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 This year, the Swiss drugmaker - the top global spender in
pharmaceutical research and development (R&D) - has been talking up
several medicines being trailed by Roche Pharma Research & Early
Development, or "pRED", as potential stars.
Its pRED unit operates independently from Genentech "gRED" research
and Roche's Chugai R&D arm in Japan.
A resurgence would be timely. Chief Executive Severin Schwan needs
his R&D operations firing on all cylinders to fulfill promises of
growth as patents expire on Rituxan, Avastin and Herceptin. These
Genentech-developed drugs, which have combined sales of $20 billion
a year, are either already exposed to rivals' cheaper copies in
leading markets or soon will be.
"In pRED, some exciting opportunities are now coming through after a
time when many things did not work," Schwan told Reuters in a recent
interview. "It goes in waves. You can't program to have a certain
number of molecules coming through the pipeline every year in each
unit."
Topping pRED's list of pipeline hopefuls is CEA-TCB, a so-called
bispecific antibody drug that brings a patient's cancer-fighting
T-cells closer to tumor cells in order to kill them. Other promising
products include a replacement for eye drug Lucentis, idasunutlin
for diseases including acute myeloid leukemia and an autism drug in
mid-stage Phase II trials.
"THANK GOD"
Though approvals remain some way off - idasunutlin's planned filing
date is 2019, for instance - Roche insiders in Basel are relieved
that pRED appears to have regained its footing following years in
Genentech's shadow.
"Thank God," one Roche executive said, requesting anonymity. "It
took a while, but pRED is finally starting to deliver."
From the 1990s, Roche has thrived largely on Genentech's hit-making
machine. After Rituxan, Herceptin and Avastin came Lucentis and
cancer drugs Perjeta and Kadcyla.
Since 2016, Genentech's labs added cancer immunotherapy Tecentriq
and multiple sclerosis drug Ocrevus, seen by analysts as hitting $1
billion sales this year.
Additionally, Roche's recently-approved hemophilia drug Hemlibra,
predicted by some as a $5 billion-per-year medicine, emerged from
Chugai's labs. So did Alecensa for lung cancer, another drug with
blockbuster aspirations.
So pRED still has much catching up to do. "Roche's three big drug
hopefuls - Ocrevus, Tecentriq and Hemlibra - aren't from pRED,
they're from elsewhere in the company," said Michael Nawrath, a
Zuercher Kantonalbank analyst.
"Without the Americans, Roche would be just a specialized
diagnostics company."
FUMES OF YESTERYEAR
By contrast, the reputation of Roche's own research organization,
after inventing Valium in the 1960s and antibiotic Rocephin in the
1980s, has run on the fumes of yesteryear.
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Even pRED's much-heralded Rituxan follow-up drug Gazyva has so far
produced just modest results with $200 million in 2016 sales, though
recent expanded approvals could accelerate revenue.
In 2010, Roche closed a U.S. branch of pRED's labs in Nutley, New
Jersey, and slashed 1,000 jobs. Its third research chief since 2012,
John Reed, joined four years ago from California's Sanford-Burnham
Medical Research Institute.
His mission was to help get pRED's 2,200 scientists in Switzerland,
Britain's Welwyn Garden City, Germany and Shanghai back on track by
focusing less on "blue sky" projects and more on medicines
underpinned by a solid hypothesis.
"BIG SAUCE"
A fund manager who owns Roche shares sees Reed's arrival in Basel as
a watershed. "The effectiveness of Roche R&D in Switzerland has been
transformed by John Reed," the investor said. "I am quite optimistic
about Swiss R&D starting to produce new drugs."
Some analysts also see pRED closing the gap to Genentech, perhaps
partly by emulating its focus on therapeutic antibodies that the San
Francisco-based company pioneered.
"Quite a few competitive products in development at pRED are based
on antibodies," said Baader Helvea's Bruno Bulic. "It might be that
at some point, the student might surpass the master."
In 2009, when Roche bought the 44 percent of Genentech it did not
already own for $47 billion, Schwan insisted on keeping the pRED,
gRED and Chugai research organizations separate on the grounds that
a combined R&D monolith would "kill innovation".
With pRED potentially re-emerging from the drug-development
wilderness, Schwan remains adamant it was the right decision.
"I can understand that if somebody looks at it from outside, they
might ask why the hell we have three research units," he said. "But
I believe it doesn't make sense to put it all together and make one
big sauce out of it. You should still see the components."
($1 = 0.9899 Swiss francs)
(Additional reporting by Ben Hirschler and Simon Jessop in London;
editing by David Stamp)
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