roche: defining priorities for a high tech healthcare …c67012a3-18a6-406d-b582-ba... ·...
TRANSCRIPT
1
1
Roche: Defining priorities for a high tech healthcare company
Erich Hunziker, Deputy Head of the Corporate Executive Committee and CFO February 2008
2
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; and11 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
3
Additional information in relation to the offer for Ventana shares and where to find it
These materials are for informational purposes only and do not constitute an offer to purchase or a solicitation of an offer to sell Ventana’s common stock. The tender offer is being made pursuant to a tender offer statement on schedule TO (including the offer to purchase, letter of transmittal and other related tender offer materials) filed by Roche with the Securities and Exchange Commission (SEC) on June 27, 2007. These materials, as they may be amended from time to time, contain important information, including the terms and conditions of the offer, that should be read carefully before any decision is made with respect to the tender offer. Investors and stockholders can obtain a free copy of these materials and other documents filed by Roche with the SEC at the website maintained by the SEC at www.sec.gov.The tender offer materials may also be obtained for free by contacting the information agent for the tender offer, Mackenzie Partners, at (212) 929-5500 or (800) 322-2885 (toll-free). Additional information can also be found on www.roche.com.
4
Performance up-date
Our priorities
3
5
Sales in CHF billion USD2006 2007 CHF local growth
% change in
2007: Industry-leading sales growth continued
Pharmaceuticals 33.3 36.8 10 11 15
Diagnostics 8.7 9.3 7 6 12
Roche Group 42.0 46.1 10 10 15
6
Differentiated and rejuvenated product portfolioFrom 1 to 9 products with sales at or above CHF 1 billion
0
4
8
12
16
20
24
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
Xeloda
Rocephin
Roaccutane
MabThera/Rituxan
NeoRecormon/Epogin
CellCept
Herceptin
Pegasys
Avastin
Pharmaceuticals key products (CHF billion) By year of market introduction
TarcevaBoniva
4
7
Core EPS continued to rise rapidly
11.85
7.84
5.874.714.34
9.86
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2002 2003 2004 2005 2006 2007
Core EPS CAGR1 ('02 – '07): 22%CHF
1 Compound Annual Growth Rate
8
Strategic acquisitions and portfolio enhancementsCommitted to technology leadership
Driving personalisedhealthcare
Leader inPharma
Leader in Diagnostics
Earlydetection Diagnosis
Patientstratifi-cation
Treatment Monitoring
• THP (therapeutic antibody technology)
• Alnylam (RNA interference technology)
• Transgene (therapeutic HPV vaccine)
• BioVeris (electrochemiluminescencetechnology)
• 454 Life Sciences (ultra fast gene sequencing)
• NimbleGen (high-density DNA microarrays)
• Ventana (tissue-based diagnostics)1
• Tanox (acquired by Genentech)
1 Tender offer pending
5
9
Our objectives for 2008
Sales
• High single-digit local currency sales increase for Roche Group (excl. Tamiflu pandemic1)
• Above-market sales growth1 in both divisions
Core EPS
• Core earnings per share target2 at least at record 2007 level despite significant increase in R&D investment and considerably lower Tamiflu pandemic sales
Shareholder return
• Continuous increase in dividend pay-out ratio over the next 3 years
1 Excluding government and corporate stockpiling orders of Tamiflu for pandemic use2 At constant exchange rates Barring unforeseen events
10
Performance up-date
Our priorities
6
112006 2011 2016
1
Roche Challenge # 1Achieve above peer level sales growth for both divisions
Can we constantly
gain market share
in both divisions ?
