
The industry
Low replacement power of current
earnings levels
Poor pipelines
Cost cutting
2013-14
Roche
Extended stability
Low generic exposure
Investment into the future
6
Focus on our core businesses
High
Pharma
Medical
Differentiation
Roche Focus
MedTech
Generics
Low
Dia
OTC
Premium for Innovation
High
7
Roche’s strategy focuses along either dimension
Va
cc
in
es
Chiron
Corixa
Proximity
to Core
(regarding
products)
Hexal
BioVeris
Domantis
Sirtris
NimbleGen
G
en
er
ic
s
GlycArt
Ph
ar
m
a
Lek
Zentiva
Sabex
Proximity to Core
(regarding business model)
* Bubble size depicts
value of acquisition
8
Source: SDI Analysis
Not to invest in the future means being out of
business in ten years
Refill of top line
Maturing
portfolio
Years
1
2
Drug development Pre-clinical
timeline*
R&D
3
4
5
6
Clinical R&D
7
8
9
10
NDA Review
9
*Source: www.fda.gov/fdac/graphics/newdrugspecial/drugchart.pdf
A well risk balanced approach to investment
Most projects in late stage de-risked
% of Pharma
Development spend
Proof of Concept
40 NMEs in Phase I
16 NMEs in Phase II
New
Molecular
Entities
dalcetrapib (CETPi)
NMEs
in
Phase
III
*PPARαγ
9
taspoglutide (GLP-1)
9
TDM-1
9
ocrelizumab
9
pertuzumab
9
1 LE in Phase I
Line
Extensions
42%
40%
11 LEs in Phase II
9
36 LEs in Phase III
2007
2008
* Formal decision to move into phase III pending
10
Responsible management of R&D spend
Higher attrition in early stage - higher success in late stage
Preclinical, Phase I and II
Phase III and Registration
100
100
Industry Median
Roche
Industry Median
Roche
80
80
Success Rate (%)
Attrition Rate (%)
90
60
40
70
20
60
'99 -'00 -'01 -'02 -'03 -'04 -'05 -'06
'02
'01
'00
'99
'98
'97
'96
'95
Source: R&D General Metrics Study, KMR GROUP, INC
0
'99 -'00 -'01 -'02 -'03 -'04 -'05 -'06
'02
'01
'00
'99
'98
'97
'95
'96
Performance up-date
Strategy
Main trends influencing long term value propositions
Personalized Healthcare- Roche best positioned
Summary
12
Main trends influencing the long-term value
propositions
Personalised Healthcare
Maximizing assets on hand
13
Personalised Healthcare
Increasing demand by stakeholders
Patients &
Physicians
Best treatment
Regulators
Payers
Better efficacy &
safety profile
Better cost / benefit
Industry
More competitive
14
Scenarios for PHC Added Value Distribution
Value captured by different stakeholders depending on
IP and timing of diagnostic
IP for Diagnostic
Breast Cancer
Assay
B-Raf inhibitor
B-Raf mutant test
Rx
Low
High
Rx
Dx
High
High
Dx
Payor
High
Neutral
Payor
Diagnostic after
Drug Launch
Diagnostic with
Drug Launch
Rx
Low
High
Rx
Dx
Medium
Medium
Dx
Payor
High
Neutral
Payor
K-Ras Test
No IP for Diagnostic
Herceptin and
Her2 test
15
Main trends influencing the long-term value
propositions
Personalised Healthcare
Maximizing assets on hand
16
Key drivers for long term development in place
High
Develop the short term drivers while not neglecting the long
term opportunities
Inherent development risk
Virology
CNS
Metabolic
Inflammation
Low
Oncology
existing
ILLUSTRATIVE
Earlier Phases
Maturity of portfolio
17
Oncology franchise approaches CHF 20 billion in sales
Oncology sales
(CHF billion)
local growth
+15 %
20.0
Europe/RoW
7%
+27 %
40%
+9 %
16.0
12.0
8.0
53%
4.0
Double-digit growth continues
+20 %
• Continued strong increase in Avastin sales,
driven by strong uptake in mCRC and mBC
• Emerging markets contributing to
continued growth of MabThera, Herceptin
and Tarceva
Japan
• Strong launches of Avastin, Tarceva, and
adjuvant Herceptin
0.0
2004
2005
Europe/RoW
2006
US
2007
2008
Japan
18
Major growth opportunities outside the US for key
products
% of sales
100
80
56
49
49
41
35
29
24
65
71
76
60
40
20
44
51
51
59
0
AVASTIN MABTHERA CELLCEPT
TARCEVA
EU / ROW (incl. Japan)
XELODA
Nth America
HERCEPTIN
PEGASYS
Time on
market
19
Each cancer type is different
And needs a specific treatment approach
Incidence
100%
80%
3rd line
2nd line
1st line
adjuvant
60%
40%
20%
Survival
0%
CRC
BC
Adjuvant DFS at 3 years*
72 %
81 %
Metastatic median OS *
25 months
36 months
* Assuming best current care, Incidence: GLOBOCAN 2002 and Roche market research
NSCLC
50 %
11 months
20
First in class mechanisms establishing new standards
of care
Rank
First in class
Drug
Sales ($m) MAT 3Q08
1
MabThera
