Innovation and value creation Alan Hippe, CFO Roche Group J.P. - - PowerPoint PPT Presentation

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Innovation and value creation Alan Hippe, CFO Roche Group J.P. - - PowerPoint PPT Presentation

Innovation and value creation Alan Hippe, CFO Roche Group J.P. Morgan Healthcare Conference San Francisco, January 12th, 2016 This presentation contains certain forward-looking statements. These forward-looking statements may be identified by


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Innovation and value creation

Alan Hippe, CFO Roche Group J.P. Morgan Healthcare Conference San Francisco, January 12th, 2016

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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 – www.roche.com All mentioned trademarks are legally protected

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Performance update Innovation and efficiency Improving the standard of care Outlook

3

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Q3 2015: Sales growth for fifth consecutive year

4

All growth rates at constant exchange rates (CER)

0% 0% 1% 4% 2% 6% 4% 6% 6% 4% 8% 7% 5% 4% 5% 6% 5% 7% 6%

0% 2% 4% 6% 8% 10% Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

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HY 2015: Strong underlying Group core operating profit & margin

5 % of sales

CHFbn

CER=Constant Exchange Rates * Excluding sale of filgrastim rights in 2014 at CER

8'3 8'6 9'5 9'4 9'2 38'1% 38'5% 40'7% 41'0% 39'2%

HY 2011 HY 2012 HY 2013 HY 2014 HY 2015 +2% at CER (+7%*)

(+0.4%p

  • excl. filgrastim*)
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2014: Dividend and payout ratio further increased

6

1 compound annual growth rate

8.00 31'9 34'5 38'8 44'8 48'6 51'6 55'3 54'5 54'7 56.0 0'00 1'00 2'00 3'00 4'00 5'00 6'00 7'00 8'00 9'00 10'00

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Dividend payout ratio (%) CHF

2014 payout ratio: 56.0%

Payout ratio calculated as dividend per share divided by core earnings per share (diluted); Note: For 1995, a special dividend was paid

  • ut to mark F. Hoffmann-La Roche’s 100th anniversary in 1996
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Performance update Innovation and efficiency Improving the standard of care Outlook

7

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Roche strategy: Focused on medically differentiated therapies

8

Generics

Differentiation

MedTech OTC

Premium for innovation

Dia Pharma

Focus

Regulators:

Optimised benefit / risk ratio

Payors:

Optimised benefit / cost ratio

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Roche’s strategy remains unchanged

Success hinges on excellence in innovation & execution

  • Focus investment on differentiated molecules
  • Continuously improve processes

9

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Roche/Genentech: Sustained record of cutting edge scientific discoveries

(* through Oct. 2015)

10

5 10 15 20 25 4 3 4 9 4 9 4 8 10 16 12 14 9 20

Research publications in Cell, Science, or Nature

10*

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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SLIDE 11

Approach towards innovation

Exploring broad …

We invest more early stage …to increase options to choose from

46% 40% 54% 60% R & Early D Roche Late D Industry avg 18 11 19 2014 2012 2013 # of NME’s entering Pre-clinical Industry avg. % of budget

External sources: Investment split based on the CMR Pharmaceutical R&D Factbook (data from 10 companies, 2014); Number of entries into Pre-clinical for Industry based on data from KMR, data for 2011-2013.

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Approach towards innovation …but prioritizing rigorously

We select at late stage entry

Clinical differentiation

Threshold

high low low high

Greater differentiation Sales Time Medical need

Continued Disqualified

Illustrative

…to increase sales potential

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2 4 6 8 10 12

2010-14 2009-13 2008-12 2007-11 2006-10

Roche Industry

Likelihood of launch from phase 0

Achievements: Innovation

Above-average R&D success rate

Note: Success rates calculated at the project/indication level for overlapping 5-year periods based on KMR data (13 peers and Roche)

