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Overview:
The future of medicine
is personalised
Severin Schwan, CEO
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 presentation, 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 fluctuations in currency exchange rates and general financial market conditions;
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, unexpected side-effects of pipeline or marketed products;
6 increased government pricing pressures;
7 interruptions in production;
8 loss of or inability to obtain adequate protection for intellectual property rights;
9 litigation;
10 loss of key executives or other employees; and
11 adverse publicity and news coverage.
Any statements regarding earnings per share growth is not a profit forecast and should not be interpreted
to mean that Roche’s earnings or earnings per share for this year or any subsequent period will
necessarily match or exceed the historical published earnings or earnings per share of Roche.
For marketed products discussed in this presentation, please see full prescribing information on our
website – www.roche.com
All mentioned trademarks are legally protected
Agenda
Morning session
09:00 Severin Schwan: Overview
David Loew: Pharmaceuticals
Hal Barron: Late stage pipeline
10:15 Q&A
10:45 Break
11:00 Daniel O’Day: Diagnostics
Alan Hippe: Financial view
11:40 Q&A
12:00 Lunch
Afternoon session
13:10 Breakout sessions: 3 in parallel
(pRED, gRED, Emerging markets)
14:10 Breakout sessions: 3 in parallel
(pRED, gRED, Emerging markets)
15:10 Closing Q&A
16:00 Drinks
Our strategy
R&D productivity - general considerations
R&D allocation and governance at Roche
Pipeline progress
An increasingly challenging environment
Where do we go from here?
4
Regulators
Medical benefit-risk ratio
• Efficacy (clinical endpoints)
• Safety (‘zero’ tolerance)
Payers
Economic benefit-cost ratio
• Constrained funding capacity
• Demanding real outcome evidence
Investors
Economic risk-return ratio
• Declining Returns
• Declining Growth
5
Roche strategy: Focused on medically
differentiated therapies
Generics
Differentiation
MedTech
OTC
Pre
miu
m f
or
inn
ova
tio
n
Dia Pharma
Focus
Regulators: Optimised benefit / risk ratio
Payors: Optimised benefit / cost ratio
Roche strategy: Leveraging Pharma & Diagnostics
Through-out discovery to market
Unrestricted know-how and IP exchange
Faster adoption of PHC solutions (medicine and test)
Pharmaceuticals
Diagnostics
Development Commercialisation Research
Research assay Technically validated
IVD assay
Clinically validated
IVD assay
6
More efficient development
Roche strategy: Tailor made access options for
high value products
7
Established Markets Emerging Markets
Universal access and coverage
-> Negotiate prices for new medicines
Limited patient access
-> Enable access to public funding
Value based pricing Tiered pricing
Our strategy
R&D productivity - general considerations
R&D productivity at Roche
Pipeline progress
R&D productivity of Pharma industry: average
returns1 falling to critical levels
9 1 Different methodologies (e.g. IRR, economic returns) Sources: Bernstein Research 2011, McKinsey 2011, KPMG 2011, Deloitte 2011, Roche analysis
0%
5%
10%
15%
20%
25%
1960 1970 1980 1990 2000 2010
Bernstein
KPMG
Deloitte
McKinsey
Cost of Capital:
8%-10%
Return on R&D
investment
R&D productivity differs substantially among
players
10
4 x $ 710 m Peak Sales
(per $1 bn R&D)
Average annual
NME peak sales (2001-10)1
US$ bn
Average annual R&D investment (1997-2006)1
US$ bn
Roche
1 Peak sales and R&D calculated pro forma to account for major M&A Source: EvaluatePharma; BCG analysis; Roche analysis
$ 165 m Peak Sales
(per $1 bn R&D)
Implications of R&D productivity challenge
Segregation will continue as only true innovation will be rewarded
11
Willingness to pay for added value
Me
dic
al
dif
fere
nti
ati
on
high low
No / limited
differentiation
High
differentiation
True
innovators
Generics
‘Me-too’
players ??
low
h
igh
Our strategy
R&D productivity - general considerations
R&D allocation and governance at Roche
Pipeline progress
Roche R&D productivity
Key success factors
13
In-house cutting edge science
External innovation
Efficient resource allocation
In house cutting edge science
Providing an environment for top scientists
14
• Culture of empowerment & decentralised
decision making
• At the forefront of leading academic research
Exchange with academia: hiring top
academic scientists/clinicians
Post-doc program : >240 postdocs p.a.