4,189
2
Herceptin
4,129
3
Avastin
4,052
4
Glivec
3,491
5
Taxotere
2745
6
Eloxatine
2,236
7
Arimidex
1,944
8
Gemzar
1,601
9
Erbitux
1,412
Casodex
1,343
10
Successful products need to be first class entrants –
the race begins early in R&D
21
Paradigm change: Development of all main cancer
types in parallel
le
p
m
a
Ex
tin
s
a
v
of A
3rd
line
3rd
line
9
9
line
9
9
1
line
9
Adjuvant
9
9
1 line
9 Adjuvant 9
BC
Adjuvant
9CRC NSCLC
3rd
line
2nd line
st
2nd line
2nd line
1st
9
9
9
9
9
Ovarian
Prostate
st
Gastric
GIST
RCC
9 Completed
9 Ongoing
22
Avastin: significant potential for additional
indications in the metastatic setting
Important Phase III newsflow over next 2 years
Indication
Study name
Start
Status*
Previously-treated
glioblastoma
BRAIN
2007
May 5, 2009 US FDA
granted accelerated
Filing*
2008
approval
1st line metastatic
ovarian cancer
GOG-0218
ICON-7
Q3’05
Q4‘06
Interim analysis H2’09
Expect data 2010
Relapsed Platinum
sensitive ovarian
cancer
OCEANS
GOG-0213
Q2‘07
Q4’07
Expect data 2010
Expect data 2013
2010-2013
1st line hormonerefractory prostate
cancer
CALGB 90401
Q4’07
Interim analyses
Q2’09 and Q4’09
2011
1st line advanced
gastric cancer
AVAGAST
Q3’07
Interim analysis H2‘09
2010
2010
23
*Projected timelines for positive results
Exciting mid / early-stage opportunities in oncology
3rd generation anti-CD20- potential for improvement over
MabThera based on Glycart technology
Improved product features
Extended patent life for many
other monocloncal antibodies?
Increased direct cell death
Increased ADCC
MabThera
Lower CDC
Herceptin
Phase I in NHL
Pertuzumab.
GA101: Phase II ongoing
Phase I data presented at ASH 2009
ADCC= (antibody dependent cell-mediated cytotoxicity); CDC= (complement dependent cytotoxicity)
24
ASCO 2009 Highlights
Avastin
NSABP C-08: Adjuvant colon cancer efficacy results – late-breaker abstract
RIBBON-1: 1st line HER2-negative metastatic breast cancer – oral presentation
Tarceva
ATLAS: 1st line maintenance therapy for advanced non-small cell lung cancer –
late-breaker oral presentation
SATURN: 1st line maintenance therapy for advanced non-small cell lung cancer –
oral presentation
SATURN: 1st line maintenance therapy for advanced non-small cell lung cancer biomarker data
Herceptin
ToGA: 1st line HER2-positive advanced gastric cancer –
oral presentation
T-DM1
Phase II second-line+ HER2-positive mBC final results
Joint Roche-Genentech
Investor Science Events
Sunday May 31st
Monday June 1st
NSABP = National Surgical Adjuvant Breast and Bowel Project
25
Key drivers for long term development in place
High
Develop the short term drivers while not neglecting the long
term opportunities
Inherent development risk
Virology
CNS
Metabolic
Inflammation
Low
Oncology
existing
ILLUSTRATIVE
Earlier Phases
Maturity of portfolio
26
Rheumatoid Arthritis: Not all patients respond to
current therapy
% ACR70 Responders
Gold standard therapy
anti-TNF + MTX
Unmet Medical Need
Only 1 of 3 patients receives
significant benefit
anti-TNF + MTX
anti-TNF alone
ACR 70＝70％ Improvement in:
MTX alone
Disease activity – patient
Disease activity – physician
Patient assessment of Pain
Physical disability
Acute phase reactants – CRP,ESR
27
Comprehensive development program in RA
Covers all treatment stages
SERENE*
MabThera
(MTX IR)
IMAGE**
(MTX naive, X-ray study)
MIRROR*
(MTX IR, dose escalation)
REFLEX
(Anti-TNF IR)
SCORE**
(DMARDs IR)
current Tx paradigm
NSAIDs or Cox-2
DMARDs
TNF inhibitors
(+/- MTX)
2nd biologic
(+/- MTX)
OPTION*
(MTX IR)
Actemra
AMBITION*
(6 mnth MTX free/ MTX naive,
monotherapy)
TOWARD*
(DMARDs IR)
RADIATE*
(Anti-TNF IR)
LITHE**
(MTX IR, X-ray study)
* Indication not yet approved, awaiting regulatory approval
** Phase III trial in progress
28
Performance up-date
Strategy
Main trends influencing long term value propositions
Summary
29
Roche Pharma pipeline overview
CNS
Focused on five Disease Biology Areas
Metabolic/CV
RA/Inflammation
Oncology
Xeloda
MabThera
Herceptin
Avastin
Tarceva
Pertuzumab
T-DM1
R7159 3rd gen anti-CD20
R1507 (IGF-1R mAb)
Apomab
Apo2L/TRAIL
Anti-CD40 mAb
Hedgehog inhibitor
16 ph. I compounds
MabThera
Actemra
R1594 ocrelizumab
R667 RARγ
9 ph. I compounds
On Hand
Virology
Pegasys
Tamiflu
R3484 HPV16
R7128 HCV pol. Inh.
