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The Pulse of the Pharmaceutical Industry

Steady As She Goes 2013

Written by: | | Dated: Tuesday, October 1st, 2013

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Roche once again enjoyed growth in 2012 despite market difficulties, and the company continues its winning strategy of developing drugs for unmet needs and companion diagnostics.

Despite increasing cost pressures in many markets, 2012 was a positive year for Roche, in which the company posted good results. Executives say Roche’s strategy – developing medically differentiated medicines and diagnostic products for diseases in areas of high unmet medical need – has served the company positively. According to Franz Humer, Roche’s chairman, despite the pricing pressures felt in Europe, the company’s focus on high-value medicines and diagnostic tests meant that relative to the rest of the industry, Roche’s sales in Europe held up well.

“In general, what we are seeing is an increasing shift from the established markets, especially in Europe, to the faster growing emerging market nations in Asia and Latin America, where Roche already records a fifth of its sales,” Humer says. “Cancer and cardiovascular disease are now among the leading causes of death in emerging economies and demand for our medicines is rising as a result. We are actively expanding our position in Asia and Latin America, thereby improving global access to our medicines and diagnostics products.”

The company has also reorganized its organizational structure. In doing do, Roche has decided to closed its site in Nutley, N.J., as part of the consolidation of research and early-stage development activities. The company remains on track to close the site by the end of 2013.

Roche also took some steps to revamp its leadership in 2012 and 2013. Two new corporate executive committee members were announced in the second half of 2012. Daniel O’Day, former chief operating officer of the Diagnostics Division, was appointed chief operating officer of the Pharmaceuticals Division as of Sept. 1, 2012. Roland Diggelmann, former head of the Asia-Pacific region within Roche Diagnostics, was appointed as a new member of the corporate executive committee and as O’Day’s successor as chief operating officer of the Diagnostics Division.

The board of directors also proposed the election of Dr. Severin Schwan, CEO of the Roche Group, as a new member of the board of directors of Roche Holding Ltd. Humer says this will enable the board of directors and corporate executive committee to work together even more closely, which will help promote the growth of the company in today’s challenging market environment.

Humer is preparing for his departure. At the annual shareholders meeting in March 2014, the Roche board of directors will propose Christoph Franz to be elected as chairman of the board. Franz is the CEO of Lufthansa.

According to Humer, the key to better serving patients’ needs in a better, safer, and more cost-effective way is clinical differentiation. By focusing on personalized healthcare, the company will continue to advance its successful strategy of focus and innovation for the benefit of patients, physicians, employees, and shareholders. About 60 percent of the projects in Roche’s pharmaceuticals pipeline are being developed in conjunction with companion diagnostic tests. In 2012 Roche launched the medicines Perjeta for breast cancer and Zelboraf for melanoma, alongside their companion diagnostics.

“Medical innovation not only benefits patients, but also our partners in the healthcare market, payers, the economy, and society in general,” Humer says. “Regrettably, in Europe in particular, there continues to be too much focus on costs and short-term thinking, which harbors the risk of missing longer-term opportunities for our economy and society. This longer-term perspective tends to be neglected in the discussions about rising healthcare costs, as does the contribution that pharmaceuticals and diagnostics make to medical progress.

“Sustainable success – and this applies not only to Roche but to business generally – requires long-term thinking and forward-looking investments. Innovation is, and will continue to be, the motor driving our long-term success.”

Company and product performance

According to Schwan, Roche delivered a strong performance in 2012, continuing the positive growth trend of recent years. “We met all our sales and earnings targets, and importantly, made significant strides in product development,” Schwan says.

In 2012, Roche sales increased 4 percent at constant exchange rates and 7 percent in Swiss francs to SFr45.5 billion ($48.52 billion), with both the Pharmaceuticals and Diagnostics Divisions growing faster than their respective markets. Roche delivered strong growth in the United States and the emerging markets, whilst in Europe the company continued to feel pricing pressure from healthcare budget cuts. Core operating profit increased 11 percent (at constant exchange rates) to SFr17.2 billion ($18.34 billion), outpacing sales growth significantly. Roche’s core operating profit margin rose 2.1 percentage points to 37.7 percent, driven mainly by productivity gains and cost savings.

In the first half of 2013, sales were SFr23.3 billion ($24.84 billion), 4 percent more than the first half 2012.

