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 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 2
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
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*)
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
out to mark F. Hoffmann-La Roche’s 100th anniversary in 1996
Roche strategy: Focused on medically
differentiated therapies
8
Generics
Differentiation
MedTech
OTC
Pre
miu
m f
or
inn
ova
tio
n
Dia Pharma
Focus
Regulators: Optimised benefit / risk ratio
Payors: Optimised benefit / cost ratio
Roche’s strategy remains unchanged
Success hinges on excellence in innovation & execution
• Focus investment on differentiated molecules
• Continuously improve processes
9
Roche/Genentech: Sustained record of
cutting edge scientific discoveries
(* through Oct. 2015) 10
0
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
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. 11
Approach towards innovation
…but prioritizing rigorously
We select at late stage entry
Clinical differentiation
Threshold
high low
low
high
Greater
differentiation
Sa
les
Time
Me
dic
al
ne
ed
Continued
Disqualified
Illustrative
…to increase sales potential
12
0
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%
Data management
Collaborations are key
Real outcome data on
actual benefit and
side effects
Clinical Trials Clinical Practice
Controlled, clinical trial data
on expected benefit and
side effects Analysis
Decisions on treatment
Insight for R&D
14
Roche’s strategy remains unchanged
Success hinges on excellence in innovation & execution
• Focus investment on differentiated molecules
• Continuously improve processes
15
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
16
Driving operational efficiencies
Optimization production capacities
17
2014 2015 2016 2017 2018 2019 2020 2021
Ca
pa
cit
y
Un
its
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
taselisib
19
NM
Es
line
ext
ensi
ons
2015 2016 2017
venetoclax
alectinib
Cotellic
lebrikizumab
atezolizumab
ocrelizumab
lampalizumab
ACE910
Post 2017
etrolizumab
crenezumab
gantenerumab
olesoxime
Herceptin + Perjeta
Gazyva
atezolizumab + chemo
Gazyva
New growth opportunities outside oncology
Oncology/hematology
Neuroscience
Ophthalmology
Immunology
The 7 steps of the Cancer-Immunity Cycle guide
our 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 20
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
taselisib
22
NM
Es
line
ext
ensi
ons
2015 2016 2017
venetoclax
alectinib
Cotellic
lebrikizumab
atezolizumab
ocrelizumab
lampalizumab
ACE910
Post 2017
etrolizumab
crenezumab
gantenerumab
olesoxime
Herceptin + Perjeta
Gazyva
atezolizumab + chemo
Gazyva
New growth opportunities outside oncology
Oncology/hematology
Neuroscience
Ophthalmology
Immunology
Ocrelizumab: Active in both RMS & PPMS
23
• 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;
: R
MS
P
PM
S
Multiple Sclerosis: Improvements over SoC
driving market growth
24
,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
taselisib
25
NM
Es
line
ext
ensi
ons
2015 2016 2017
venetoclax
alectinib
Cotellic
lebrikizumab
atezolizumab
ocrelizumab
lampalizumab
ACE910
Post 2017
etrolizumab
crenezumab
gantenerumab
olesoxime
Herceptin + Perjeta
Gazyva
atezolizumab + chemo
Gazyva
New growth opportunities outside oncology
Oncology/hematology
Neuroscience
Ophthalmology
Immunology
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
Lebrikizumab in severe uncontrolled asthma
High efficacy and improved convenience
27
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
Multiple major pivotal trials reading out near term
Significant filing and launch activities ahead
29
Year Molecule Indication Market
opportunity
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
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
30
2015 outlook: Guidance upgraded
31
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
taselisib
33
NM
Es
line
ext
ensi
ons
2015 2016 2017
venetoclax
alectinib
Cotellic
lebrikizumab
atezolizumab
ocrelizumab
lampalizumab
ACE910
Post 2017
etrolizumab
crenezumab
gantenerumab
olesoxime
Herceptin + Perjeta
Gazyva
atezolizumab + chemo
Gazyva
New growth opportunities outside oncology
Oncology/hematology
Neuroscience
Ophthalmology
Immunology
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)
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 RecombinateHemofil M HelixateReFacto 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
ACE910 can address the major medical needs for
both inhibitor and non-inhibitor patients
36
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
NO
N-I
NH
IBIT
OR
Prophylaxis with by-passing
agents
Every other day, IV
On-demand treatment with
by-passing agents
2-3h intervals, IV
INH
IBIT
OR
Immune Tolerance Induction 70-80 % success rate
limitation due to very high cost and heavy burden for patients
Less frequent & SC
injection
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
Dis
ab
ilit
y
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
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 38