Roche: Committed to innovation and profitable growth. Severin Schwan, CEO Roche. Merrill Lynch, London September 2011

Transcription

1 Roche: Committed to innovation and profitable growth Severin Schwan, CEO Roche Merrill Lynch, London September

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; and 11 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 All mentioned trademarks are legally protected 2

3 Financial performance Challenges and answers Strong position Strategy 3

4 HY 2011: Group performance Core EPS growth +10% 1 CHF m %Change CHF LC Sales 24,636 21, Core operating profit 9,159 8, as % of sales Core net income 6,062 5, as % of sales Attributable to Roche shareholders 5,965 5,697-4 Core EPS (CHF) IFRS net income 5,565 5, as % of sales local currency 4

5 HY 2011: Core operating profit development Profit growth driven by productivity improvements US healthcare reform incl. excise tax EU austerity measures Japan price cuts '834 Core Op. Profit FY10 Fx rates -367 Tamiflu Avastin US/WE CellCept US/WE Boniva US/WE sales Profit growth underlying business +950 Cost savings OpEx/ GNE integration Core Op. Profit FY10 Fx rates +5% 5

6 HY 2011: Group core operating profit and margin Strong margin increase over years CHF m 35.0% 37.2% 38.1% +1.8 % p 1 (+0.9 % p) 40.0% 43.9% 42.2% +2.7 %p 1 (+1.7 %p) % of sales 8'403 9' % 1 (-10 %) 8'251 7'650 8' % 1 (-10 %) 7' % 22.3% 21.9% -0.2 %p 1 (-0.4 %p) ' % 1 (-9 %) 1'063 1 local currency Roche Group Pharma Division Diagnostics Division 6

7 P&L structure reflecting innovation based strategy Peer group core operating profit margin 2010 Eli Lilly Roche Merck Novartis Sanofi Pfizer GSK Astra JNJ GSK JNJ Eli Lilly Novartis Astra Pfizer Merck Sanofi Roche R&D % sales 22% 19% 18% 16% 14% 14% 14% 13% 11% M&D+G&A % sales 33% 32% 32% 31% 29% 29% 29% 25% 23% FY 2010 figures; restated to a core basis based on publicly available information Astra Sanofi Pfizer Roche Merck GSK Eli Lilly Novartis JNJ Core operating profit margin % sales 28% 27% 31% 31% 30% 35% 1. Pfizer: Non-core items in CoS 2. Eli Lilly: 8%p. lower CoS ratio vs. Roche. Not feasible to judge if definition of Lilly s CoS same as Roche s 3. JNJ: No adjustments feasible as no details are disclosed. 38% 38% 44% 7

8 Attractive payout ratio Average yearly dividend growth ( ): 22% Payout Ratio of 52% 3.40 CHF Pay-out compound ratio calculated annual growth as dividend rate per share divided by core earnings per share (diluted) 8

9 Financial performance Challenges and answers Strong position Strategy 9

10 Pharma growth rates have declined in last decade From double digit to single digit Pharma market growth rate (prescription drugs) Bolus of patent expiries Price pressures Utilization controls Source: EvaluatePharma 10

11 R&D productivity of Pharma industry Output relatively flat, while R&D costs have increased Industry R&D spend (US$ bn) # NMEs approved # New Molecular Entities (NMEs) (lagging 5 year average) R&D spend Notes: R&D spend figures may not include overhead components as reported in company annual reports Source:. NME data for from Peltzman, S. (1973) J. of Political Economy 81, no. 5: NME data for as reported in Hutt, P.B. (1982) Health Affairs 1(2) NME Data for from Parexel s Pharma R&D Statistical Sourcebook 2009/2010, FDA, and PhRMA. Industry R&D spend data from PhRMA Annual Membership Survey, 2008 and Parexel 2009/

12 R&D productivity Excellence in science key lever to reduce attrition Industry success rate Research Phase 0 Phase 1 Phase 2 Phase 3 RegistrationLaunch Understanding of disease biology Probability of success - 64% 48% 25% 67% 83% 4% Leveraging Personalized Healthcare - stratify patient population early on Industry: 4% Roche: 9% Rigorous decision making transition only most promising projects Major decision points Source: Industry success rates - Linda Martin, KMR, Bernstein R&D conference 2011 Roche publically available data, BCG analysis 12

13 R&D allocation Mix of qualitative and quantitative factors Research & Early Development Late Stage Development Top down Project driven - Annual budget allocation - Number of phase II transitions expected - Unmet medical need - Market potential - Efficient development - Probability of technical success 13

14 Operational Excellence: Financial impact Expected savings of CHF 2.4 billion by CHF million Other 2 pred Group Functions Development Tech Ops & Sites Commercial Pharma Medicines In addition to synergies of CHF 1 billion from the Genentech integration 2 Pharma Partnering, gred, Diagnostics sites 14

