A sustainable business model based on innovation and ... - Roche

Roche
A <strong>sustainable</strong> <strong>business</strong> <strong>model</strong> <strong>based</strong> 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) pricing and product initiatives of competitors;
(2) legislative and regulatory developments and economic conditions;
(3) delay or inability in obtaining regulatory approvals or bringing products to market;
(4) developments in financial market conditions, including the market for acquisition financing and other capital markets and fluctuations in
currency exchange rates;
(5) 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;
(6) increased government pricing pressures or changes in third party reimbursement rates;
(7) interruptions in production;
(8) loss of or inability to obtain adequate protection for intellectual property rights;
(9) Litigation;
(10) 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;
(11) potential difficulties in integrating the <strong>business</strong>es 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;
(12) 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;
(13) the ability of Roche to generate cash flow to, among other things, repay acquisition-related debt as currently contemplated;
(14) loss of key executives or other employees; and
(15) 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
Q1’08 Q1’09 CHF local
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
Roche’s unique position
Stability of
<strong>business</strong> <strong>model</strong>
Peers
Growth
Roche
Bridging the cliffs,
Cost-cutting,
Diversification
2007 2013-14
The industry
Low replacement power of current
earnings levels
Poor pipelines
Cost cutting
Roche
Extended stability
Low generic exposure
Investment into the future
6

Focus on our core <strong>business</strong>es
High
Roche Focus
Pharma
Dia
Medical
Differentiation
MedTech
Generics
OTC
Low
Premium for Innovation
High
7

Roche’s strategy focuses along either dimension
Proximity
to Core
(regarding
products)
Corixa
BioVeris
Domantis
Chiron
Vaccines Vaccines
Hexal
GlycArt
Sirtris
Pharma Pharma
Lek
Generics Generics
Zentiva
NimbleGen
Sabex
Proximity to Core
(regarding <strong>business</strong> <strong>model</strong>)
*
Bubble size depicts
value of acquisition
Source: SDI Analysis
8

Not to invest in the future means being out of
<strong>business</strong> in ten years
Refill of top line
Maturing
portfolio
Years
1 2 3 4 5 6 7 8 9 10
Drug development
timeline*
Pre-clinical
R&D
Clinical R&D
NDA Review
*Source: www.fda.gov/fdac/graphics/newdrugspecial/drugchart.pdf
9

A well risk balanced approach to investment
Most projects in late stage de-risked
New
Molecular
Entities
% of Pharma
Development spend
NMEs
in
Phase
III
40 NMEs in Phase I
16 NMEs in Phase II
dalcetrapib (CETPi)
*PPARαγ
taspoglutide (GLP-1)
TDM-1
ocrelizumab
pertuzumab
1 LE in Phase I
Proof of Concept
Line
Extensions
42% 40%
11 LEs in Phase II
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
100
90
100
80
60
40
Success Rate (%)
80
70
Preclinical, Phase I and II Phase III and Registration
Industry Median
Roche
20
Industry Median
Roche
Attrition Rate (%)
60
0
'95-'99
'96-'00
'97-'01
'98-'02
'99-'03
'00-'04
'01-'05
'02-'06
'95-'99
'96-'00
'97-'01
'98-'02
'99-'03
'00-'04
'01-'05
'02-'06
Source: R&D General Metrics Study, KMR GROUP, INC

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
Better efficacy &
safety profile
Payers
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
Breast Cancer
Assay
Rx
Low
IP for Diagnostic
High
Rx
B-Raf inhibitor
B-Raf mutant test
Dx
High
High
Dx
Diagnostic after
Drug Launch
Payor
Rx
High
Low
Neutral
High
Payor
Rx
Diagnostic with
Drug Launch
Dx
Medium
Medium
Dx
K-Ras Test
Payor
High
Neutral
No IP for Diagnostic
Payor
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
Develop the short term drivers while not neglecting the long
term opportunities
Inherent development risk
Low High
ILLUSTRATIVE
Oncology
Inflammation
existing
Earlier Phases
Maturity of portfolio
Virology
CNS
Metabolic
17

Oncology franchise approaches CHF 20 billion in sales
Oncology sales
(CHF billion)
20.0
16.0
12.0
8.0
4.0
local growth
+15 %
7%
40%
53%
+27 %
+9 %
+20 %
Double-digit growth continues
Europe/RoW
• 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 2006 2007 2008
Europe/RoW US Japan
18

Major growth opportunities outside the US for key
products
% of sales
100
80
56
49 49
41
35
29
24
60
40
20
44
51 51
59
65
71
76
0
AVASTIN MABTHERA CELLCEPT TARCEVA XELODA HERCEPTIN PEGASYS
Time on
market
EU / ROW (incl. Japan)
Nth America
19

Each cancer type is different
And needs a specific treatment approach
Incidence
100%
80%
60%
40%
3rd line
2nd line
1st line
adjuvant
20%
Survival
0%
CRC BC NSCLC
Adjuvant DFS at 3 years* 72 % 81 % 50 %
Metastatic median OS * 25 months 36 months 11 months
* Assuming best current care, Incidence: GLOBOCAN 2002 and Roche market research
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First in class mechanisms establishing new standards
of care
Rank 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
First in class
7 Arimidex 1,944
8 Gemzar 1,601
9 Erbitux 1,412
10 Casodex 1,343
Successful products need to be first class entrants –
the race begins early in R&D
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Paradigm change: Development of all main cancer
types in parallel
Example of Avastin
3 rd
line
2 nd line
1 st line
Adjuvant
3 rd
line
2 nd line
3 rd
line
2 nd line
1 st line
1 st line Adjuvant
Adjuvant
RCC
BC
NSCLC
CRC
Gastric
Ovarian
Prostate
Completed
Ongoing
GIST
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Avastin: significant potential for additional
indications in the metastatic setting
Important Phase III newsflow over next 2 years
Indication
Study name
Start
Status*
Filing*
Previously-treated
glioblastoma
BRAIN
2007
May 5, 2009 US FDA
granted accelerated
approval
2008
1st line metastatic
ovarian cancer
GOG-0218
ICON-7
Q3’05
Q4‘06
Interim analysis H2’09
Expect data 2010
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
*Projected timelines for positive results
23

