QUOTE AND NEWS
FiercePharma  Nov 26  Comment 
Targeted drugs, personalized medicine, stratified therapy--whatever you call it, using biomarkers to identify particular patients for particular drugs has been hailed as a boon for patients and a savvy strategy for pharma.
MarketWatch  Nov 25  Comment 
While a lot of it is useful, the self-help guru contradicts himself and confuses readers, says Cullen Roche.
FiercePharma  Nov 21  Comment 
Boehringer Ingelheim's Ofev and Roche's Esbriet became the first two U.S.-approved treatments for idiopathic pulmonary fibrosis when the FDA green-lighted them on the same day last month. And while Roche has the lead with Esbriet in Europe,...
TheStreet.com  Nov 20  Comment 
NEW YORK (TheStreet) -- Shares of Celldex Therapeutics  surged 13.83% to $21.32 in early afternoon trading Thursday on higher-than-average volume. The stock soared Monday after the company announced positive results of its immunotherapy in...
FiercePharma  Nov 19  Comment 
The U.K.'s cost-effectiveness gatekeepers have flip-flopped on Novartis' Xolair before, withdrawing support for the drug in 2012 before expanding its approval for asthma the following year. Now, the National Institute for Health and Clinical is...
TheStreet.com  Nov 18  Comment 
NEW YORK (TheStreet) -- Shares of Celldex Therapeutics  dipped in late morning trading Tuesday, down 6.77% to $17.01, after the stock surged Monday following the company's announcement of positive results of its immunotherapy in treating a...
TheStreet.com  Nov 17  Comment 
NEW YORK (TheStreet) -- Shares of Inovio Pharmaceuticals  dropped 8.82% to $10.03 in afternoon trading Monday after the company announced Roche  had terminated its collaboration, option, and license agreement to develop Inovio's prostate...
TheStreet.com  Nov 17  Comment 
NEW YORK (TheStreet) -- Shares of Celldex Therapeutics  soared 24.48% to $17.63 in morning trading Monday after the company announced positive results of its immunotherapy in treating a certain type of brain tumor. The company announced its...
The Hindu Business Line  Nov 17  Comment 
Roche said on Monday that the US health regulator approved its Avastin drug as a treatment for women with ovarian cancer that is resistant to platinum-containing chemotherapy.Avastin, which...




 


Roche Pharmaceuticals (OTC: RHHBY) is one of the largest pharmaceutical companies in the world by revenue. The company, based in Basel, Switzerland, has three main biologic therapies -- cancer therapies Avastin and Herceptin, and arthritis and cancer treatment Rituxan/MabThera. Roche is also the manufacturer of Tamiflu, one of the only available treatments for aggressive strains of influenza.[1] In FY 2010, Roche generated revenues of CHF 47.5B and net earnings of CHF 8.9B.[2]

Rituxan, a drug for arthritis and cancer, retains patent exclusivity through 2015, while Avastin and Herceptin, both cancer therapies, retain patent exclusivity through 2019.[3] [4] Such patent exclusivity gives Roche one of the youngest and most profitable product portfolios in the pharmaceutical industry.[5]

Corporate Overview

Recent News

In January 2010, the FDA approved Roche's antibody drug, Actemra, to treat rheumatoid arthritis. The drug, which was originally developed by Roche subsidiary, Genentech, is already approved in Europe and Asia and is expected to reach blockbuster status (more than $1B USD in annual sales).[6] Actemra is a first-in-class drug that directly inhibits the interleukin-6 receptor, which is known to be involved in the symptoms of arthritis. The drug is administered intravenously every 4 weeks to patients.[7]

Recent Acquisitions

In March, 2009, the company completed a $46.8 billion buyout of the remainder of outstanding shares of US biotech company Genentech (of which it already owned a majority stake). [8] The company also holds a majority stake in Chugai Pharmaceuticals (4519-TO) of Japan.

Business Segments

The company has two divisions: Pharmaceutical and Diagnostics. The company is the world's largest cancer drug manufacturer with additional drugs for various indications such as macular degeneration, antivirals, and a large vaccine unit. In FY 2010, Roche generated revenues of CHF 47.5B and net earnings of CHF 8.9B.[9]

Pharmaceutical (78% of sales, CHF 37.06B in FY 2010)

Cancer Drugs (57% of sales, CHF 21.3B in FY 2010)

The following drugs all generated at least CHF 1 billion in sales in 2010.