12
2007: Outgrowing the market in all geographies
4%
12%
5%
7%
6%
17%
3%
6%
15%
10%
11%
Other
Japan
LatinAmerica
NorthAmerica
Europe
Division
0%
10%
20%
30%
40%
50%
60%
70%
2003 2004 2005 2006 2007IMS YTD Oct '07
Local sales growth
Pegasys
Herceptin
MabThera/Rituxan
NeoRecormon/Epogin
CellCept
Avastin
Xeloda
Tarceva
Boniva
% Key products of total pharmaceutical sales
Roche
7
13
0 2 4 6 8 10 12 14
Quarters since launch
Sal
es
Roche Oncology: Strongest growing franchise Avastin: Best growing oncology brand ever
Avastin launch compared to other cancer therapies (US plus top-5 EU markets1)
0
5
10
15
20
2004 2005 2006 2007
Europe/RoW US Japan
CHF billion
+28 %
+11 %
+14 %
2007 vs. 2006local growth
6 %
44 %
50 %
1 Source: IMS. Products included are Avastin, Alimta, Arimidex, Camptosar, Eloxatine, Erbitux, Femara, Gemzar, Herceptin, MabThera, Nexavar, Sutent, Tarceva, Taxol, Taxotere, Xeloda
Avastin
+20 %
14
Key products on growth pathNew indications provide fresh growth opportunities
0
1
2
3
4
Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07
HerceptinAvastin
MabTheraTarceva
0
1
2
3
4
5
Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07
50%29%
MA
T sa
les
(CH
F bn
)
0
2
4
6
Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07
0
0.5
1
1.5
Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07
Roche Pharma salesPharma Division sales
MA
T sa
les
(CH
F bn
)
MAT = Rolling 4 quarter sales at avg. YTD Sept. '07 exchange rates
8
15
Our oncology strategy: Setting new standards of care New tumor types, new combinations, new lines of intervention
In preparation
GIST
3rd
line
2nd line
1st line
Adjuvant
BC
3rd
line
2nd line
1st line
Adjuvant
NSCLC
3rd
line
2nd line
1st line
Adjuvant
CRC
Completed
Ongoing
RCCProstate
OvarianPancreatic
target all tumor types
Clinically differentiated product
Superior outcome for patients
Example Avastin
target all possible combinations
target earlier (adjuvant) intervention
16
Avastin still early in its journey Realising full potential across tumour types
Avastin also trialed in gastric, ovarian, prostate, aNHL, and brain (GBM)
(Trial names) [Approval status]. More trials are ongoing than listed above.
Launched[EU; with interferon]
–Kidney(RCC)
–Phase III(AVEREL w/Herceptin)
Phase III(BETH w/Herceptin)
Breast (HER2+)
Phase III(RIBBON-2, incl. w/Xeloda)
Launched [EU paclitaxel]Phase III (AVADO, RIBBON-1)
Phase III(BEATRICE, E5103)
Breast (HER2-)
Phase III(BETA Lung w/Tarceva)
Launched[EU majority of chemos,
US carboplatin/paclitaxel]
Phase III(E1505)
Lung (NSCLC)
Launched [EU, US, JP; broad label in 1st and subsequent lines]
Phase III(AVANT, NSABP C-08,
E5202, E5204)
Colon/ rectal
2nd-line of treatment1st-line of treatment
Advanced/metastatic(Extending life)
Early/adjuvant (Potential for cure)
Tumour
9
17
FundingRoche oncology products are cost-effective
MabThera1st LineFollicular
NHL StageIII/IV
MabTheraAggressive
NHL
Herceptinearly BC
Tarceva 2ndline NSCLC
Statins highrisk
HerceptinmBC
Glivec CML StatinsElderly low
risk
GBP in (000)
8 2-18 5-23
29-3822-28
36-38
59-111
8 - 11
Cost per QALY for selected drugs (UK data – NICE/SMC)
We aim to expand use of our products to earlier-stage cancers, providing full benefit to patients
18
Oncology is still dramatically under funded Compared to other disease areas
Source: A pan-European comparison regarding patient access to cancer drugs, Karolinska Institute DALY: Disability-Adjusted Life Years, figures from 2002/3; Commonly used measure of the burden of disease
17.1%
16.7%
8.7%
5.9%
26.3%
Mental disease25.3%
Cardiovascular
Cancer
Injuries
Resp.
Other
6.4%Cancer
Total disease burden in DALYs
Total healthcare costs
Drugs
8%
Ambulatory16%
Other
9%
Inpatienthospital care
67%
Cost breakdown in oncology
(example: Germany)
10
19
Roche has a low exposure to genericsLong-term sustainable business
0%
20%
40%
60%
80%
100%
2004 2006 2008 2010 2012 2014
Sales erosion due to generisation (% of 2004 sales)
Roche
Average European peers
20
CellCept
Pegasys Neo Recormon
Herceptin
XelodaMabTheraAvastinin CRC
FUTURE PILLARS
Actemra
Boniva
MabThera in RA
Diabetes Care
Molecular Diagnostics
Immuno-Diagnostics
Avastin adjuvantCRC
USA (Greater)Europe Japan Asia China Latin
America
Tarceva
Roche: Unique geographic risk diversification
Avastin adjuvantNSCLC
Avastin adjuvant in BC
CETP i
GLP - 1
Roche: Unique “pillars of value” risk diversification
Roche has a unique „investment case“
Mircera
Avastinin NSCL
Avastinin BC
Pertuzumab
Ocrelizumab (AI)
11
21
Pharmaceuticals 16 14 12 11
Roche Pharma 13 11 10 14
Genentech 30 26 18 6
Chugai -7 4 4 4
Diagnostics 6 5 4 8
Roche Group 14 12 10 10
Outlook on 2008 sales: Growth 1.5 to 2 times the world market on an underlying basis
Growth2007
+ 10%
Tamiflu
Pan-demicsales
High single digit
Under-lying
growth
Q1 ‘07 Q2 ‘07 Q3 ‘07 Q4 ‘07
Excluding government &corporate pandemic Tamiflu
Local sales growth rates 2007 vs 2006
22
Conclusion # 1:
Roche wants to maximize assets on hand –
and to translate value opportunities into reality
Challenge # 1:
Achieve above industry-standard sales growth
The short/medium term sales perspective
12
23
2 Can we achieve an
attractive top-line and
still deliver strong
EPS growth?