High quality of publications (Science, Cell,
Nature: 17 in 2010, 12 in 2011)
• Focus on translating science into patient
benefit
Patent applications of leading
healthcare companies
1 Source: WIPO-databank, counted are all Patent Cooperation Treaty (PCT)-applications per international classification C (covers all Pharmaceuticals, Biotech and Chemicals, excluding Diagnostics)
0
50
100
150
200
250
300
2009 2010 2011
Companies rated in the above analysis include:
Abbott, Amgen, AstraZeneca, BMS, GSK, J&J, Merck (US), Novartis,
Pfizer, and Sanofi
Roche
R&D resource allocation
Decision criteria for portfolio trade off
15
Development Research
Medical need
Plausibility of scientific hypothesis
Expertise in the field
Scientific judgment
Analysis
Strength of preclinical / early clinical data
Market potential / competition
Technical feasibility
Roche R&D: Allocation of funds
16
Decides
overall ‘risk
appetite’
Corporate
Executive
Committee
(CEC)
Sets total*
budget by unit
(Total CHF 8bn)
• Invest proportionally more into R&D as compared to peers
• Cap / keep R&D stable in view of the overall market risks
Diagnostics
(CHF 0.9bn)
REDs
(CHF 2.5bn)
Chugai
(CHF 0.8bn)
(arms length)
Late stage
(CHF 3.9bn)
Reviews
allocation
Approves LIP
decisions
Oncology Neuroscience Immunology Virology Metabolism
MetMAb e.g.
* Refers to actual 2011 figures
R&D allocation of funds: Next level & governance
Rigorous project evaluations
17
Research Launch
Ph
0
Registration
Major independent decision points
Ph
1
Ph
2
Ph
3
RRC ESPC LSPC / CEC
Research Review Committee
(RRC)
Early Stage Portfolio
Committee (ESPC)
Late Stage Portfolio Committee (LSPC)
Corporate Executive Committee (CEC)
18
Reduce
complexity
Optimise
resource
allocation
Refine
infrastructure
Nutley
• Increase investment in late stage
• Leverage support functions
• Reduce infrastructure costs
(support functions / site
infrastructure)
• Unify sites for ‘non clinical
safety and chemistry’
• Close R&D centres (Nutley)
• Co-locate management
TCRC
Example: Optimise research at pRED
Shanghai
Basel
Welwyn Penzberg
Schlieren
Support Centers
Strategic sites
35 36 47 42 38
16 18
21 23
23 8 8
11 11 11
0
20
40
60
80
2009 2010 2011 HY 2012before R&D
prioritisation
HY 2012after R&D
prioritisationPhase I Phase II Phase III + Registration
New Molecular Entities
Continued focus on external innovation
Roche Partnering
19
150 existing partnerships
33% of total R&D pipeline compounds (phase 1-3) are from
external
CHF 32% of total Pharma sales (2011) are from partnership
compounds
Our strategy
R&D productivity - general considerations
R&D allocation and governance at Roche
Pipeline progress
Roche portfolio: Increasing value through focus
21
35 36 47
42 38
16 18
21 23
23 8
8
11 11
11
0
20
40
60
80
2009 2010 2011 HY 2012
before R&D
prioritisation
HY 2012
after R&D
prioritisation
Phase I Phase II Phase III + Registration
New Molecular Entities
59 62
76 72
79
Expanding into selected therapeutic franchises
22
Non risk-adjusted
2017 onwards 2015 2012 2013 2014
ale
gli
taza
r
on
art
uzu
ma
b
oc
relizu
ma
b
T-D
M1
Potential
Filing
Year
GA
10
1
bit
op
ert
in
Larger
(> 1 bn)
Smaller
(up to
~1 bn)
Metabolism Oncology Immunology Neuroscience Virology
2016/17
leb
rik
izu
ma
b
ron
talizu
ma
b
an
ti-P
CS
K9
LIP candidates
2012 target: 3 out of 5
Bc
l-2
-se
l in
h
etr
olizu
ma
b
MEK
09
73
me
ric
ita
bin
e
da
no
pre
vir
Pe
rje
ta
2012
Late stage pipeline Potential phase II / LIP read outs
23
Number of NMEs
2013
Oncology
Neuroscience
Metabolism
Virology
Immunology
EGFR ADCC Mab (GA201) etrolizumab
MEK 0973
rontalizumab
Bcl-2-sel inhibitor
anti-PCSK9
5
Dual PI3k/ mTor inh.
anti-EGFL7
PI3 kinase inhibitor
anti factor D
crenezumab
mGluR5 antagonist
mGluR2 antagonist
setrobuvir
10
gantenerumab
LIP=Lifecycle Investment Point
Ophthalmology
Summary
1
2 Strong growth in Emerging Markets facilitated by
innovative access models
3 Leading product pipeline providing value for the future
Strategic focus on innovation and driving Personalised
Healthcare
24
We Innovate Healthcare