Roche: Ensuring sustained success in
a more challenging environment
JP Morgan - January 2011
Dr. Erich Hunziker, Deputy Head of the
Corporate Executive Committee and CFO
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
2
3
4
5
6
7
8
9
10
11
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;
fluctuations in currency exchange rates and general financial market conditions;
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;
increased government pricing pressures;
interruptions in production;
loss of or inability to obtain adequate protection for intellectual property rights;
litigation;
loss of key executives or other employees; and
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
2
A position of strength
Operational Excellence – adapting to a changing environment
Continued focus on innovation
3
Even in an economic downturn demand for
healthcare increases; but funding is and will
become more challenging
No. of healthcare
events
Funding of
healthcare
Research
activities
Access to
healthcare
Higher life
expectancy
Social
security systems
Co-paymentsystems
Health
awareness
Population
growth
Today
Slowdown
of Economy
Payments
by individuals
2020
Today
2020
4
Emerging markets show strong growth
and are a Roche focus point
IMS Health Pharma Market
Ranking 2013 US $ Bio
Growth (CAGR)
US, EU
APAC, LATAM, CEMAI
Total
2008-14
3-4%
9-13%
5-6%
1
United States
289.8
2
Japan
93.3
3
China
66.7
4
Germany
46.1
5
France
40.1
6
Spain
26.6
7
Italy
26.1
8
Russia
23.4
9
Brazil
22.9
10
Canada
20.5
11
UK
20.4
12
Venezuela
20.2
13
Turkey
16.3
14
India
15.6
15
Mexico
12.4
5
Source: CAGR 08-14 Decision Resource/groupH (+/-1.5% assumed)
Source: IMS Health, Market Prognosis June 2009
Biotech products drive growth in both divisions
Pharma Division
67%
Diagnostics Division
85%
Biotech products as % of sales
H1’ 2010
7
Long patent protection
Biosimilars facing high hurdles
Long primary patent protection
of our key biologics
Biosimilars outlook
US: 12 years data exclusivity
Patents
US
EU
ROW/EM
• 2 routes for biosimilar approval:
- Proof of similarity
- Proof of inter-changeability
Avastin
2019
similar
Lucentis
2019
marketed by
Novartis
Both requiring clinical trials
(still to be specified by FDA)
Rituxan/
MabThera
2018
earlier
Herceptin
2019
earlier
EU: legal and regulatory hurdles likely
to remain high for biosimilars
Pegasys
2018
similar
ROW/EM: investment in countries
with strong IP regulations (China)
Brand awareness important
8
Biosimilar draft guidelines in Europe
• Phase III clinical trials (double blind, equivalence) as normal route for showing similarity, in
particular where no pharmacodynamic (PD) pathway
– In Oncology usually no PD established
– End points: Response Rate, PFS where most sensitive. OS data to be collected
• Clinical trials required for diseases with different mode of action
– Rheumatoid Arthritis, Oncology
– Metastatic, adjuvant
• Extrapolation only to indications with same mode of action
– Not for different diseases, different mode of action, different dosing, different safety
requirements
• The requirements for clinical evaluation of biosimilar mAbs are open to broad interpretation
in the current draft guideline. Roche believes that a number of aspects needs to be clarified
prior to final implementation
9
% of US Sales Lost to Generics / Biosimilars
Roche: Limited exposure to patent expiries
Ro
2010
2011
2012
2013
40%
35%
30%
25%
20%
15%
10%
5%
0%
e/ G
h
c
h
tec
n
e
en
Jo
h
&
on
ns
J
n
so
n
oh
G
o
lax
e
lin
K
ith
Sm
illy
L
i
El
Z
tr a
As
a
ec
n
e
/S
rck
e
M
ng
eri
h
c
h
ug
o
l
P
n
Sa
s
nti
e
v
-A
ofi
% Sales Lost calculated by subtracting given year sales (‘10, ’11, ‘12, ‘13) from full year sales from year prior to LOE.
Data excludes sales lost impact of products with LOE prior to 2010.