Challenge # 2Turn attractive top line into attractive bottom line
2006 2011 2016
24
• People are key!
Activate potential and constantly educate: to learn faster than
our competitors is the only sustainable factor of success!
• The right “quantum” size for Roche ?
Fixed cost versus variable cost
• Operational productivity
Doing the right things rightThree focus areas
13
25
Number of employees
Readiness for changelow high
Our leadership and communications efforts have to concentrate here
To achieve our ambitions we have to activate the potential of our 72,000 employees!
Activate our employees’ potentialConstant education to overcome fear of change
26
Even if costs grow considerably slower than sales”, there is risk that we build up too much infrastructure / fixed costs!
Sales
What is the right quantum size for a “sustainable”Roche?
14
27
We must become better and cheaper in whatever we do!
Operational productivity is an important key enabler for the Roche Group
Constantly improving operational productivity
28
0
2
4
6
8
10
12
14
16
2001
2002
2003
2004
2005
2006
2007
21.3%
22.9%
25.9% 27.9%
20.2%
16.3%
Focus on differentiated products paying offOutstanding long-term value creation
05
101520253035404550
1997
1999
2001
2003
2005
2007
1 Prescription and Diagnostics2 Continuing businesses, before exceptional items
Group sales1 (CHF billion)
CAGR 15 %
Group operating profit2 (CHF billion)31.4%
Continuing to focus on our core assets
CAGR 25 %
15
29
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Committed to continuously increase pay-out ratio over the next 3 years
CHF Dividend CAGR1 (’91-’07): 19%
1 compound annual growth rate1 Compound Annual Growth Rate. 1995 includes centenary bonus. 2007 Dividend: Proposed by the Board of Directors.
30
Outlook 2008 Profit: A commitment to our future Redistribution of ‘costs’ into R&D
Upside - not in outlook:- Additional Tamiflu pandemic sales
- Avastin adjuvant
- Delayed start or ‘failure’ of R&D assets (in particular risk-factored success of many phase II assets)
Underlying growth
and
Product Mix
and
Efficiency gains
Tamiflu pandemic
sales impact
Core EPS 2007
R&D
Commitment for thefuture
16
31
Conclusion # 2:
Roche has many programs running to ensure above
industry standard EPS-growth
Challenge # 2:
Achieve above industry-standard value creation
Short/medium term bottom-line perspective
32
1
2
3
Can we produce enough
internal and external
innovation to maintain
the Roche Group’s
Leadership position?
Challenge # 3Filling the “strategic gap”
2006 2011 2016
17
33
Which degree of innovation (= medical differentiation) is necessary to jump regulatory and reimbursement hurdles?
Research DevelopmentMarketing &DistributionProduction
CustomerbenefitInnovation
Sustainable leadershipHow can we constantly provide benefit to customers?
34
Performance
Innovation and Change ManagementPerformance improvements are not linear
Time
Major obstaclesare overcome; innovation reachescertain adoption level
Innovation widelyadopted; furtherpushing the performancewith this innovationbecomes increasingly difficult
18
35
Performance
Large-Scale TransformationRequires multiple S-Curves building on each other
• Critical for large scale transformation is that major innovations build on each other
• Combination of quantum-leap progress and continuous improvement
Organisation needs a major step change every few years followed by a period of stability to digest, optimize and continuous improvements
Time
Quantumchange
Continuousimprovement; preparationof nextquantumchange
36
The Roche “hub & spoke”-model: Roche controls the global value chain, but is open for Research partnerships
“Roche core”
Research DevelopmentMarketing +Distribution
ProductionInnovation
partners
19
37
Access to Innovation is key - competition growingCosts of third party innovation is raising steeply!