13 5% 8%

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Data management

Collaborations are key

Real outcome data on actual benefit and side effects

Clinical Trials Clinical Practice

Controlled, clinical trial data

  • n expected benefit and

side effects

Analysis Decisions on treatment Insight for R&D 14

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Roche’s strategy remains unchanged

Success hinges on excellence in innovation & execution

  • Focus investment on differentiated molecules
  • Continuously improve processes

15

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Driving operational efficiencies

Select examples R&D

Lean Protocol Design Sourcing Strategy Partnerships

Rethinking protocol design to reduce complexity Outsourcing transactional clinical operations roles Industry consortium (20 companies) to drive trial efficiency

Savings of ~100m CHF per year

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Driving operational efficiencies

Optimization production capacities

17

2014 2015 2016 2017 2018 2019 2020 2021

Capacity Units

2013 2014 2015 2016 2017 2018 2019 2020

Large molecules Small molecules

highly potent small molecules with lower capacity requirements pipeline of large molecules and entry into new high volume segments

Savings of ~100m CHF per year

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Performance update Innovation and efficiency Improving the standard of care Outlook

18

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taselisib

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NMEs line extensions 2015 2016 2017

venetoclax alectinib Cotellic lebrikizumab atezolizumab

  • crelizumab

lampalizumab ACE910

Post 2017

etrolizumab crenezumab gantenerumab

  • lesoxime

Herceptin + Perjeta Gazyva

atezolizumab + chemo

Gazyva

New growth opportunities outside oncology

Oncology/hematology Neuroscience Ophthalmology Immunology

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The 7 steps of the Cancer-Immunity Cycle guide

  • ur prioritization framework for Atezolizumab

Step 1: Release of Cancer Cell antigens:

  • ex: Atezo + chemo, Gazyva, aCD40

Step 2 & 3: Cancer antigen presentation & priming and activation

  • ex: Atezo + interferon, OX40

Steps 4 & 5: Trafficking & inflitration of T cells to tumours

  • ex: Atezo + Avastin, aCSF1R,

Steps 6 & 7: Recognition of cancer cells by T cells & killing of cancer cells

  • ex: Atezo + Meki, IDOi, aOX40

Chen and Mellman. Immunity 2013

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Atezolizumab: Pivotal programs by disease

21 KIDNEY

Going deep in diseases where we have strong scientific rationale

cis-inel.=cisplatin ineligible patients

Lung

FIR and BIRCH

Dx+ mono

Bladder

IMvigor 210

1L cis-inel. & 2L

Breast Kidney

POPLAR

2L+ mono

IMpower 110

1L non-sq. Dx+ mono

IMpower 130&150

1L non-sq. combo

IMpower 111

1L sq. Dx+ mono

IMpower 131

1L sq. combo

OAK

2L mono

IMpower 010

  • Adj. Dx+ mono

IMvigor 211

2L mono

IMvigor 010

Adj.

IMmotion 150

1L combo

IMmotion 151

1L combo

IMpassion 131

1L combo

Rolling filing initiated Data in 2016 Data in 2017

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taselisib

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NMEs line extensions 2015 2016 2017

venetoclax alectinib Cotellic lebrikizumab atezolizumab

  • crelizumab

lampalizumab ACE910

Post 2017

etrolizumab crenezumab gantenerumab

  • lesoxime

Herceptin + Perjeta Gazyva

atezolizumab + chemo

Gazyva

New growth opportunities outside oncology

Oncology/hematology Neuroscience Ophthalmology Immunology

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Ocrelizumab: Active in both RMS & PPMS

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  • Selective depletion of a B cell subset leaving

the ability to generate new B cells intact

  • Administered IV twice yearly

RMS=relapsing forms of multiple sclerosis (MS) which includes patients with RRMS and SPMS with superimposed relapses; RRMS=relapsing-remitting MS; SPMS=secondary progressive MS; PPMS=primary progressive MS;

:

RMS PPMS

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Multiple Sclerosis: Improvements over SoC driving market growth

