ViewPoints: Roche's half-year report card - enhancing its oncology focus

During the first half of 2012, Roche has made a number of moves to enhance its position as the most specialised player within the Big Pharma peer set. Not all have been successful – its failed bid to acquire the gene-sequencing company Illumina a blot on the copybook – but the majority have.

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For the best part of a decade and a half, Roche's specialty has been oncology – where the company now commands a notable market leading position. In 2011, approximately 61 percent of its prescription pharmaceutical sales ($35 billion) were derived from cancer products ($21 billion). Of this figure, sales worth around $17 billion were derived from Roche's three key cancer brands, the oncology monoclonal antibody products Rituxan (for non-Hodgkin’s lymphoma), Avastin (breast, colon, lung and renal cancer) and Herceptin (HER2-positive breast cancer), each of which generated annual sales in excess of $5 billion last year.

These three products – all of which stem from Genentech (an exclusive collaborator with Roche since 1990 and acquired by the Swiss player in 2009) – have been at the vanguard of the Swiss company's cancer market domination in recent years. Therefore, it is unsurprising that research efforts have focused both on the development of new oncology products and on the means to extend the life-cycles of these established brands where possible.

A key development – which has gained notable momentum over the past six months – is the enhancement of Roche's HER2-positive breast cancer franchise via the successful approval of Perjeta and the continued progression of T-DM1 towards the market. See ViewPoints: Roche’s T-DM1 hits expectations and ViewPoints: Roche does it again; Perjeta approval boosts HER2 franchise.

HER2-positive breast cancer – which represents around 30 percent of all breast cancer cases – is arguably where Roche has most effectively realised the 'personalised medicine' strategy that underscores its twin-pillar pharma/diagnostics structure. Furthermore, driven by anticipated uptake of the Perjeta and T-DM1 franchises, HER2-positive breast cancer will emerge as Roche's leading cancer indication by 2016, according to analyst consensus forecasts compiled by FirstWord, accounting for around 37 percent of the drugmaker's oncology MAb sales.

In addition to expanding sales in the HER2 space – Perjeta and T-DM-1 will both increase the cost of HER2 therapy and extend the length of time that patients are treated – the development of follow-on products in the oncology space represents a key pillar in Roche's strategy to counter potential biosimilar competition, note analysts at Sanford C. Bernstein. See ViewPoints: Roche's T-DM1 – Innovation as a barrier to biosimilar competition.

Furthermore, Roche has made notable moves over the past six months to implement new pricing strategies for its oncology MAb products in emerging markets, including India (where Emcure will market Rituxan and Herceptin) and South Africa. See ViewPoints: Roche continues re-pricing strategy for antibody products in emerging markets.

Another striking example of Roche’s pursuit to become a more specialised player occurred earlier this month with the announced closure of the company's former US headquarters in Nutley, New Jersey. See ViewPoints: Why job cuts at Roche won’t slow R&D progress.

Closure of the facility has been on the cards since the full acquisition of Genentech in 2009, note analysts. In recent years there has been a perceived lack of productivity at the New Jersey site, wrote Bank of America analysts, while Genentech has shined as the primary R&D catalyst within Roche’s pharmaceutical division for over a decade. Analysts at Citibank anticipate the drugmaker will exit the hepatitis, cardiovascular (following Phase III setback for dalcetrapib) and possibly metabolic disease fields; all signposts that Roche is becoming even more focused on oncology, a view reflected by the dominance of this disease across the company's late-stage pipeline. Deutsche Bank analysts forecast that around 68 percent of 2016 pipeline sales will be derived from oncology products – worth $4.3 billion dollars and heavily shaped by the anticipated performances of Perjeta and T-DM1.

Roche is seeking to retain a flat level of R&D expenditure, while a number of its rivals cut budgets. Outside of oncology, Alzheimer's disease has emerged as a key area of interest for the company, while within the cancer sphere, money is being spent not only on bringing new products to the market but for funding post-launch studies to help convince payers to continue prescribing the drugmaker's expensive MAb therapies in an increasingly austere environment.

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