  • Avastin (17% of sales) is the company's largest cancer drug with approvals to treat kidney, colorectal, breast and lung cancers.[10]
  • MabThera/Rituxin (17% of sales), also known as Rituxin, is a drug used to treat both cancer and rheumatoid arthritis (RA). Within the cancer field, it is currently used mainly as a treatment for non-Hodgkins lymphoma, but it is undergoing testing for many other applications. The drug is Roche's second largest cancer drug.
  • Herceptin (15% of sales) is the primary treatment for adjuvant (early stage) HER-2 positive breast cancer. Roche estimates its market share in Europe's five largest markets is approximately 75% with similar penetration in the US market.
  • Xeloda (4% of sales) is colorectal, stomach and breast cancer drug.
  • Tarceva (4% of sales) is a second-line treatment for lung and pancreatic cancer.
  • NeoRecormon/Epogin (3% of sales) also known as Epogin, is an anemia drug who faces major pricing pressure from branded competitor, as well as increased sales of biosimilar generics and an FDA warning against the entire drug class.

Other Drugs

  • Pegasys (4% of sales) is a major antiviral drug used mainly in the treatment of hepatitis B and C. The drug has at least 70% market share in the US. Pegasys is the company's best selling non-cancer therapy.
  • CellCept (4% of sales) is an immunosuppressant used mainly for transplant patients. Sales have declined since it began facing generic competition in 2009.
  • Lucentis (4% of sales) is a drug for age-related macular degeneration, a major cause of age-related blindness.
  • Bonviva/Boniva (3% of sales) is a drug for the prevention and treatment of osteoperosis.
  • Tamiflu (2% of sales) is an influenza vaccine that is only of only a few approved treatments for especially aggressive strains of influenza.

Diagnostics (21.9% of sales, CHF 10.4B in FY 2010)

Roche is a provider of diagnostics products (products for testing and treating medical conditions) in addition to its pharmaceutical products. The division has five units: Professional Diagnostics, Applied Science, Tissue Diagnostics, Diabetes Care, and Molecular Diagnostics. Professional Diagnostics is the largest unit, accounting for nearly half of the division's sales, followed by Diabetes Care and Molecular Diagnostics.

Research and Development (CHF 9.05B in FY 2010

The vast majority of the company's research and development spending was concentrated in pharmaceuticals. Developing a new drug is a time-consuming and costly endeavor. Hundreds of thousands of candidate compounds must be screened to identify a handful of potential drugs, and even fewer of these candidate drugs are found to be effective at treating a disease. The drug must then pass strict safety standards in several series of clinical trials. The entire process of developing a new drug and bringing it to the market takes up to 10 to 15 years and on average costs $800 million.[11]

Most of Roche's product pipeline focuses on continuing the development of already certified successful drugs like Avastin. It has many clinical trials combining its approved drugs with other compounds or using its cancer drugs for different cancer treatment applications. Success with these trials would extend the scope and duration of the drugs' patents, bringing in billions more in revenue.[12]

Trends and Forces

Generic drugs: Not a large threat

For a detailed discussion of brand name vs generic medication, see also Brand name vs Generic medications.

Due to Food and Drug Administration (FDA) regulations, pharmaceutical patents last 17 years, during which a pharmaceutical company has an exclusive right to manufacture a particular drug. After the patent expires, generic versions of the product can be produced and sold by competitors. Generic medication is cheaper to produce (due to the substantially lower research and development costs) than brand medication, and the lower cost is often a strong incentive for consumers to choose generics over branded drugs. In addition, the presence of a generic alternative may force a decrease in the brand name medication's price, through increased competition. Roche's business model is highly dependent on patent protection and the enforcement of intellectual property rights, and weak patent protection decreases the profitability of drugs. Major pharmaceutical companies are constantly threatened by the entrance of generics.

Roche, however, has one of the youngest pipelines in the industry. Its biggest drugs - MabThera/Rituxan, Avastin, and Herceptin - accounted for large portion of annual revenues and have patent protection through 2015, 2019, and 2019, respectively. The only major drug for which the company is losing revenue due to pricing pressure (both from branded competition and generics) is the anemia drug NeoRecormon/Epogin.