15 Financial performance Challenges and answers Strong position Strategy 15

16 Key Pharmaceuticals & Diagnostics products A risk-diversified portfolio of drugs and BUs Sales (CHF bn) with > than CHF 6 bn 1 with > than CHF 5 bn 11 with > than CHF 1 bn '03 '04 '05 '06 '07 '08 '09 '10 * 2010 sales Avastin MabThera/Rituxan Herceptin Diabetes Care Pegasys Immunochemistry CellCept NeoRecormon Tarceva Clinical Chemistry Xeloda Lucentis Molecular Dx Boniva >CHF 6bn* >CHF 1bn* >CHF 5bn* 16

17 Roche: Limited exposure to patent expiries in the short and medium term 40% 35% % 25% 20% 15% 10% Business impact from biosimilars 2014/15 and beyond? 5% 0% % Sales Lost calculated by subtracting given year sales ( 10, 11, 12, 13) from full year sales from year prior to LOE. Data excludes sales lost impact of products with LOE prior to Source: Evaluate Pharma 17

18 Roche strategy for post-patent biologics marketplace Actively pursuing multiple strategies Innovate Re-define the standard of care Mode of administration, combination therapies and new drugs Protect Protect high standards Enforce efficacy and safety standards, defend intellectual property Expand Act to expand patient access in emerging markets Change from global pricing to tiered pricing, including 2nd brand 18

19 Aleglitazar Portfolio outlook Market expectations regarding peak sales Larger (> 1 bn) Smaller (up to ca 1 bn) Zelboraf Vismodegib Pertuzumab T-DM1 Obinutuzumab Glyt-1 Dalcetrapib Ocrelizumab MetMAb Mericitabine Lebrikizumab potential Launch Year Non risk-adjusted gred pred 19

20 Financial performance Challenges and answers Strong position Strategy 20

21 Roche: Focused on medically differentiated therapies Focus Pharma Dia Premium for innovation Generics OTC MedTech Differentiation 21

22 Our delivery Personalized Healthcare becoming reality T-DM1 Metastatic breast cancer (HER-2 expression level) Pertuzumab Metastatic breast cancer (HER-2/3 expression level) Mericitabine 1 Hepatitis C (HCV viral load, genotype) MetMAb 1 Non-small cell lung cancer (MET status) Lebrikizumab 1 Asthma (periostin level) Zelboraf Metastatic melanoma (BRAF V600E mutation) 1 LIP decision made, phase III start pending 22

23 Efficiency improvements and long-term growth Track-record Outlook Core operating profit and margin 38.1% 34.7% 35.0% 37.2% Profitability CHF bn FY 2011 Target increased to around 10% Core EPS growth * HY 2008 HY 2009 HY 2010 HY 2011 Number of 12 mericitabine 1 NMEs 10 ocrelizumab MS 2 ocrelizumab Actemra 4 taspoglutide dalcetrapib ocrelizumab pertuzumab Glycine reuptake inh aleglitazar taspoglutide dalcetrapib ocrelizumab Hedgehog inh Zelboraf T-DM1 GA101 (CLL) pertuzumab LIP decision made, phase III start pending Glycine reuptake inh aleglitazar dalcetrapib lebrikizumab 1 MetMAb 1 Hedgehog inh Zelboraf T-DM1 GA101 (CLL, NHL) pertuzumab HY 2011 Growth Potential NMEs filings in 2011 Zelboraf (metastatic melanoma) pertuzumab (1 st l. HER2+ mbc) vismodegib (advanced BCC) *in local currency 23

24 We Innovate Healthcare 24

25 Conclusions Roche well positioned for the future Unchanged innovation-driven strategy Optimized operational setup driving current business and increasing profitability Continued significant investments in industry-leading product pipeline 25

26 Operational Excellence Comprehensive scope, differentiated measures Pharma Medicines gred pred Pharma Partnering Group Functions 1 Research & Early Dev. Development Tech Ops / Sites Commercial US/EU Commercial - ROW G&A/Procurement 1 Finance, IT, HR, Communication, Legal Strong impact Moderate impact 26

27 Personalised Healthcare- benefit for all stake holders, including the industry Today Benefit from patient stratification Future Time to market Reduced Patient pool Faster penetration Lower development costs Price increase /stability Increased market share 27

28 2011: Major clinical news for late-stage NMEs 6 Phase III and 10 Phase II studies Phase II Phase III Compound Indication Study Zelboraf (BRAFi) 1st line met melanoma BRIM3 Lucentis Diabetic macular edema RIDE RISE Avastin Relapsed ovarian cancer OCEANS pertuzumab + Herceptin 1st line HER2+ mbc CLEOPATRA Herceptin Early HER2+BC sc HANNAH vismodegib (Hedgehog i) Advanced BCC Pivotal study T-DM1 1st line HER2+ mbc PFS data GA101 Relapsed indolent NHL Head-to-Head against MabThera/Rituxan MetMAb NSCLC 2nd / 3rd line Final data lebrikizumab Asthma MILLY; MOLLY mericitabine Hepatitis C PROPEL final data; JUMP-C dalcetrapib CV risk reduction dal-vessel dal-plaque 28