Source: Evaluate Pharma
N
is
art
v
o
ze
Pf i
et h
y
r/W
10
Key Pharmaceuticals & Diagnostics products
A risk-diversified portfolio of drugs and BUs
35
25
MabThera/Rituxan
20
Herceptin
Diabetes Care
15
Pegasys
Immunochemistry
CellCept
NeoRecormon
Tarceva
Clinical Chemistry
Xeloda
Lucentis
Molecular Dx
Boniva/Bonviva
10
5
0
'03
'04
'05
'06
'07
'08
'09
* Sales 2009
>CHF 1bn*
Sales (CHF bn)
11 with > than CHF 1 bn
>CHF 5bn*
Avastin
1 with > than CHF 5 bn
30
>CHF 6bn*
2 with > than CHF 6 bn
11
Actemra/RoActemra in Rheumatoid Arthritis
Successful launch
Actemra/RoActemra quarterly sales
CHF m
120
• Uptake remains very encouraging
• In US, Actemra prescribed by nearly
60% of rheumatologists, patient share
currently 4-7% following anti-TNFs
100
80
60
• In Japan, launch restrictions lifted,
improving patients’ access to Actemra
40
• Upcoming filing for sJIA in US and EU
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
08 08 08 08 09 09 09 09 10 10 10
12
Tamiflu
Sales at normalized levels
Tamiflu quarterly sales (CHF m)
Retail
1'200
Pandemic¹
1'000
800
267
663
119
600
54
400
260
746
200
65
533
458
233
75
192
0
1
727
97
460
95
45
50
65
36
106
304
422
349
23
170
7
91
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
07
07
07
07
08
08
08
08
09
09
09
09
10
10
10
Governmental & Corporate
13
Continuous growth in sales and margin
Operating profit1 (CHF bn) and margin
Group sales (CHF bn)
12
30
R
CAG
10
25
22.8
20
24.0
7.5
6
30%
8.0
7.0
25%
20%
5.8
15%
4
10
40%
35%
8.8
8
19.8
15
35.5%
33.2%
24.6
22.0
45%
: 11%
10%
2
5
5%
0
0
0%
HY 2006 HY 2007 HY 2008 HY 2009 HY 2010
HY 2006 HY 2007
1
HY 2008 HY 2009 HY 2010
before exceptional items
14
A position of strength
Operational Excellence – adapting to a changing environment
Continued focus on innovation
15
Approach
Comprehensive scope, differentiated measures
Pharma
Medicines
gRED
pRED
Pharma
Partnering
Group
Functions1
Research & Early Dev.
Development
Tech Ops / Sites
Commercial – US/EU
Commercial - ROW
G&A/Procurement
1
Finance, IT, HR, Communication, Legal
Strong impact
Moderate impact
16
Financial impact
Expected savings of CHF 2.4 billion by 20121
2’440
CHF million
70
Other2
320
pRED
70
270
440
Group Functions
120
Development
370
420
Tech Ops & Sites
1’830
80
140
Pharma Medicines
Commercial
1070
900
2011
2012
17
1
In addition to synergies of CHF 1 billion from the Genentech integration
2
Pharma Partnering, gRED, Diagnostics sites
Impact on headcount – by function
Expected reduction of 4’800 positions by end of 2012
Pharma
Medicines
pRED
Diagnostics
Other1
Positions Transferred Positions
affected
Positions2 reduced
Commercial -2‘650
Tech Ops/Sites -1‘350
Development
+1‘500
-800
-4’800
-4‘800
-600
-640
1 Group Functions, Pharma Partnering, gRED
-260
-6‘300
2 Total number of positions transferred to other sites (800)/3rd parties (700)
18
Financial impact
One-off restructuring costs of about CHF 2.7 billion
400
CHF million
800
200
200
400
1’500
2’700
1200
Non-Cash
1500
Cash
400
600
900
2010
2011
2012
Total 2010-12
19
Early debt redemption of USD 2.5 bn note due 2012