Net income in 2012 was 2.4 percent higher at SFr9.77 billion ($10.42 billion), as the good operating performance was offset by costs associated with a number of major restructuring programs and a higher tax rate.

In the first half of 2013, net income was SFr6.05 billion ($6.45 billion), 44.4 percent more than in the same period last year. The increase was due to the fact that the large restructuring charges relating to the closure of the U.S. site in Nutley that were incurred in 2012 were not repeated this year.

Diluted earnings per share in 2012 were SFr11.16 ($11.90), 1.6 percent more than in 2011. First-half 2013 diluted earnings per share were SFr6.88 ($7.34), 39.6 percent more than in the first half of 2012.

In 2012, Roche’s three top-selling products were Rituxan/MabThera, Herceptin, and Avastin. The three medicines performed strongly in 2012 as demand grew in all regions. These drugs led sales in the Oncology division, which posted sales of SFr21.34 billion ($26.76 billion), 11 percent more than in 2011. Oncology division sales in the first half of 2013 were SFr11.17 billion ($11.92 billion), 7.1 percent more than in the same period last year.

Rituxan/MabThera was Roche’s top-selling product in 2012, with sales of SFr6.7 billion ($7.15 billion). Oncology sales were driven by the strong uptake of the first-line maintenance treatment of follicular lymphoma (a type of non-Hodgkin’s lymphoma) as well as first-line and relapsed/refractory chronic lymphocytic leukemia in the United States and Western Europe. Sales in the rheumatoid arthritis franchise were driven by increased use in patients with an inadequate response to treatment with tumor necrosis factor inhibitors. In the first half of 2013, sales were SFr3.4 billion ($3.63 billion), 2.6 percent more than in the first half of 2012.

Herceptin was the No. 2 product for Roche in 2012, with sales of SFr5.89 billion ($6.28 billion), 12.1 percent more than in 2011. Sales grew in all regions, and demand was especially strong in the CEMAI (Central and Eastern Europe, Middle East, Africa, Central Asia, Indian Subcontinent) and Latin America regions. U.S. sales increased largely due to continued uptake for stomach cancer and an increased availability of patients resulting from the closure of large trials in HER2 positive breast cancer. Some positive impact from ongoing efforts to improve the quality of HER2 testing is believed to have contributed to the performance as well. HER2 testing was also a key growth driver in Western Europe, and global growth was additionally due to programs to help improve access in emerging markets. Japanese sales were driven by continued uptake in stomach cancer.

Avastin was the third top-selling product in 2012, with sales of SFr5.62 billion ($6.15 billion), 11.8 percent more than in 2011. Avastin is back on the growth path following its successful launch in ovarian cancer in Europe at the end of 2011. The drug is also benefiting from significant uptake in Japan. During the first half of 2013, Avastin recorded sales of SFr3.09 billion ($3.3 billion), 10.3 percent more than in the first half of 2012.

No. 4 in 2012 sales was the virology product Pegasys. The drug generated SFr1.65 billion ($1.76 billion), 14.7 percent more than in 2011. In the first half of 2013, Pegasys sales were SFr724 million ($772 million), slipping 19.8 percent from the first half of 2012. Sales fell as physicians in the United States and some key European markets await the expected launch of second-generation triple-combination and interferon-free therapies at the end of 2013 and start of 2014.

The company’s fifth best-selling product for 2012 was the cancer drug Xeloda, with sales of SFr1.52 billion ($1.62 billion), 12.5 percent more than in 2011. Growth was driven primarily by strong demand in the United States, China, and Japan with increased U.S. sales partly due to shortages of certain alternative cancer medicines. In first-half 2013, sales totaled SFr771 million ($822 million), 1 percent more than during same-time 2012.

The sixth best-selling product for Roche in 2012 was the age-related macular degeneration drug Lucentis. Sales amounted to SFr1.48 billion ($1.58 billion), 2.8 percent less than in 2011. Sales declined due to the entry of a competitor drug to treat wet age-related macular degeneration and central retinal vein occlusion. First-half 2013 sales reached SFr820 million ($875 million), 10.1 percent more than in the first half of 2012.

