Roche is on a medicinal roll. The company operates two segments, pharmaceuticals and diagnostics, and sells its products in some 190 countries. Roche's prescription drugs include cancer therapies MabThera/Rituxan and Avastin, Perjeta and Kadcyla for HER2-positive breast cancer, hepatitis drug Pegasys, idiopathic pulmonary fibrosis drug Esbriet, macular degeneration therapy Lucentis, and Tamiflu, which is used to prevent and treat influenza (including pandemic strains). The company markets many of its bestsellers through subsidiary Genentech and affiliate Chugai Pharmaceutical. Roche's diagnostics arm offers clinical lab supplies, genetic tests, diabetes monitoring supplies, and point-of-care diagnostics for health care providers.
Roche's pharmaceuticals division accounts for more than three-fourths of annual revenues, with oncology drugs making the largest sales contribution (77% of revenues in 2014). The smaller, yet faster-growing diagnostics segment is a leading maker of in vitro clinical diagnostic tests through its professional diagnostics segment; it is also an established provider of diabetes tests and glucose monitors.
Some of Roche's pipeline products include Anti-PDL1 immunotherapy medicine for bladder cancer, Lampalizumab for geographic atrophy of the eye, Cobimetinib and Zelboraf for advanced melanoma, and ACE910 bispecific antibody for hemophilia A.
The company treated more than 19 million patients in 2014.
The largest geographic markets for the pharma segment are the US and Western Europe. Product marketing efforts in the US are conducted through Roche's main US subsidiary, Genentech, which is one of the world's largest biotech companies. The company also has a solid stance in the Japanese drug market through its 61.5% stake in Chugai Pharmaceutical, and it is experiencing growth in Latin America and Asia.
In the Asia/Pacific region, Roche's SPHERE (Scientific Partnership for HER2Testing Excellence) program helps to improve awareness and tests and treats breast and gastric cancers. It operates in a dozen markets: Bangladesh, China, Hong Kong, India, Indonesia, Korea, Malaysia, Myanmar, the Philippines, Taiwan, Thailand, and Vietnam.
North American operations accounted for 40% of Roche's revenues in 2014, followed by Europe (31%) and other regions.
As one of the top 10 global pharmaceutical companies, Roche has steadily grown its revenues and profits over the last decade. Revenue increased by just under 2% in 2014 to CHF 47.5 billion thanks to growth in both the pharmaceutical and diagnostics segments. The pharmaceutical arm grew 4% that year due to growth in its oncology and immunology portfolios, particularly increased sales of its Acemtra treatment for rheumatoid arthritis and its Xolair treatment for chronic hives and asthma. The rising sales of Perjeta and Kadcycla helped offset any declines of Xeloda. The diagnostics arm grew 6%, driven by growth in the professional diagnostics and molecular diagnostics operations.
Net income fell 16% to CHF 9.5 billion that year, though, as expenses related to R&D, marketing, and distribution rose. Cash flow from operations grew a modest 1% to CHF 15.8 billion due to several factors (including an increase in working capital and a decline in cash used in income tax paid).
In order to expand its pharmaceutical product offerings and stave off revenue losses from patent expirations and other competitive pressures, Roche invests heavily in internal research and development programs to expand its pipeline of small-molecule and biotechnology drug candidates. The company has about 100 drugs in clinical development stages, the bulk of which aim to treat oncology, cardiovascular, metabolic, viral, inflammatory, autoimmune, and central nervous system disorders. In 2014 the company invested CHF 9 billion in core R&D (representing 19% of sales).
Roche also pursues acquisitions and site expansions.
The firm has also widened its R&D programs by forming partnerships with other drugmakers, such as Biogen Idec and Pharmasset, as well as through acquisitions. In addition to new drug formulas, Roche conducts R&D programs on existing drugs to gain regulatory approval for new indications, which typically helps to extend a drug's patent protection and increase sales volumes. In 2014 the company signed 55 new agreements, including three acquisitions, four product transactions, 37 research and technology collaborations, and 11 product out-licensing agreements.
In 2015, the US FDA provided 510(k) clearance for the cobas MRSA/SA test for the early detection of methicillin-resistanct Staphylococcus aureus (MRSA) and methicillin-resistant Staphylococcus aureus (SA) from nasal specimens; it also approved the cobas TaqScreen MPX test, v2.0, for the detection of HIV, HCV, and HBV in blood and plasma donations. The prior year, Roche received Breakthrough Therapy designation for three medicines (anti-PDL1, Lucentis, and Esbriet). Also in 2014 the company launched a new test to determine fertility levels, as well as a test to predict the likelihood of preeclampsia in pregnancy.
Not one to neglect its smaller division, Roche has been aggressively adding to its diagnostic testing stable through R&D, partnership, and acquisition efforts. In addition to clinical and diabetes tests, focus areas for the diagnostics division include tissue-based cancer diagnostics (through its Ventana Medical Systems subsidiary), life science (gene sequencing) technologies, and molecular diagnostics, which include personalized (or companion) tests that are used to determine the best treatment regimen for a specific patient.
In 2014 Roche signed a distribution agreement with Sigma-Aldrich for its biochemical reagents portfolio, which includes cellular analysis kits.
Mergers and Acquisitions
Acquisitions are also key elements in Roche's R&D growth strategy, and have expanded its pharmaceutical segment in focused therapeutic areas. For example, in 2014 it acquired Seragon Pharmaceuticals out of California for $988 million; it gained rights to Seragon's portfolio of selective estrogen receptor degraders to potentially treat hormone receptor-positive cancers. It also bought Santaris Pharma out of Denmark, Austria's Dutalys, and California's InterMune (for $8.8 billion) adding Esbriet to its portfolio. The following year it purchased Ariosa Diagnostics, a molecular diagnostics company.
In 2013 it enhanced its diagnostics business and strengthened its hematology offerings with the $220 million purchase (plus contingent payments) of Constitution Medical Investors, which makes tests for blood diseases. Two years later, it bought a controlling stake in Foundation Medicine, which makes the FoundationOne cancer test, for just over $1 billion. It also acquired Genia Technologies (California), which is developing a single-molecule, semi-conductor-based DNA sequencing platform; IQuum (Massachusetts), developer of the Laboratory-in-a-tube or Liat system; and Bina Technologies (California), which provides Roche with a big data platform for centralized management and processing of next-generation sequencing data.
The company also announced plans to buy private French company Trophos, which makes olesoxime (an experimental treatment for spinal muscular atrophy, a debilitating genetic neuromuscular disease) for an upfront payment of €120 million ($140 million) plus further payments up to €350 million.
Descendants of the founding Hoffmann and Oeri families own about half of Roche. In addition, fellow Swiss drugmaker Novartis owns 33% of the company.