33% of Genentech transaction related debt repaid by
September 2010
• Exercise of call option on 9 September
2010 to redeem USD 2.5 bn notes originally
due 2012
100%
• Repayment of USD 3.0 bn and EUR 1.5 bn
floating rate notes in Q1/2010
75%
• Of the CHF 48.2 bn bonds and notes issued
to finance the Genentech transaction,
cumulative 15.7 bn (33%) will have been
repaid as per September 2010 1
50%
25%
0%
9
10 11 12 13 14 15 16 17 19 21 39
EUR
USD
1) Original net proceeds in CHF
CHF
• Outlook 2010: USD 0.5 bn ‘Genentech
legacy’ note repayment at maturity in July
2010
GBP
20
0utlook for 2010: on track to achieve the goals
Sales growth (in LC)
Group & Pharma (excl. Tamiflu): mid single-digit
Diagnostics: significantly above market
Synergies
2010:
2011:
R&D investment
Slightly below 2009 level
Core EPS growth (in LC)
Double-digit
Debt
2010:
2015:
3 yr Dividend outlook
Maintained (as announced in 2008)*
CHF 800 m
CHF 1,000 m
33% reduction (revised from 25%)
Aim to return to net cash position
Barring unforeseen events;
Total Tamiflu sales of up to CHF 1 bn assumed for 2010; LC=Local Currency
* Continuous increase in dividend pay-out ratio over the period 2008-2010
21
Financial impact 2011 vs. 2010
Guidance to be provided with 2010 year-end results
Illustrative
Results from
‚Operational
Excellence‘
Risk
factors
• Price decline
• US health care
reform
Profit contribution
of underlying
business growth
• Tamiflu
• Avastin mBC
Operating
Profit 2010
22
A position of strength
Operational Excellence – adapting to a changing environment
Continued focus on innovation
23
Competitors’ strategies to address the trends
Two distinctly different groups emerging
Diversification
Becoming more “Healthcare” than
pure “Pharma”
(incl. OTC, vaccines, medical
devices, generics, branded
generics, bio-similars, eye care,
etc.)
Focus
Pharma / Diagnostics
(no generics or biosimilars)
Roche
24
Our strategic franchises
Focus on areas with high unmet medical need
CNS
Metabolism
Virology
Inflammation
Oncology
High unmet medical need - high risk/high reward
“The new oncology?”
Only dalcetrapib targets primary care; aleglitazar: specialty
product.
Focus on hepatitis; existing infrastructure to launch new products.
RA biologics: area of high growth – Actemra strongly positioned
Leader in oncology with strong pipeline-Regulatory requirements
evolving, raising the bar for new products (including competition)
25
Our Distinctiveness
Diversity of approaches fueling global scale and reach
“Federation” of
>150 partners
Worldwide
execution
Autonomous
centers
Genentech
R&ED
Roche
DBAs*
Roche Dx
Chugai
Diversity
Late-stage
development
Research
Early Dev.
Manufacturing
Commercialisation
Scale, Reach, Speed
26
* DBA: Disease Biology Areas
Roche Group pharma R&D pipeline today
phase I
(38 NMEs)
RG3639
dulanermin
cancer
RG7256 BRaf inh(2) BRAF mutated melanoma
RG7112 MDM2 ant (2 ) solid & hem tumors
RG7160 EGFR huMab
solid tumors
RG7167 CIF/MEK
solid tumors
RG7304 Raf & MEK dual inh
solid tumors
RG7321 PI3 kinase inh
solid tumors
RG7334 anti-PLGF