No. 7 in sales was the cancer drug Tarceva, which generated SFr1.31 billion ($1.4 billion), 5 percent more than in 2011. Growth in the United States, Brazil, China, and Japan offset a decline in Western Europe that can be attributed to shorter treatment durations and a slight decrease in patient share in second-line non-small lung cancer. During the first half of 2013, sales of Tarceva were SFr691 million ($737 million), 3.6 percent more than in first-half 2012.

The eighth best-selling drug for Roche was the transplantation drug CellCept, which generated SFr909 million ($969 million), 8.3 percent less than 2011. Sales continued to decline in 2012 due to continued generic erosion in the United States after patent expiration in 2009 and Western Europe following expiration in 2010. Sales in many countries of the International region were also negatively affected by price pressure and increased use of generics, but sales grew in China. Continued growth in Japan reflects the position of CellCept as the standard of care in its approved indications. In the first half of 2013, CellCept sales were SFr465 million ($496 million), a 2.4 percent improvement.

No. 9 for the company in 2012 sales was the rheumatoid arthritis drug Actemra/RoActemra. The drug generated sales of SFr842 million ($898 million), 36.2 percent more than in 2011. Sales continued to grow strongly in all approved indications and in all regions except Japan, where volume growth was offset by government price cuts. Sales increased particularly in the United States and Western Europe, where the drug continues to gain market share. Marketing and reimbursement approvals in additional countries continue to expand patient access to Actemra/RoActemra. Physicians increasingly see Actemra/RoActemra as the preferred drug for monotherapy in rheumatoid arthritis following the positive results of the ADACTA trial that showed superiority against adalimumab in this setting.

In the first half of 2013, Actemra/RoActemra sales were SFr496 million ($529 million), 28.8 percent more than in first-half 2012.

The 10th best-selling drug for Roche in 2012 was the respiratory drug Xolair, which recorded sales of SFr705 million ($752 million), 16.9 percent more than in 2011. First-half 2013 sales totaled SFr386 million ($411.6 million), 11.9 percent more than in the first half of 2012.

Herceptin, Rituxan/MabThera, Avastin, Actemra/RoActemra, Zelboraf, and Pegasys represented 60 percent of Roche’s drug sales in 2012. Sales of Zelboraf during 2012 were SFr234 million ($250 million) compared with SFr31 million ($33 million) in 2011. First-half 2013 sales amounted to SFr171 million ($182 million) compared with first-half 2012 sales of SFr92 million ($98 million).

Robust demand for clinical laboratory solutions in the Professional, Tissue, and Molecular Diagnostics businesses helped the Diagnostics Division to again grow faster than the in-vitro diagnostics market. The Diagnostics Division reported SFr10.27 billion ($10.95 billion) in sales, 5.4 percent more than in 2011.

Professional Diagnostics, with 8 percent sales growth in 2012, was the main growth contributor led by its Immunodiagnostics business. Tissue Diagnostics sales improved 12 percent, driven by the advanced staining business. Both business areas grew substantially ahead of their respective markets. Diabetes Care sales decreased by 4 percent in 2012, mainly due to reimbursement changes in Europe and difficult market conditions. Sales in Molecular Diagnostics increased by 4 percent, led by the blood screening business and HCV monitoring. Applied Science sales decreased 3 percent due to increasing competition in sequencing and a slowdown in public research funding.

Initiatives were announced in 2012 for the Applied Science and Diabetes Care businesses. The initiatives include streamlining the product portfolio, consolidating R&D activities, and increasing the efficiency of marketing and distribution operations.

Pipeline progress

Roche’s pipeline continued to deliver in 2012 with 11 positive results out of 14 late-stage trials. The company also launched three new cancer drugs: Perjeta for HER2-positive metastatic breast cancer and Erivedge for advanced basal cell carcinoma in the United States, and Zelboraf for BRAF V600 mutation-positive metastatic melanoma in Europe. Executives are confident that trastuzumab emtansine (T-DM1), which has been granted priority review in the United States, will also soon become available to patients with HER2-positive metastatic breast cancer following the strong overall survival data shown in the EMILIA trial.

Roche’s anti-PDL1 antibody, RG7446, is in mid-stage development for non-small cell lung cancer after promising Phase I data was presented at ASCO. The clinical-development program will incorporate an investigational companion diagnostic. Roche is also looking at RG7446 in additional trials in other cancer types, both alone and in combination with other medicines, such as Avastin and Zelboraf.

