March 18, 2010

Wall Street Journal

Roche Sees Blockbuster Potential In 10 Experimental Drugs

Roche Holding AG (RHHBY) Thursday said it may launch up to ten new drugs over the next few years that could become blockbusters, adding more clout to the Swiss firm's already large group of medicines that generate more than one billion dollars in revenue every year.

During the company's investor day in New York, Chief Executive Officer Severin Schwan said the firm's research in as diverse areas such as cancer, inflammation and central nervous system diseases "gives Roche a strong position that should secure long-term growth."

Boosted by the company's $47 billion takeover of U.S. biotech firm Genentech Inc in 2009, Roche's own diagnostic operations and its more than 100 partnerships with firms such as U.S.-based Biogen Idec Inc (BIIB) have helped Roche to boast one of the strongest pipelines in the industry.

More than 13 drugs are expected to be further researched in late phase trials this year and some of those could reach blockbuster status that could reach the size of Roche's best-selling drugs such as cancer medicines Avastin, Mabthera and Herceptin, which each reached sales of more than 5 billion Swiss francs ($4.7 billion) last year.

Roche pins high hopes on experimental cholesterol drug dalcetrapib that could reach annual peak sales of more than 5 billion Swiss francs ($4.7 billion) if it comes to market. A filing for the drug, which is late stage development, is expected for 2013. But Roche cautioned that the probability of success was below 50%.

Other potential blockbuster candidates include experimental drugs such as cancer medicine pertuzumab, diabetes treatments taspoglutide and aleglitazar, schizophrenia drug GlyT-1 and multiple sclerosis drug ocrelizumab, which each could reach sales of more than CHF2 billion if they pass regulatory hurdles and are launched in key markets such as the U.S., Europe and Japan.

Chances that all drugs will meet their goals and that the U.S. and European regulators will approve them are limited, analysts cautioned. Failures in late stage development are common even if a drug has proved successful in early trials.

In recent years, regulators have become more stringent when it comes to safety issues. Roche's ocrelizumab, developed with Biogen Idec, recently suspended trials in treating peopled affected by rheumatoid arthritis and lupus, two autoimmune diseases. A suspension of the drug's potential multibillion dollar indication for multiple sclerosis is likely, analysts said.

Roche's CEO said the company will continue to invest heavily into its research and development program. About 70% of its more than CHF8 billion in R&D spending are chalked up for drug development, while 30% should flow into research.

Although R&D spending is set to drop from the record level in 2009, Schwan said research will remain a key area of the company to drive future growth, saying that recent successes with molecular drugs bode well for the future.

"The key is to have the right quality," Schwan said, adding that a lower amount for R&D would created more competition within the company and move research into areas that are most promising in the future.

One such domain is what Roche dubs personalized medicine, amid which it wants to better understand the causes of a disease such cancer and provide medicines that are targeted to specific patient groups. Once such product-- developed together with U.S. pharmaceuticals developer Plexxikon Inc--is cancer medicine RG7204, which is currently in late stage trials and could turn into another high-selling product if successful, Roche said.