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,0 5,000 10,000 15,000 20,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q2 2015

19,420 18,999 15,855 13,955 12,323 11,053 10,084 8,930 6,932 5,803 5,036 4,406

Global sales (lc) USDm

Source: Evaluate Pharma Multiple Sclerosis report, October 2015; * Includes Imusera sales; SoC=standard of care Betaseron Rebif Avonex Copaxone Lemtrada Tysabri Tecfidera Aubagio Gilenya*

ABCRs Orals New biologics

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taselisib

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NMEs line extensions 2015 2016 2017

venetoclax alectinib Cotellic lebrikizumab atezolizumab

  • crelizumab

lampalizumab ACE910

Post 2017

etrolizumab crenezumab gantenerumab

  • lesoxime

Herceptin + Perjeta Gazyva

atezolizumab + chemo

Gazyva

New growth opportunities outside oncology

Oncology/hematology Neuroscience Ophthalmology Immunology

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Severe asthma: High unmet need in growing market

26 Global asthma market 2014 vs 2020

11% 29% Small Molecules Biologics

2014

1 biologic

Shifting clinical practice

2020

6 biologics

Note: Market shares based on value (sales); Source: Evaluate; defined by daily use of ≥500ug ICS + LABA

  • Approx. 300m patients worldwide and

growing strongly

  • 5-10% asthma patients have severe

disease, and ~30% of severe disease is uncontrolled despite maximal therapy

  • Over 4.5m severe asthmatics with

uncontrolled disease

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Lebrikizumab in severe uncontrolled asthma

High efficacy and improved convenience

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Summary phase II results:

  • Exacerbation reduction of 60%
  • Early onset of lung function improvement (FEV1)
  • Prefiled syringe and Q4W subcutaneous delivery

for improved convenience LUTE/VERSE MILLY

Q4W=monthly dosing; FEV=forced expiratory volume; LUTE/VERSE results presented at AAAAI 2014; Thomas NC. et al., Biologics 2012; Hanania NA. et al., Thorax 2015

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Performance update Innovation and efficiency Improving the standard of care Outlook

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Multiple major pivotal trials reading out near term

Significant filing and launch activities ahead

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Year Molecule Indication Market

  • pportunity

Incremental infrastructure

2015

Alectinib ALK+ NSCLC Low to medium Cotellic/Zelboraf Melanoma Low Venetoclax Hematology (CLL 17p del)* Low

2016

Ocrelizumab Multiple Scelerosis Medium Atezolizumab NSCLC, bladder (2/3L) Medium Lebrikizumab Asthma, AD, IPF, COPD Large APHINITY Adj HER2+ breast cancer Low GOYA NHL (aggressive) Low

2017

ACE 910 Hemophilia A Low to medium Lampalizumab Geographic atrophy Low to medium GALLIUM NHL (indolent) Low Atezolizumab+chemo NSCLC (1L) Low

2018

Taselisib (PI3Ki) HER2-/HR+ breast cancer Low to medium Idasanutlin (MDM2) Acute myeloid leukemia Low to medium Oncology Neuroscience Ophthalmology Immunology

Small: up to CHF 0.5 bn medium= CHF 0.5 to CHF 1bn large > CHF1bn

NSCLC=non-small cell lung cancer; CLL=chronic lymphocytic leukemia; AD=atopic dermatitis; IPF=idiopathic pulmonary fibrosis; COPD=chronic obstructive pulmonary disease; NHL=non-hodgkin’s lymphoma; * first indication

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Positive outlook

Strong pipeline mitigates biosimilar impact

2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Marketed products Sales Pipeline Biosimilars MabThera, Herceptin, Avastin NME launches Venetoclax, Alectinib, Cotellic, Ocrelizumab, Atezolizumab, Lebrikizumab, ACE910, Lampalizumab

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2015 outlook: Guidance upgraded