solid tumors
RG7347
anti-NRP1
solid tumors
RG7414 anti-EGFL7
solid tumors
RG7420 MEK inh
solid tumors
RG7421 MEK inh
solid tumors
RG7422 PI3 K/mTOR
solid & hem tumors
RG7440 AKT inhibitor
solid tumors
RG7444 FGFR3
oncology
RG7459 IAP antag(2)
oncology
RG7593 CD22 Mab vcMMAE solid tumors
RG7594 Antiangiogenic
solid tumors
RG7597 Her3 Mab
solid tumors
CHU
anti-glypican Mab
liver cancer
RG7413 rhuMab Beta7
ulcerative colitis
RG4934 anti-IL-17 Mab
RA
RG7449 anti-M1 prime Mab
asthma
RG7185 CRTH2 antag
asthma
RG7348
nucleoside analogue
HCV
RG7342 HCV pol (9)
HCV
CHU
serine palmitoyltransf inh
HCV
RG1512
P selectin huMab
PVD
RG4929 11 beta HSD inh metabolic diseases
RG7273 ABCA1 inducer
dyslipidemia
RG7418 anti-oxLDL
sec prev CV events
RG7426 BHT-3021
type 1 diabetes
RG1450 gantenerumab (A-beta) Alzheimer‘s
RG1578 mGluR2 antag (2)
depression
RG1662 GABA-A a5 inv ago cogn. disorders
RG7166 triple reuptake inh
depression
RG7412 anti-Abeta
Alzheimer‘s
RG7417 anti-factor D geographic atrophy
Status as of November 10, 2010
phase II
(17 NMEs + 7 Als)
RG1273
RG1273
RG3502
RG3616
RG3616
RG3638
RG7159
RG7204
RG7433
CHU
RG667
RG3637
RG4930
RG7415
RG7416
RG3648
RG3484
RG7128*
RG7227
RG7201
RG1594
RG3487
RG7090
EVO
pertuzumab
EBC HER2+
pertuzumab mBC HER2+ 2nd line
T-DM1
EBC
hedgehog path inh advanced BBC
hedgehog path inh operable BCC
Met Mab
mNSCLC
GA101 anti-CD 20
aggr. NHL
BRaf inh
met. melanoma 2nd/3rd l.
navitoclax (ABT-263) sol & hem tumors
topoisomerase I inh gastric cancer
palovarotene
emphysema
lebrikizumab (anti-IL13)
asthma
OX40L huMab
asthma
rontalizumab (IFN alpha Ab) SLE
anti-LT alpha
RA
Xolair chronic idiopathic urticaria
HPV16
cervical neoplasia
nucleoside polymerase inh.
HCV
danoprevir (protease inh)
HCV
SGLT2 inh
type 2 diabetes
ocrelizumab
RRMS
nic alpha7
AD
mGluR5 antag (2)
TRD
NMDA receptor antag
TRD
phase III
(8 NMEs + 23 Als)
RG105
RG435
RG435
RG435
RG435
RG435
RG435
RG435
RG435
RG435
RG435
RG597
RG597
RG1273
RG1415
RG1415
RG3502
RG3502
RG7159
RG7159
RG7204
RG1569
RG1569
RG1569
RG1569
RG1583
RG1658
RG1439
RG1678
Rituxan
NHLfast infusion
Avastin
adj BC HER 2+
Avastin
ovarian cancer 1st line
Avastin mBC combo Herceptin 1st line
Avastin
adj NSCLC
Avastin
adj BC HER2Avastin
adj BC Triple neg
Avastin
relapsed ovarian ca
Avastin
high risk carcinoid
Avastin
glioblastoma 1st line
Avastin
mCRC TML
Herceptin sc formulation HER2+
Herceptin
adj BC HER2+ (2yrs)
pertuzumab
mBC HER2+ 1st line
Tarceva
adj NSCLC
Tarceva NSCLC EGFR mut 1st line
T-DM1
mBC 1st line HER2+
T-DM1
mBC 2nd line HER2+
GA101 anti-CD 20
CLL
GA101 anti-CD 20
iNHL
BRaf inh met. melanoma 1st line
Actemra Ankylosing Spondylitis
Actemra
sc formulation RA
Actemra
early RA
Actemra
RA DMARD IR H2H
taspoglutide
T2D
dalcetrapib atherosclerosis CV risk red.
aleglitazar
CV risk reduction in T2D
GlyT1 inh
schizophrenia
RG3645
RG3645
Lucentis diabetic macular edema
Lucentis
AMD high dose
Registration
(1 NME + 10 Als)
RG105*
RG435*
RG435
RG435**
RG1415
RG105**
RG1569
CHU
CHU
MabThera
iNHL maint 1st line
Avastin mBC combo docetaxel 1st l.
