The relevance of Roche s strategy in the current market environment

Transcription

1 Maket dynamics in the Healthcae Industy The elevance of Roche s stategy in the cuent maket envionment D. F.B. Hume, CEO Bank am Bellevue, Januay 2005

2 This pesentation contains cetain fowad-looking statements. These fowad-looking statements may be identified by wods such as believes, expects, anticipates, pojects, intends, should, seeks, estimates, futue o simila expessions o by discussion of stategy, goals, plans o intentions. Vaious factos may cause actual esults to diffe mateially in the futue fom those eflected in fowad-looking statements contained in this pesentation among othes: 1. Picing and poduct initiatives of competitos; 2. Legislative and egulatoy developments and economic conditions; 3. Delay o inability in obtaining egulatoy appovals o binging poducts to maket; 4. Fluctuations in cuency exchange ates and geneal financial maket conditions; 5. Uncetainties in the discovey, development o maketing of new poducts o new uses of existing poducts; 6. Inceased govenment picing pessues; 7. Inteuptions in poduction; 8. Loss of o inability to obtain adequate potection fo intellectual popety ights; 9. Litigation; 10. Loss of key executives o othe employees; and Advese publicity o news coveage Fo maketed poducts discussed in this pesentation, please see full pescibing infomation on ou website

3 Five majo dynamics in Healthcae maket The gowing impotance of doing it diffeent - five answes Outlook

4 1. Consolidation in the Phama industy ongoing Top ten companies now above 50% top 10 maket shae (%) Roche / Syntex AHP / Cyanamid Ciba / Sandoz Hoechst / MMD Glaxo / Wellcome Pfize / Phamacia Pfize / W-L GW / SB Rhone-Poulenc / Hoechst Asta / Zeneca Roche / Böhinge M Souce: Wood Mackenzie Roche / Genentech Roche / Chugai Sanofi / Aventis

5 2. Industy cente gavity is shifting to the US Euopean makets loosing gound Maket dynamics 1990: US and Euope same maket size 2004: US twice the size of Euope lead to move of talented people to the US Highe R&D investment in the US 1990: Euope invested twice as much as the US (EUR 21 bn) 2004: US invests aound 30% moe (EUR 29 bn) US now leading invento fo New Chemical Entities 70% of sales of new medicines since 1998 geneated in the US

6 2. US-diven gowth in wold Phama maket Latin Ameica 3 % RoW 7 % Latin Ameica 4 % RoW 7 % Noth Ameica 50 % Japan 14% Euope 26 % Noth Ameica 59% Japan 10 % Euope 23 % 2002: US$ 409 billion CAGR ('02 '07): 10% (ange 9-10%) 2007: US$ 657 billion Souce: IMS Health, IMS Maket Pognosis, May 2003 Constant Dollas; does not eflect unaudited counties at this time CAGR: compound annual gowth ate

7 3. Funding is limited Funding of Healthcae Social secuity systems unde pessue Slowdown of Economy Co-paymentsystems Payments by individuals today 2020 Cost pessue a eality today and even toughe in the futue

8 4. Geneisation isk Up to U$ 70 billion of banded US sales at isk ove the next fou yeas US$ bn 20 Soft isk Had isk E 2007E 2006E 2005E 2004E Souce: DB, 2004

9 5. R&D poductivity has been in decline But the impotant question is the sales value pe dug Indexed annual sales Indexed eal R&D spend Indexed NME appovals No. of of dugs > U$ 1bn > U$ 3bn

10 Outlook: Futue gowth will depend on the success of diffeentiated, tageted, and cost effective teatments Global Phamaceutical Maket - Dives & Restaines $bn Combination Poducts Cost Conscious Pescibing Tageted Theapy Ageing Population Global Geneics Initiative Geogaphic Makets Pimay Cae Maket Matuity Pesonalized Medicine Maket Segmentation Global Phama Maket Foecast Value Range

11 Five majo dynamics in Healthcae maket The gowing impotance of doing it diffeent - five answes Outlook

12 1. Companies can be successful in both segments But we ae a clea value playe Medical Diffeentation high low Volume stategy high volume events e.g. Geneics Roche Focus Value stategy high value events e.g. Oncology low Pemium fo innovation high

13 Diffeentiated and pesonalized Medicines ae citical to emain competitive in the high-value segment Reduced egulatoy pessue Lowe isk of advese events Stonge maket exclusivity Pemium pices Moe efficient utilization of maketing esouces

14 Gowth in Phama diven by diffeentiated poducts Highe pices fo innovation Specialty Cae volume is not changing Volume (Stand. Units bn) but pice pe unit is highe fo Specialty Cae and has gown faste Av. Pice pe Unit 1 (CHF) 2,000 1,800 1,600 1,400 1,200 1, Pimay Cae 290 (16%) 1,481 (84%) Specialty Cae 290 (16%) 1,559 (84%) Standad unit defined as Numbe of units divided by Smallest common dose of a poduct fom. Numbe of units = Numbe of tablets, ml o gams sold x numbe of packages sold x Size of package. Souce: IMS (top 200 dugs woldwide), Maakon analysis Pimay Cae Specialty Cae