Exciting mid / early-stage opportunities in oncology
3rd generation anti-CD20- potential for improvement over
MabThera <strong>based</strong> on Glycart technology
Improved product features
Increased direct cell death
Increased ADCC
Lower CDC
Phase I in NHL
Extended patent life for many
other monocloncal antibodies?
MabThera
Herceptin
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: 1 st line HER2-negative metastatic breast cancer – oral presentation
Tarceva
ATLAS: 1 st line maintenance therapy for advanced non-small cell lung cancer –
late-breaker oral presentation
SATURN: 1 st line maintenance therapy for advanced non-small cell lung cancer –
oral presentation
SATURN: 1 st line maintenance therapy for advanced non-small cell lung cancer biomarker data
Herceptin
ToGA: 1 st 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
NSABP = National Surgical Adjuvant Breast and Bowel Project
Monday June 1st
25

Key drivers for long term development in place
Develop the short term drivers while not neglecting the long
term opportunities
Inherent development risk
Low High
ILLUSTRATIVE
existing
Oncology
Inflammation
Maturity of portfolio
Virology
Metabolic
CNS
Earlier Phases
26

Rheumatoid Arthritis: Not all patients respond to
current therapy
Gold standard therapy
anti-TNF + MTX
% ACR70 Responders
Unmet Medical Need
Only 1 of 3 patients receives
significant benefit
anti-TNF + MTX
anti-TNF alone
ACR 7070 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
MabThera
IMAGE**
(MTX naive, X-ray study)
SERENE*
(MTX IR)
MIRROR*
(MTX IR, dose escalation)
REFLEX
(Anti-TNF IR)
SCORE**
(DMARDs IR)
current Tx paradigm
NSAIDs or Cox-2 DMARDs
TNF inhibitors 2 nd biologic
(+/- MTX) (+/- MTX)
OPTION*
(MTX IR)
Actemra
AMBITION*
(6 mnth MTX free/ MTX naive,
monotherapy)
TOWARD*
(DMARDs IR)
LITHE**
(MTX IR, X-ray study)
RADIATE*
(Anti-TNF IR)
* 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
Focused on five Disease Biology Areas
Oncology
Xeloda
MabThera
Herceptin
Avastin
Tarceva
Pertuzumab
T-DM1
R7159 3 rd gen anti-CD20
R1507 (IGF-1R mAb)
Apomab
Apo2L/TRAIL
Anti-CD40 mAb
Hedgehog inhibitor
16 ph. I compounds
On Hand
RA/Inflammation
MabThera
Actemra
R1594 ocrelizumab
R667 RARγ
9 ph. I compounds
Metabolic/CV
R1658 CETP Inh.
R1583 GLP-1
R1439 dual PPAR
9 ph. I compounds
Promising Late
Stage
Virology
Pegasys
Tamiflu
R3484 HPV16
R7128 HCV pol. Inh.
R7227 HCV prot. inh.
Emerging
Mid-Term
CNS
ocrelizumab RRMS
R1678 Schizophrenia
R3487 Alzheimer’s
4 ph. I compounds
Early
Stage
30

Profitability measures
Operating cash flow per employee
CHF 000’s
250
Operative Cash Flow per employee
200
Roche
150
100
GSK
Sanofi-Aventis
Novartis
50
0
2003
2004 2005 2006
2007
SDI Analysis; Source: Annual Reports of corresponding companies, datastream, currency rates (average 365 days)
31

Roche: M&D and G&A % to sales
Freeing up resources for innovation
40%
Roche (Prescription)
GSK
35%
Sanofi-Aventis
30%
Eli Lilly
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
100
Top 10 Corporations Protected Sales Expiring to 2012 & Beyond (US$ Const)
SHARE OF PROTECTED SALES EXPIRING % US$
80
60
40
20
0
42
Total
Market
69
GSK
62
Pfizer
54 51 48 48
AZ
S-A
J&J
MSD
41
Lilly
36
Novartis
24
Abbott
14
Roche
2008-2012 2013 & beyond
Source: IMS Health MIDAS Market Segmentation MAT June 2008, Ethical protected brand sales only.
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
First line
Second line
Patient share
Patient share
35%
35%
30%
30%
25%
25%
20%
Avastin
20%
Avastin
15%
15%
10%
10%
5%
5%
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
Q4
08
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
Q4
08
Source: Synovate Patient Monitor and Top-Up, Top-5 EU
36

Top 10 Oncology Products
Sales and market shares in seven major markets in 2007
50%
40%
Avastin
$2,651m
CAGR, 2006-07
30%
20%
10%
0%
Herceptin
$2,653m
Erbitux
Taxotere
$1,040m
Arimidex
$1,837m
$1,364m
Gleevec
$1,990m
Gemzar
Lupron
Rituxan
$1,156m
$1,411m
Eloxatin
$3,216m
$1,964m
0% 2% 4% 6% 8% 10% 12%
-10%
Bubble size represents 2007 sales
Market share, 2007
Source: Datamonitor, MIDAS Sales Data, IMS Health, April 2008, Copyright ©, reprinted
with permission
Roche/Genetech’s MabThera, Herceptin and Avastin
DMHC2416: Commercial Insight: Top 20 Therapy Cancer Brands (08/2008)
dominate the current cancer brands market
37