RG7446 is a new type of cancer treatment that is designed to restore a patient’s own immune system so that it is able to fight tumor cells. The drug works by interfering with a protein called PD-L1.

Roche decided to stop all clinical trials involving aleglitazar after a regular safety review of the Ale-Cardio Phase III study investigating aleglitazar in type 2 diabetes detected safety signals and lack of efficacy.

Roche further strengthened the outlook for its hematology franchise with encouraging data on obinutuzumab (GA101) and the Bcl-2 inhibitor RG7601, which Roche is developing with AbbVie (see profile on page 22). The study outcomes were presented at the 49th Annual Meeting of the American Society of Clinical Oncology and at the 18th Annual Meeting of the European Hematology Association in June.

GA101 and RG7601 are part of Roche’s next generation of targeted medicines for certain blood cancers such as non-Hodgkin’s lymphoma and chronic lymphocytic leukemia GA101 won breakthrough therapy designation and priority review from FDA in chronic lymphocytic leukemia in the first half of 2013 on the back of positive Phase III results.

RG7601 will move into late-stage development after Phase I data showed an 84 percent overall response rate in patients with relapsed or refractory CLL and an overall response rate of 53 percent in patients with relapsed or refractory NHL. RG7601 is designed to promote a natural cell death process known as apoptosis.

The stage 1 analysis of the CLL11 study showed that GA101 combined with chlorambucil, a standard chemotherapy, resulted in an 86 percent reduction in the risk of disease progression, relapse or death, compared to those treated with chlorambucil only. The trial also showed that the length of time people lived without their disease getting worse more than doubled compared to those who were treated with chlorambucil alone. The stage 2 analysis looking at the head-to-head comparison of GA101 in combination with chlorambucil versus Rituxan/MabThera in combination with chlorambucil will be reported at a later time.

Avastin is being studied for the treatment of advanced cervical cancer in the GOG240 Phase III study sponsored by the U.S. National Cancer Institute and conducted by the Gynecologic Oncology Group. The primary endpoint is overall survival. The GOG240 trial showed that Avastin plus chemotherapy allowed women with advanced cervical cancer to live longer than women who were treated with chemotherapy alone. The risk of death was 29 percent lower in women treated with Avastin and chemotherapy, while women treated with Avastin and chemotherapy lived a median of nearly four months longer compared to those who were given only chemotherapy. The median survival was 17 months with Avastin and chemotherapy versus 13.3 months for chemotherapy alone.

Avastin is also being studied in newly diagnosed glioblastoma in a Phase III trial called AVAglio. The co-primary endpoints: overall survival and progression-free survival. The AVAglio study showed that those patients who received Avastin plus radiotherapy and temozolomide chemotherapy to treat newly diagnosed glioblastoma lived more than four months longer without their disease getting worse than those who were treated with a placebo plus radiotherapy and temozolomide chemotherapy. Overall survival was not significantly improved.

The Diagnostics Division launched several new instruments and devices throughout 2012, reflecting advances in lab automation, near patient testing and diabetes management, as well as further expanding oncology, infectious disease and metabolic test menus.

In September 2013, the European Union’s Committee for Medicinal Products for Human Use recommended approval of Kadcyla as a single agent, for the treatment of adult patients with HER2-positive, unresectable locally advanced or metastatic breast cancer who previously received trastuzumab and a taxane, separately or in combination.

The CHMP opinion is based on clinical data from the international, Phase III EMILIA study that found Kadcyla helped people with HER2-positive locally advanced or metastatic breast cancer who had previously been treated with Herceptin and a taxane chemotherapy to live for nearly 10 months (9.6 months) without their disease getting worse and extended their life expectancy to more than two-and-a-half years overall (30.9 months). Kadcyla has also demonstrated a tolerable safety profile and is associated with fewer of the severe side effects usually experienced with current chemotherapy known to impact patients’ daily lives.

Kadcyla is an HER2-targeted therapy that connects two anti-cancer properties: the HER2 inhibition of trastuzumab (the active ingredient found in Herceptin) and the cytotoxic chemotherapy DM1. Trastuzumab and DM1 are joined together using a “stable” linker to deliver DM1 directly to HER2-positive breast cancer cells.

