Roche preps an M&A shopping list as it nears a debt-free future

Departing Roche Chairman Franz Humer

With his nearly 20-year stint at Roche ($RHHBY) coming to an end, longtime chairman Franz Humer said he's leaving the drugmaker just as it gets out from under Genentech-related debt, clearing the way for some dealmaking and an R&D jump-start.

As The Wall Street Journal reports, Roche churned out about $18.6 billion in free cash flow last year, and analysts expect it to completely pay down the $47 billion Genentech deal by 2015. That gives the company a chance to expand its reach through M&A, Humer told the newspaper, and the company is looking for deals large and small. But being the world's biggest drugmaker by market cap means Roche can afford to be picky, and the Swiss giant won't pull the trigger unless a deal makes scientific, strategic and financial sense, Humer said. "We don't need to spend that cash," he added.

Roche is already well entrenched in oncology, but the company has plenty of room to grow in rare diseases, antibiotics and neuroscience, high-value areas in which it has either suffered setbacks or struggled to piece together a promising pipeline. Roche's pRED R&D operation is already rolling on the collaboration front, striking deals in RNA therapies and anti-infectives and looking to spend "up to a few billion" in the next year or so, partnering chief Sophie Kornowski-Bonnet told FierceBiotech in January.

But acquiring or licensing external drugs is only effective if the buyer can follow through, and Roche's R&D paradigm has come under some scrutiny in recent years, as pRED, divided between a few European sites and New York City, has struggled to keep up with gRED, which operates out of Genentech's campus in South San Francisco. Meanwhile, Roche has endured some late-stage stumbles over the past few months, including a Phase III failure for the schizophrenia treatment bitopertin and this week's flop for MetMAb in lung cancer.

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Humer believes Roche's setup sparks intracompany competition and thus great research, and he said the drugmaker has no plan to follow an industry trend and consolidate its R&D operation into a single hub.

"I'm a proponent of different research sites in different parts of the world that can compete," Humer told WSJ. "You have to tap into different cultures. I feel confident this is the right approach."

Meanwhile, on its home field of oncology, Roche is lagging a bit behind Bristol-Myers Squibb ($BMY) and Merck ($MRK) in the promising space of cancer-fighting PD-1 inhibitors, but Humer told WSJ his company's institutional knowledge of immunotherapies gives it a leg up on "these companies that have only ventured into biologics in the last few years," and the departing chairman expects Roche to lead the way in cancer for years to come.

"There is still a lot of science that needs to be explored," Humer told the Financial Times. "This is not an overnight event, but it will bring us closer and closer to--I do not like the word cure--but to treating many more cancers like a chronic disease."

- read the WSJ story
- check out the FT interview

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