1. Roche


R&D budget: CHF 11.05 billion ($10.98 billion)
Change from 2017: +6%
Total 2018 revenue: CHF 56.85 billion ($56.51 billion)
R&D budget as percentage of revenue: 19.3%

Roche’s R&D spend is always one of the biggest among the biopharma industry, and with a 6% increase to CHF 11.05 billion ($11.06 billion) in 2018, split between pharma and diagnostics, it is showing no signs of a slowdown.

In 2018, the company streamlined its marketing and sales costs in order to pump the savings back into the pipeline—split between its pharmaceuticals and diagnostics divisionsand that is a trend it says will continue in the coming years.

Arguably now more than ever that big spend is critical. Roche is losing patent protection on its big three drug franchisesRituxan, Herceptin and Avastinwhich collectively accounted for 36% of total sales last year. Biosimilar competition is already underway in Europe and will gather pace in the U.S. in the coming years, while another big seller—eye disease therapy Lucentis—is also coming to the end of its patent life.

New stars like Ocrevus are starting to deliver sales growth, and 2018 also saw important approvals and launches for immuno-oncology drug Tecentriq in non-small cell lung cancer (claiming a niche in a market dominated by Merck & Co.’s rival Keytruda), Hemlibra for hemophilia A, and first-in-class flu drug Xofluza.

It’s also on course to add to that tally with a record 16 new molecular entities in late-stage development and two of those due to be launched in 2019. Those are first-in-class anti-CD79b antibody drug conjugate polatuzumab vedotin for aggressive lymphoma—which started a priority review at the FDA in February—and entrectinib for NTRK-fusion positive solid tumors, acquired along with Ignyta for $1.7 billion in 2017.

This year should also see filings for anti-IL-6 antibody satralizumab for neuromyelitis optica, a drug developed by Roche’s Japanese subsidiary Chugai, as well as for risdiplam, a small-molecule gene splicing modifier for rare disease spinal muscular atrophy (SMA) that would compete with Biogen’s blockbuster Spinraza.

Both SMA therapies are threatened by the potential approval this year of Novartis’ one-shot gene therapy Zolgensma. Roche thinks there will still be a role to pay for drug therapy in SMA even if gene therapies reach the market, not least because around a third of adults develop immunity against the viruses most commonly used as vectors for gene therapy delivery.

The company’s mid- to late-stage pipeline has a number of novel compounds in play, notably Huntington’s disease therapy RG6042, which is leading the pack among drugs that aim to reduce production of a mutant protein that underpins the neurodegenerative disease.

Not all of Roche’s R&D spending goes on innovative new medicines; it also has a defensive strategy for older drugs. That includes an implantable Lucentis device that can deliver the drug for six months or even a year at a time versus current monthly injections and could protect the franchise from biosimilar competition. Similarly, it's working on a fixed-dose combination of HER2 breast cancer drugs Herceptin and Perjeta aimed particularly at patients who are not in line for chemotherapy.

Roche has had its fair share of pipeline setbacks in the last few months of course, headed by the recent demise of beta amyloid-targeting crenezumab for Alzheimer’s disease (AD), which was abandoned after flunking two phase 3 trials in early-stage patients. That wasn’t unexpected given the large number of amyloid-targeting drugs that have failed at the last hurdle in AD, but it reduces confidence in gantenerumab, Roche’s last remaining amyloid program.

Among other projects shed last year was RG6125, an anti-cadherin 11 antibody for rheumatoid arthritis acquired through the $105 million buyout of Adheron, which had reached the phase 2 testing stage; PI3K hopeful taselisib; and all of Roche’s work with NewLink on IDO/TDO inhibitors, an immuno-oncology target that fell out of favor after Incyte’s IDO-targeting indoximod failed in late-stage testing.

Roche’s M&A activity last year also reveals its R&D aspirations, and in 2018 it made its first foray into gene therapy via a partnership with 4D Molecular Technologies in the inherited retinal disorder choroideremia, which was reinforced earlier this year when it agreed to buy Spark Therapeutics for $4.3 billion.

Roche’s M&A also shows how much emphasis the company is placing on digitalization, a term that is littered throughout its 2018 annual report. After buying out Foundation Medicine for $2.4 billion and Flatiron for $1.9 billion, Roche says it now has more than 100 digital technology and data initiatives already underway, focusing on analyzing large data sets at scale to look for new biomarkers and druggable targets and to help guide clinical development. It says embracing digitalization will lead to new and better medicines that are brought to market faster and used more effectively in clinical practice.

Check out Roche’s pipeline here.

1. Roche

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