Roche pipeline to fuel future growth

Swiss pharmaceuticals group Roche has this week held an R&D day to highlight its drug pipeline and the products that are expected to drive its future revenue growth. Having recently recovered from a period of difficulty, Roche has now said that it has 12 drugs, either on the market or in late-stage development, each with peak annual sales potential of more than one billion Swiss francs ($778 million).

Roche has enjoyed somewhat of a revival in recent years. At the turn of this century the Swiss drugmaker was struggling to deal with a series of drug failures as well as a price-fixing scandal. As if to emphasize the fluctuating nature of the pharmaceutical industry, Roche is now attracting considerable market attention following strong first quarter financial results and because it holds one of the most exciting drug pipelines in the industry.

Oncology leader

Roche's pharmaceuticals pipeline has steadily improved in quantity, quality and value. The group currently has 119 projects in research and 61 new molecular entities (NMEs), including six opt-in opportunities, in development. Roche revealed plans to submit 25 regulatory filings over the next five years, including filings for 11 lead indications, the first of which will be Boniva, its osteoporosis treatment.

The company's recent revenue growth has been driven by its oncology division. Indeed, in the last five years Roche has become the world's leading supplier of anti-cancer treatments, supportive care products and cancer diagnostics. Roche's product portfolio today offers a broad range of anti-cancer drugs, including key products for non-Hodgkin's lymphoma, breast cancer and colorectal cancer.

Roche is also looking to develop some of its most promising drugs, like MabThera Avastin and Tarceva for additional indications. The group recently reported that a phase III clinical trial of MabThera had reached its primary goals two years early.

Future pillars of growth

An interim analysis of the phase III study demonstrated that MabThera met its primary endpoints of response rate and progression-free survival, in the treatment of patients with the relapsed indolent form of non-Hodgkin's lymphoma. The drug, which Genentech markets in the US as Rituxan, achieved sales of over $2 billion in 2003. On the back of this latest research, MabThera is now expected to gain expanded approval, enabling the drug to generate further revenues.

Roche was also quick to highlight those products that currently lie further back in development. With drugs showing promise in a variety of therapeutic areas, analysts were shown that Roche plans to excel in therapeutic areas outside of oncology. In MRA for example, Roche holds a new experimental compound for the treatment of rheumatoid arthritis.

Other highlights of Roche's presentation included diabetes treatment R483 and Cera, a slow-release formulation of EPO, which have both moved into phase III testing. Beyond that, the company has high hopes for an asthma drug candidate that recently completed phase II trials and R673, which is being investigated for the treatment of depression.

Strategic holdings

Much of Roche's future growth is likely to be a result of its strategic holdings in Genentech and Chugai. Such partnerships have allowed the Swiss Pharma to develop its presence in niche therapeutic markets while expanding in Asia Pacific, most notably Japan.

The company's relationship with Genentech probably represents Roche's most successful strategic move to date, given the number of highly successful products that have resulted and significantly benefited the company. In 2001, Genentech prescription sales were $1,699 million, an increase of 37.7% over 2000 and accounting for 15.3% of Roche's 2001 total pharmaceutical revenues. Roche has a 58% shareholding in the Californian biotech company and benefits from being offered any new development projects for joint or exclusive development/commercialization before they are licensed to third parties;

At the end of 2001 Roche announced that it was merging its Japanese operations, Nippon Roche, with Chugai, Japan's 10th largest pharmaceutical company. The move represents an important step in expanding Roche's global presence, boosting it from 12th place to 9th in the ranking of the world's largest pharmaceutical companies. Since competition in Japan is expected to heat up significantly over the next five years, Roche is likely to have an early-mover advantage relative to many competitors in consolidating its market position and reinforcing its brand.

The success of these collaborations have helped Roche resist advances made by Novartis, its cross town rival that remains eager to create a Swiss pharmaceuticals giant. With an R&D spend to go past the five billion Swiss franc mark in 2004, Roche looks increasingly well positioned to meet future challenges and remain independent.

Related research:

• PharmaVitae 2003: Roche

• Roche: key issues and metrics in Big Pharma

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