In July 2013, Roche announced that the European Commission granted conditional approval to Erivedge for the treatment of adult patients with symptomatic metastatic basal cell carcinoma or locally advanced BCC inappropriate for surgery or radiotherapy. This approval makes Erivedge, a capsule taken once-a-day, the first licensed medicine for patients in the European Union with this disfiguring and potentially life-threatening form of skin cancer.

A conditional marketing authorization is granted to medicinal products with a positive benefit/risk assessment that satisfy an unmet medical need and whose availability would result in a significant public health benefit. Under the provisions of the conditional approval, Roche will provide additional data on Erivedge in advanced BCC from an ongoing safety study.

Basal cell carcinoma is generally considered curable when confined to the skin. However, in some cases the disease will invade surrounding tissue (locally advanced) or spread to other parts of the body (metastatic BCC) in a manner that cannot be effectively treated with surgery or radiation.

In January 2012, Erivedge became the first licensed medicine for patients with advanced BCC in the United States when FDA approved it under the priority-review program that provides for an expedited review of drugs that offer major advances in treatment. Since October 2012, Erivedge has been approved in Switzerland, Australia, Israel, South Korea, Mexico, and Ecuador. Roche is working closely with other regulatory authorities to ensure Erivedge is made available as quickly as possible.

In the first half of 2013, Roche Diagnostics launched nine major products in several key markets. The new tests and systems aid the early detection, diagnosis and monitoring of a broad range of conditions and help healthcare professionals to make the right treatment choices and manage illness in a cost-effective way.

In the first half of 2013, Roche acquired Constitution Medical Investors, a developer of a highly innovative hematology testing system that is designed to provide faster and more accurate diagnosis of blood-related diseases such as anemia and leukemia. This acquisition will further strengthen Roche’s hematology test portfolio in this market. The laboratory hematology testing business has an estimated global market size of more than $2 billion.

Roche will soon launch the new cobas 8100 series, which will help to automate laboratory routine tasks, increasing cost-efficiency and reducing manual handling. The system uses intelligent robotics to prepare blood samples for immediate testing and post-analytical processing. The short and predictable turn-around times will help physicians to make timely treatment decisions for patients.

In June 2013, the fully automated cobas 6800 system for molecular diagnostic testing was shown to the public for the first time. This mid-volume platform is expected to bring exceptional level of automation, throughput and cost-efficiency to molecular testing and blood screening laboratories. The system is in the test phase.

In the first six months of 2013, FDA approved a new workflow process for the cobas 4800 HPV Test. This new process allows laboratories to use the same sample used for a Pap test with the cobas 4800, making it easier to screen women for HPV 16 and HPV 18, two strains of the human papillomavirus responsible for about 70 percent of cervical cancer cases.

During the scientific sessions of the American Diabetes Association in June, Roche Dia- betes Care presented the results of the ABACUS 5 study, which investigated the use of the Accu-Chek Aviva Expert automatic bolus advisor. This device calculates the appropriate insulin doses based on regular blood glucose monitoring in insulin-dependent patients. The study results revealed that the use of the bolus adviser improved the ability to reach glycemic targets, supporting therapy adherence and patient well-being without an increase of the number of hypoglycemic events.

Product sales and financial performance

Rituxan/MabThera $7,153 $6,404
Herceptin $6,280 $5,602
Avastin $6,147 $5,644
Pegasys $1,759 $1,534
Xeloda $1,624 $1,444
Lucentis $1,579 $1,624
Tarceva $1,401 $1,344
CellCept $969 $1,057
Actemra/RoActemra   $898 $659
Xolair $752 $643
NeoRecormon/Epogin $719 $956
Valcyte, Cymevene $680 $607
Activase, TNKase $527 $483
Tamilfu $623 $383
Pulmozyme $573 $525
Mircera $410 $367
Boniva/Bonviva $344 $742
Madopar $331 $314
Nutropin $324 $338
Rocephin $284 $283

All sales are in millions of dollars.

  2012 2011
Revenue $48,522 $45,357
Net Income $10.422 $10,178
EPS $11.90 $11.71
R&D $10,187 $8,879
  1H13 1H12
Revenue $24,843 $23,913
Net Income $6,449 $4,598
EPS $7.34 $5.26
R&D $4,837 $5,287

All figures are in millions of dollars except EPS.

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