15 Some easons why we ae not in the geneic business Compaably small pat of the Phama maket (~10%) Lage numbe of competitos (~400) Low pofitability (wold wide aveage ~11%) it s a cost plus business poduct pofitability not sustainable - magins decline with numbe of playes pofit must constantly be enewed with off-patent poducts

16 2. Non-mega-meged companies do bette Maket shae Change in ethical dug maket shae ( ) "Mega-meged" companies -2.8 % Only top ten anked companies consideed in chat. Souce: Wood Mackenzie "Non-mega-meged" companies +10 % Meck & Co, J&J, Eli Lilly, Roche Pfize, GSK, BMS, Aventis, Phamacia

17 3. Unique innovation model Roche expetise combined with extenal dynamism Phama Diagnostics Alliances and collaboations Spin-offs

18 4. A consideable pat of ou eseach is in biologicals Published Success Rates Small Molecules KMR (99-03) Phase 0 57 % 1 30 % 2 29 % 3 62 % Filing 100 % Phase 1 To appoval 6 % Theapeutic Poteins (TP) CMR Tufts (96-98) Phase % 84 % 2 60 % 72 % 3 87 % 75 % Filing 88 % 100 % Phase 1 To appoval 34 % 45 % A 3 to 4 times highe success ate fo TPs

19 Biologics- inceasing pat in Innovation Roche: biggest poduce 50 Biologics Othe second biggest biotech company Patneing impotant Souce: FDA FDA NCE appovals

20 5. Diagnostics and Phama unde one oof: Solutions along the value chain Enable bette medical decision making test test test test dug test pedisposition sceening tageted monitoing geneal sceening diagnosis theapy selection monitoing Ealie diagnosis peiodic disease status checks ealie teatment Pevention lifestyle, nutition, medicine Patient statification diffeentiated teatment use of phamacogenetics efficacy avoid advese events

21 Five majo dynamics in Healthcae maket The gowing impotance of doing it diffeent - five answes Outlook

22 Roche is actively shaping its futue by acquisitions and disposing of non-coe businesses Stating point H1 '00... Sales CHF 13.6 billion Diagnostics 22 % 13 % Vitamins & Fine Chem. 6 % OTC H1 '04 CHF 14.6 billion Diagnostics 27 % 59 % 73 % Phama Phama Continuous impovement of business mix

23 Stong pesence in Specialty Cae Gowing bands in key fanchises Hepatitis Pegasys Copegus Tansplant CellCept Oncology MabThea Heceptin Xeloda Avastin Taceva Anaemia NeoRecomon R744 (CERA) Rheumatoid Athitis MRA MabThea Launched poducts Pe-egistation o pipeline poducts

24 Selective enty into Pimay Cae We will decide on how to poceed, based on diffeentiation Pimay Cae Boniva R483 (Insulin Sensitize) R411 (asthma) R673 (depession) JTT-705 (dyslipidemia) Diffeentiated poducts alone o o with a patne

25 Next 5-y gowth coming fom tangible assets Suppoted by poducts with low development isk Contibution to gowth in Aveage annual gowth in % + Cuent Poducts Lifecycle Extension Bondonat Pegasys Heceptin Othes Peegistation Avastin Taceva Boniva Development Poducts CERA MRA Insulin sensitize R411Asthma NK-1 Omnitag Othes Geneicised Poducts Rocephin NeoRecomon Dilatend Othes illustative MabThea Heceptin Xeloda CellCept Pegasys Bondonat Othes

26 Roche clinical development Close to doubling the success ate fo NMEs ove the past 5 yeas in % Actions taken on high attition-ate '96-'00 '97-'01 '98-'02 '99-'03 '00-'04

27 High Innovation Roche pipeline Innovative and isk balanced Gound-Beakes NK1 (depession) Insulin Sensitise Phase II and III late stage MabThea (TNF) Bondont (MBP) Dual integin inhibito Heceptin (asthma) (adjuvant) CERA MabThea (RA, 1st) MRA (RA) MabThea (CLL) Pegasys (HBV) Avastin Indication Extensions and Known Mechanisms Taceva Boniva Xeloda (adjuvant) Low Novel Follow-Ons High Development Risk Me-toos Low Oncology Anaemia Viology Inflammatoy diseases / Bone Metabolism CNS

28 Whee did ou stategy take us? Development ove the past yeas Diagnostics: fom a niche playe to global maket leade Wold leade in oncology poducts with sales ove CHF 1 bn Quantum leap in Japan No. 2 in biotech

29 Value ceation though maketed mega bands and a isk balanced, diffeentiated pipeline Pegasys Heceptin Diabetes Cae Cuent Xeloda Molecula Diagnostics NeoRecomon Avastin Futue Boniva Bondonat (MBP) Taceva R744 (CERA) MRA Immuno- Diagnostics CellCept MabThea Insulin sensitize MabThea in in RA RA