0
100
200
300
400
500
2000 2001 2002 2003 2004 2005
Early-stageLate-stage
• Average cost of in-licensing deals rose 40% (CAGR) since 2000
• By 2010, 40% of Pharma peers’revenues expected to come from external sources of innovation
Average cost of in-licensing (Rx), $m
38
Disease Biology Areas• Focus on five DBAs
• Decisions made by Disease Biology Leadership Teams (DBLTs) against measurable metrics
• Up to Proof of Concept: DBLTs manage compound progression within respective DBA
• After Proof of Concept: DBLTs responsible for conducting scientific/ medical reviews and providing options to Pharma Leadership Team
Roche 2015: Disease Biology Areas (DBAs) Alignment and focus
Idea Market
DBA CNS
DBA Oncology DBLT
DBA Viral
DBA Inflammatory
DBA Metabolic
DBLT
DBLT
DBLT
DBLT
Clear focus
More independent and flexible disease areas
Faster and simpler decision processes
20
39
Key drivers in place for sustainable growthCurrent and projected sources of value creation (phase IIb and III)
2007 2011 2015
AvastinmCRC,NSCLC
Herceptinadjuvant BC
MabTheraNHL
HCVPolymerase
Inhibitor
ILLUSTRATIVE
ActemraRA
Avastinadjuvant
Colon cancer CETPinhibitor
OcrelizumabRA, lupus
PertuzumabmBC
Avastinadjuvant
Breast cancerAvastinadjuvant
Lungcancer
OcrelizumabMS
GLP-1T2 diabetes
MabTheraRA
AvastinmBC
extensions
MabTheraCLL
HPV16therapeutic
vaccine
Tarceva1st line maint.
Tarceva+Avastin
combo 2nd line
Xelodaadj. BC
40Unless stated otherwise, submissions will occur in US and EU.
MabTheraCLL (EU)
Xeloda+Avastinadj. CC (EU)
CERA (R744 ) cancer anaemia
Avastinprostate Ca (EU)
ocrelizumab (R1594 )RA & SLE (EU)
AvastinNSCLC squamous (EU)
Major Roche managed projected submissionsover the next years
Tarcevaadj. NSCLC (EU)
GLP-1 (R1583)type II diabetes
Avastin+HerceptinmBC 1st line (EU)
Status as of December 31, 2007.
MabTheraiNHL maint 1st line (EU)
RAR gamma (R667)emphysema
Pha
se 3
MabThera+Avastinaggressive NHL (EU)
Avastinadj. NSCLC (EU)
HCV pol.inhib. (R1626)HCV
HPV 16 (R3484)cervical neoplasia
2008 2009 2010 2011 post 2011
Avastinovarian Ca (EU)
PNP inhibitor (R3421)AI/transplant
Pha
se 2
TarcevaNSCLC 1st line maint (EU)
MabTheraRA DMARD IR (EU)
Tarceva+AvastinNSCLC 2nd line (EU)
Avastinpancreatic cancer (EU)
Herceptingastric Ca (EU)
Xeloda adj. CC combo oxaliplatin
Xelodaadj. BC
CETP inhibitor (R1658)dyslipidemia
aleglitazar (R1439)type II diabetes
AvastinHER2- adj. BC (EU)
Avastinadj. CC (EU)
AvastinmBC + standard chem (EU)
Avastingastric Ca metastatic(EU)
DPP-IV (3) (R1579)type II diabetes
Tarceva+AvastinNSCLC 1st line (EU)
DBA OncologyDBA InflammationDBA VirologyDBA MetabolicDBA CNSOthers
Tarceva + AvastinNSCLC 1st line maint (EU
IGF-1R inh huMAb R1507Ewing’s sarcoma (EU)
pertuzumab (R1273)early BC (EU)
AvastinmBC + Taxotere (EU
pertuzumab (R1273)HER 2+ BC (EU)
21
41
Major phase III commitments – large investmentsAdditional large phase III trials started or starting soon
2007 2008 2009
Avastin adjuvant CC
Avastin adjuvant lung
Avastin gastric, NHL
Avastin mBC
Actemra RA
Ocrelizumab RA, lupus
Avastin adjuvant BC
Ocrelizumab MS
Pertuzumab mBC
CETPi
GLP-1
Other T2D compounds
HCV pipeline
42
Roche key therapeutic areasCurrent and future pillars of growth
MabThera
AvastinHerceptin
TarcevaPertuzumab
OncologyXeloda
ApomabApo2L/TRAIL
R1583 GLP-1
Metabolic
3 phase I compounds
R1439 dual PPAR
Virology
R7227 Protease Inh.
PegasysR1626 Polym. Inh.
CNS6 phase I compounds
On HandPromising Late
StageEmerging Mid-Term
Early Stage
R1658 CETP Inh.
R1594 ocrelizumab
RA/Autoimmune
5 phase I compounds
ActemraMabThera
Tamiflu
R7128 Polym. Inh.R3484 HPV16
PNP inhibitor
15 phase I compoundsARQ
R1579 DPP-IV