R7227 HCV prot. inh.
ocrelizumab RRMS
R1678 Schizophrenia
R3487 Alzheimer’s
4 ph. I compounds
R1658 CETP Inh.
R1583 GLP-1
R1439 dual PPAR
9 ph. I compounds
Promising Late
Stage
Emerging
Mid-Term
Early
Stage
30
Profitability measures
Operating cash flow per employee
CHF 000’s
250
Operative Cash Flow per employee
Roche
200
150
GSK
Sanofi-Aventis
100
Novartis
50
0
2003
2004
2005
2006
2007
31
SDI Analysis; Source: Annual Reports of corresponding companies, datastream, currency rates (average 365 days)
Roche: M&D and G&A % to sales
Freeing up resources for innovation
40%
Roche (Prescription)
GSK
35%
Sanofi-Aventis
Eli Lilly
30%
AstraZeneca
25%
Merck & Co.
Novartis
20%
2002
2003
2004
2005
2006
2007
32
Patent expiry 2008-2012
Roche short-/medium-term has the strongest patent
protected portfolio… and highest share of biotech products
Top 10 Corporations Protected Sales Expiring to 2012 & Beyond (US$ Const)
80
60
40
20
69
62
54
42
51
48
48
41
36
24
14
2008-2012
Source: IMS Health MIDAS Market Segmentation MAT June 2008, Ethical protected brand sales only.
Roche
Abbott
Novartis
Lilly
MSD
J&J
S-A
AZ
Pfizer
GSK
0
Total
Market
SHARE OF PROTECTED SALES EXPIRING % US$
100
2013 & beyond
33
Roche: A unique “investment case”
Clear and focused strategy
– Medically differentiated products
– Poised to become leader in Personalised Healthcare
Attractive risk profile
– Low generic risk; lowest among European large-cap players
Assets in place for sustained success
– World market leader in Oncology
– Emerging Rheumatology & Autoimmune, and Metabolic franchises
Industry-leading organic growth
Unique high-tech healthcare investment
34
We Innovate Healthcare
35
Avastin in mCRC: Strong uptake continues
Second line
First line
Patient share
Patient share
35%
35%
30%
30%
25%
25%
Avastin
20%
Avastin
20%
15%
15%
10%
10%
5%
5%
0%
0%
Q4
05
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Q3
08
Source: Synovate Patient Monitor and Top-Up, Top-5 EU
Q4
08
Q4
05
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Q3
08
Q4
08
36
Top 10 Oncology Products
Sales and market shares in seven major markets in 2007
50%
Avastin
$2,651m
CAGR, 2006-07
40%
Herceptin
$2,653m
30%
Erbitux
$1,040m
Arimidex
$1,364m
20%
Taxotere
$1,837m
Gleevec
$1,990m
10%
Gemzar
$1,156m
Lupron
$1,411m
Rituxan
$3,216m
Eloxatin
$1,964m
0%
0%
2%
4%
6%
8%
10%
12%
-10%
Market share, 2007
Bubble size represents 2007 sales
Source: Datamonitor, MIDAS Sales Data, IMS Health, April 2008, Copyright ©, reprinted
with permission
Roche/Genetech’s MabThera, Herceptin and Avastin
dominate the current cancer brands market
DMHC2416: Commercial Insight: Top 20 Therapy Cancer Brands (08/2008)
37