4:41 PM
Feb 08, 2019
 |  BioCentury  |  Product Development

Genentech takes the wheel

Why Roche could lean on Genentech to gain lost ground in cancer immunotherapy

Roche has good cause to call on Genentech to prevent it from losing its long-standing dominance in cancer. While the pharma is late to the party in immuno-oncology, its former biotech unit is behind at least three positive moves that could help it recover the lost ground.

The Genentech Inc. unit has established itself as Roche’s primary growth driver, serving as its primary U.S. commercial engine -- a market that is gaining in importance to the pharma’s balance sheet.

Over the past five years, U.S. revenues have contributed an increasing proportion of Roche’s top line (see Figure: “Genentech’s Sales Share”).

Figure: Genentech’s sales share

The Genentech Inc. unit of Roche (SIX:ROG; OTCQB:RHHBY) has contributed the lion’s share of products and total sales to the pharma. Among the pharma’s 20 top selling products, 13 originated at Genentech (yellow), while five came from Roche (green). Roche’s Chugai unit (orange) has contributed almost as much in sales as the Roche division. The Genentech unit also serves as Roche’s commercial hub in the U.S., which has accounted for an increasing proportion of Roche’s total sales over the last five years. In that time, sales in Europe and Japan have largely remained flat. Source: Roche earnings

Among Roche’s top 20 drugs by sales in 2018, 13 (65%) were spawned at Genentech prior to its 2009 takeout by the pharma; those 13 accounted for 78% of Roche’s total CHF44 billion ($44.6 billion) in last year’s drug sales.

But the three drugs that make up the lion’s share of revenues face competition from biosimilars, and Bristol-Myers Squibb Co. and Merck & Co Inc. are well ahead of the Swiss pharma in terms of sales for immunotherapies, the class expected to form the core of cancer treatment going forward.

Recent changes to the executive team are signs Roche is putting stock in Genentech management to help ward off an imminent decline.

Both the pharma and its subsidiary have traditions of promoting from within to the top jobs, but the executive leadership has been driven by Basel insiders.

With the appointment of William (Bill) Anderson as CEO of Roche Pharmaceuticals in January and James Sabry taking the role as head of partnering last August, the 10-member executive committee now contains three leaders with Genentech pedigrees (see Figure: “Bringing Genentech into the Fold”).

Figure: Bringing Genentech into the fold

A trio of departures and subsequent replacements on the executive committee of Roche (SIX:ROG; OTCQB:RHHBY) has brought more balance to the group, increasing the number of members with experience at the Genentech Inc. unit. Current executive committee...

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