Flu Pandemics/Epidemics

There is always a threat of a regional or even global outbreak of a major influenza virus. For example, the Spanish influenza pandemic of 1918 infected 500 million people and killed 10% of victims.[13] More recently, the Avian flu of the early 2000s killed at least 200 people around the world, particularly in Southeast Asia.[14] The Swine flu scare of April 2009 similarly threatened countries all over the world, and the possibility that a future swine flu variant could turn into a major flu pandemic is a serious concern. Public health officials all over the world have stocked up on vaccines and treatments in the event of such an outbreak. Roche's Tamiflu is one of two approved influenza treatments for aggressive influenza strains.. A similar increase was initially expected in 2010, but when there were fewer H1N1 cases than expected, many countries cancelled or downsized their orders. A sustained period of calm can result in decreased demand for Tamiflu and hurt Roche's bottom line, but renewed fear of outbreak (such as the Swine flu scare) can be a significant boon to earnings.

Tightening FDA Regulations

Beginning in 2009, the FDA implemented a series of reforms that include stricter monitoring of drug adverse events, more funding for the agency, stronger ability to force product recalls, more scientific expertise within the agency, more transparency. While the tightened regulations and increased transparency will eventually improve the overall quality of pharmaceutical products, companies will have to adjust to the stricter standards and stronger enforcement.[15]

Competition

Competitors to Roche's major drugs include:

  • MabThera/Rituxan -- MabThera competes with Bexxar by GlaxoSmithKline. The two drugs do not align perfectly, however, as Bexxar tends to be a treatment that follows initial use of MabThera. [16]
  • Avastin -- Avastin competes in a number of different therapeutic markets (including colorectal and kidney cancer) with Erbitux by ImClone & Bristol-Myers Squibb, Nexavar by Bayer & Onyx, Sutent by Pfizer, Gleevec by Novartis, and Vectibix by Amgen. The drugs all work differently, targeting and killing cancer through different mechanisms. [17] [18]
  • Herceptin -- Herceptin competes head-to-head with Tykerb by GlaxoSmithKline in the breast cancer therapeutic market. GlaxoSmithKline is funding a trial comparing the drugs that is expected to be completed in 2011.[19]

Roche's biggest competitors include Pfizer (PFE), Merck (MRK), GlaxoSmithKline (GSK), Novartis AG (NVS), Eli Lilly and Company (LLY), Bristol-Myers Squibb Company (BMY), Sanofi-Aventis SA (SNY), and Gilead Sciences (GILD).

Competition in the pharmaceutical industry lies mostly in specific drug markets. For example, a new diabetes drug is not going to have any effect on an existing cholesterol drug, no matter how successful it is. As a result, financial data on the pharmaceutical companies do not tell the whole story. Instead, it may be more appropriate to analyze Roche's competitors by each drug market (See section on Major Drugs and Industry Trends).

References

  1. Strong operating performance for Roche in 2009
  2. RHHBY 2010 Annual Report Financials, p. 2
  3. [www.yale.edu/ybps/pharmaceuticalcasecompetition2007/PharmaCase2007.pdf]
  4. [mba.tuck.dartmouth.edu/cib/PDFs/Butz.pdf]
  5. Tough Projections for Big Pharmas: Drug Revenues Don't Look Promising.
  6. U.S. approves Roche's Actemra arthritis drug
  7. Actemra (tocilizumab) - What You Should Know
  8. Trading Markets. "Roche Acquires Genentech." 30 March 2009
  9. RHHBY 2010 Annual Report Financials, p. 2
  10. Reuters. "Roche's Avastin gets U.S. nod for kidney cancer." 3 Aug 2009
  11. "2007 Pharmaceutical Industry Profile.
  12. Roche 2008 Annual Report
  13. Wikipedia Entry on Spanish Flu
  14. Wikipedia Entry on Avian Flu
  15. The FDA: A tough tonic
  16. [1]
  17. WebMD Guide to Colorectal Cancer Treatment
  18. San Francisco Chronicle. "Study: Avastin expands reach." 3 June 2007.
  19. Herceptin vs. Tykerb Drug Trial
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