Emerging market opportunities for Roche. Luke Miels, Head of Asia-Pacific Roche Pharmaceuticals

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1 Emerging market opportunities for Roche Luke Miels, Head of Asia-Pacific Roche Pharmaceuticals

2 International region overview Eastern Europe & Middle East Asia Pacific Africa Latin America Market drivers Increasing investment in healthcare Life style changes and the emergence of western diseases Emergence of alternative funding models in some markets Market barriers Pricing pressure and controls High out of pocket costs Delays in registration and reimbursement 2

3 International region Increasing importance for Roche International region as proportion of total Pharma sales 28% 27% 27% 26% 25% 24% 23% 22% HY '08 FY '08 HY '09 FY '09 HY '10 FY '10 HY '11 FY '11 HY '12 3

4 E7 countries Strong growth in key emerging markets % -6% +54% +14% -3% India Russia Korea Turkey Mexico % China % Brazil 0 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 1 CER=Constant Exchange Rates; absolute values in CHF m at average 2011 exchange rates 4

5 Roche is significantly outperforming the market in China 35% Roche China Multinationals in China Overall Chinese market 30% 26% 27% 26% 28% 29% Growth rate (MAT) 25% 20% 15% 10% 21% 22% 19% 16% 16% 19% 23% Roche China sales force 5% 0% Q3 ' '152 1'647 1'783 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Source: IMS Hospital Audits, MAT growth, June 2012 (Q2, 2012) 5

6 Integrated HER2 testing and Patient Access Program has doubled access to Herceptin Herceptin patient initiations HER2 Dx + Herceptin 1'723 1'733 2'008 1' Q Q Q Q Q

7 EGFR testing project driving Tarceva leadership in Philippines Approval of 1 st line EGFR+ NCSLC and launch of EGFR testing project 50% 44.5% Value market share 40% 30% 20% 31.4% 24.2% 10% Tarceva Iressa Alimta 0% Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Source: Philippines IMS sales data April 2012, MAT 7

8 Introduction of a second brand in India 35% of Indian population have access to healthcare Key components 2 brands 1 st phase: Herceptin, MabThera and Pegasys Current Out of Pocket Govt <1% (4.2 Mio) Self Insured <1% (8.4 Mio) Tier 1: Expanded Out of Pocket 2 nd phase: potentially Mircera and Avastin High Class 4% (42 Mio) Planned execution = 420 Mio Middle Class 17% (210 Mio) Private Market Below Poverty Line 13% (160 Mio) Remaining population without access to healthcare Tier 2: Government Field focus on key products to increase patient capture Co-marketing with local partner to increase reach and mitigate risk of compulsory licensing 65% (780 Mio) Government Initiated packaging & technology transfer, demonstrating long term commitment 8

9 Brazil public sector : ebc patients treated with Herceptin doubles Increased HER2 testing Increased share Doubled number of Herceptin patients % public patients tested for HER2 92% 95% % share 38% 63% Herceptin patients 1,845 3,

10 Strategies in the Emerging Markets Strategic options Price adjustment Localisation List/Net price adjustment Second brand Local manufacturing Combinations are possible 10

11 Greatest long term value in Emerging markets is created by reducing time to market Examples in China Clinical trial application submissions 17 Programs in late stage development * *Expected 11

12 Summary: Workshop Pharma Further continuous growth expected in emerging markets 1 Opportunity for innovation does exist in emerging markets 2 Execution of the Roche EM strategy is delivering results 3 Acceleration of new products is the largest mid to long term driver of value 12

13 Roche Diagnostics and Emerging Markets Michael Heuer, Regional Head EMEA-LATAM

14 Emerging Markets An increasingly attractive environment Prospering economies Changing demographics Growing markets Increased healthcare spending Higher testing demand Expanding lab networks 2

15 Emerging Markets account for majority of IVD market growth Worldwide IVD market 1, E ($ bn) % Emerging Markets/RoW 26% 74% 68% Established Markets 2011 Growth from Emerging Markets Growth from Established Markets 2016E 1 Incl. Diabetes Monitoring; excl. Applied Science and Insulin Delivery Systems Note: Emerging Markets=Eastern Europe, Asia Pacific, South America, Canada; Established markets=us, W Europe, Japan Source: Roche internal analysis, validated by an external IVD consultancy 3

16 Roche Diagnostics Emerging Markets (EM) in numbers Presence in 100 countries in EM 19% sales growth* in E7 countries > 30% of total Diagnostics Sales * * 2011 in CER 4

17 Emerging Markets Strong growth trajectory expected to continue IVD MARKET SALES 1 SALES GROWTH 1 USD mn Russia Middle East Brazil China E Russia Middle East Brazil China E CAGR 1 Roche Sales Growth in % 37% 8% 27% 10% 8% 21% 27% 1 Roche internal analysis, validated by external IVD consultancies; 2 in constant exchange rate 5

18 Roche Diagnostics EM strategy Leveraging on leadership strengths Tailor strategy to adapt to local market conditions Expand commercial reach Retain and recruit local talent Grow installed base 6

19 Roche Diagnostics in China IVD market leader in a fast growing country Market characteristics Drivers Government investing in healthcare Diagnostics early in investment cycle Population more affluent Challenges Geographically large country Competitive environment Highly complex market and regulatory requirements Roche strategy focus areas Expanding commercial reach Retaining and recruiting local talent - Best employer award two years in a row 7

20 Roche Diagnostics in Russia Healthcare in focus of state support programs Market characteristics Roche strategy focus areas Centralised decision making Healthcare National Project Allocation of USD 28 bn of state funds Government hospitals updating infrastructure 70% of IVD market Private Healthcare continues to grow Grow installed base Focus on Lab organization issues (eg. IT, pre-analytic) Blood banks / women s health programs Virology Governmental Program (HIV, HCV, HBV) with Roche technology 8

21 Roche Diagnostics in Brazil Growth driven by innovation Market characteristics Expected to become 7th largest IVD market by 2015 ~7.000 laboratories Laboratory consolidation in private sector Growing recognition of value of IVD in medical care Increasing acceptance of and access to new technologies Tissue diagnostics, sequencing etc. Roche strategy focus areas Grow installed base Focus on automation and IT as differentiators Focus on medical value Build on medical evidence eg. HPV with Athena data 9

22 Roche Diagnostics in Middle East Differentiation through superior support Market characteristics Government tenders Major source of supply for state controlled labs and hospitals Roche strategy focus areas Expanding commercial reach Involvement of local agents Increasing demand and access to healthcare Underserved regions with large market potential Establishment of new commercial hub in Dubai for 20 countries in the region Retaining and recruiting local talent Incorporation of agent employees 10

23 Roche Diagnostics in Emerging Markets Committed to continue our leadership 1 Expand commercial reach Meet regional demand with focus on medical value 2 Grow installed base Differentiation through complete solutions offering 3 Retain and recruit local talent Support, develop and exploit skills of local organisations 11