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Group sales growth1 Mid-single digit Core EPS growth1 Ahead of sales growth2 Dividend outlook Further increase dividend in Swiss francs

1 At constant exchange rates (CER) 2 Excluding sale of filgrastim rights in 2014

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Appendix

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taselisib

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NMEs line extensions 2015 2016 2017

venetoclax alectinib Cotellic lebrikizumab atezolizumab

  • crelizumab

lampalizumab ACE910

Post 2017

etrolizumab crenezumab gantenerumab

  • lesoxime

Herceptin + Perjeta Gazyva

atezolizumab + chemo

Gazyva

New growth opportunities outside oncology

Oncology/hematology Neuroscience Ophthalmology Immunology

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Hemophilia A: Current treatment strategies

34 Episodic (on demand) treatment

  • Patients treated only when they bleed
  • Can be up to 30-60 times per year

Prophylaxis

  • Goal is to prevent bleeds
  • IV infusion 2-3 times per week
  • Can reduce bleed rate to 0-2 per year

for non-inhibitor patients

  • Should be the standard, but is still not

used in ~35% of patients (treatment burden, adherence, IV access issues)

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Hemophilia A: There are significant limitations of current treatment options

1.7 1.9 2.1 2.1 2.6 2009 2010 2011 2012 2018 FEIBA VH NovoSeven

3%

5.3 5.5 6.0 6.1 8.4 2009 2010 2011 2012 2018

Others Recombinate Hemofil M Helixate ReFacto AF/Xyntha Humate P 6%

*Company reported sales; 1EvaluatePharma consensus analyst estimates

1

FVIII market (USD 6.1bn in 2012)* By-passing agent market (USD 2.1bn)*

  • Current FVIII treatments

− Limited half-life of only 8-12 hrs − Frequent IV injections − Induce neutralizing antibodies, which inhibit their function

  • Current bypassing treatments

− Much shorter half-life of ~4-6 hrs − Multiple frequent IV infusions − Long infusion times (30+mins) for FEIBA − Unstable efficacy compared to FVIII

35

1

USSbn USSbn

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ACE910 can address the major medical needs for both inhibitor and non-inhibitor patients

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Potentially more effective prophylaxis No potential to induce FVIII inhibitor

ACE 910 Prophylaxis treatment 3 times/week, IV On-demand treatment 1-3 times/bleeding event, IV

Inhibiting Factor VIII antibodies in 20-30% of the patients

NON-INHIBITOR

Prophylaxis with by-passing agents Every other day, IV On-demand treatment with by-passing agents 2-3h intervals, IV

INHIBITOR

Immune Tolerance Induction

70-80 % success rate limitation due to very high cost and heavy burden for patients

Less frequent & SC injection

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37

Secondary Progressive (SPMS) (20-25%)

Initial RRMS followed by disability

  • accumulation. Still experience

relapses which eventually stop

Primary Progressive (PPMS) (10-15%)

Slow but nearly continuous worsening of disease from outset (no relapses)

Relapse-Remitting (RRMS) (60-65%)

Clearly defined relapses (attacks) with remissions initially returning to baseline but gradually result in sustained disability

Three major types of Multiple Sclerosis

Disability Time

Relapse No Relapse

Mainly degenerative Mainly inflammatory

Adapted from Lublin 1996, Arnold 2004

Inflammatory / Degenerative

  • High unmet need:
  • high efficacy therapies have major

safety issues

  • diagnosis and classification is

difficult, often retrospective and can take 2-5 years

  • Treatment decisions concentrated

mainly in MS centers/hospitals

  • Advocacy groups powerful in access
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Achievements: Productivity

Doubled number of projects at same costs

2012 2013 2014 2010 2011 +90% Filing Ph0-2 Ph3 Pharma Development Spend

Late stage development costs & number of projects

Excludes Chugai, pRED and gRED, Medical Affairs and PTD Source: Roche internal development data

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Doing now what patients need next