Avastin mBC combo std chemos 1st l.
Avastin
mBC 2nd line
Tarceva NSCLC EGFR mut 1st line
Rituxan
ANCA assoc vascul
Actemra
sJIA
Edirol
osteoporosis
EPOCH
chemo induced anemia
* approved in EU
** filed in US
NME
Additional Indication
Oncology
Inflammation/Immunology
Virology
Metabolic/Cardiovascular
CNS
Ophthalmology
Others
RG-No Roche Genentech managed
CHU
Chugai managed
EVO
Evotec
RG105 MabThera is branded as
Rituxan in US and Japan
RG1569 Actemra is branded as
RoActemra in EU
27
Impact on product pipeline
Industry-leading late stage pipeline maintained
Number of NMEs
up to 14
Virology
HCV pol inh
CNS
ocrelizumab MS1
GlyT-1 inh
Metabolic
10
Inflammation
GlyT-1 inh
aleglitazar
Oncology
aleglitazar
taspoglutide
taspoglutide
dalcetrapib
dalcetrapib
lebrikizumab1
ocrelizumab
MetMAb
Hedgehog inh
Hedgehog inh
taspoglutide
BRAF inhibitor
BRAF inhibitor
dalcetrapib
T-DM1
T-DM1
ocrelizumab
ocrelizumab
RG7159 (CLL)
Actemra
pertuzumab
pertuzumab
4
2
2007
1
SGLT2 inh1
LIP and phase III decision pending
2008
2009
RG7159
(CLL, NHL)
pertuzumab
2010E
28
Impact on product pipeline
Progressing Personalized Healthcare
T-DM1
MetMAb
Metastatic breast cancer
Non-small cell lung cancer
(HER-2 expression level)
(MET status)
Pertuzumab
Lebrikizumab1
Metastatic breast cancer
Asthma
(HER-2/3 expression level)
(periostin level)
RG 7128
RG7204
Hepatitis C
Metastatic melanoma
(HCV viral load, genotype)
(BRAF V600E mutation)
1
LIP and phase III decision pending
29
Diagnostics
Continued high growth driven by need for medical value
Potential to improve healthcare
efficiency
Innovative tests in areas of
medical need
Testing
efficiency
medical
value
Patch pump
diabetes care
Digital Pathology
tissue analysis
MRSA
screening
HPV
early diagnosis
dual HER2
protein & gene
BRAF test
patient selection
Diagnosis
Companion
Diagnostics
IVD <2 % total worldwide healthcare spend
Influences >60 % of critical decision making
30
The Roche advantages
• We do not sacrifice our long-term future by short-term
cost cutting: innovation remains key !
• We have established an entrepreneurial model for our R&D – setup
• We are preparing for fundamental changes
in the healthcare environment
Roche delivering now – but still investing into the future!
31
We Innovate Healthcare
32
Impact on headcount – by geography
Main impact in US and Europe
USA
CH
Europe
(excl. CH)
ROW
Positions Transferred Positions
affected
Positions1 reduced
-3’550
+1‘500
-770
-4’800
-1’300
-680
-6‘300
1 Total number of positions transferred to other sites (800)/3rd parties (700)
33
Financial impact
One-off restructuring costs of about CHF 2.7 billion
CHF million
2’700
300
IT / Other costs
400
Portfolio prioritization costs
800
Site closure and transfer costs
1200
Employee-related costs
Total 2010-12
34
Avastin: Portfolio within a portfolio
Key treatment option in multiple tumor types
2009 Sales
Ovarian
• Superior PFS front line
Metastatic
Breast
• Superior PFS in multiple 1st
line trials
• Superior PFS in 2nd line
Renal
• Superior PFS in 1st line
Recurrent
Glioblastoma
Advanced
Non-Small Cell
Lung Cancer
Metastatic
Colorectal
20%-25%
• Unsurpassed
PFS and OS
75%- 80%
• Superior OS 1st line
• Superior PFS 1st and 2nd line
• Superior OS 1st and 2nd line
• Superior PFS 1st and 2nd line
35