Roche CEO Warns Against 'Middle Ground' Approach To Combat Pricing Pressure
This article was originally published in Scrip
Roche Holding AG's CEO Severin Schwan says the only surefire way to beat pricing pressures is to focus on "highly innovative medicines, differentiated medicines, medicines which provide significant value for patients". By doing this Roche has been "less exposed to price pressure not only in the US, but worldwide, and we see that in the numbers." The company reported third quarter sales on Oct. 22 that beat expectations.
Schwan made the comments in a presentation accompanying the Swiss firm's third quarter financial announcement, where Roche raised its 2015 sales forecast after strong demand for its cancer and immunology drugs contributed to a rise in third-quarter revenue. Roche now expects sales growth in the mid-single digit range, at constant exchange rates.
The company said third-quarter sales of its pharmaceuticals increased to CHF9.34bn from CHF9.13bn, while revenues at its diagnostics division were slightly down at CHF2.6bn. Total sales for the three months to Sept. 30 rose by 6% to CHF11.94bn from CHF11.78bn a year earlier. Consensus expectations were around CHF11.85bn.
"On the innovation side, clearly the highlight of the quarter if not of the year is the data we presented for ocrelizumab," said Schwan.
Ocrelizumab was the undisputed main attraction of the 2015 European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) annual meeting, which was held earlier this month. Roche presented detailed clinical data for the drug from three Phase III trials: OPERA I and II in relapsing-remitting multiple sclerosis (RRMS) patients and ORATORIO in primary progressive multiple sclerosis (PPMS) patients. The CD20 antibody showed impressive efficacy across the entire pivotal clinical trial program, with the PPMS data most notable considering the absence of any approved treatment options in this patient population.
Schwan also outlined his thoughts on what the continued pricing pressure might mean for companies with a less innovative or differentiated pipeline.
"In general terms, as price pressure goes up, you will see more segmentation of the market. We will see a clear segmentation of those companies who bet on true innovation and in clinically relevant innovation which makes a difference for patients. And on the other hand, you will see generics companies who focus on cost, on scale of economies, et cetera. But the part in the middle, it will get tougher and tougher for those companies to survive and this part will definitely disappear. So, either you are highly innovative with a clear meaningful differentiation or you go into low cost generics. But there is nothing in between anymore."
Schwan says this is being clearly demonstrated in Europe already, and he expects the same trend in the US. "But with our focus on innovation, we should be well-positioned."
"In summary, a good performance," said analysts from Deutsche Bank. "The guidance raise should further help sentiment and confidence in the numbers."