Roche - The Biggest R&D Spenders In Biopharma

Company: Roche
2011 spending: $8.8 billion
2010 spending: $9.2 billion
Change: -4.3%
Percentage of revenue: 19%

Note: Roche ($RHHBY) records its numbers in Swiss francs, registering 7.2 billion francs spent on drug research last year, with 981 million francs on diagnostics; 8.08 billion total. 

Last year, Roche's top drug prospect was vemurafenib, or Zelboraf now, a cancer drug it had licensed in from Plexxikon that went on to become one of the most highly touted new drugs approved for marketing. This year, it's time for T-DM1 to finally take the ranks among the top cancer drug prospects, with new late-stage data underscoring again just what kind of potential the drug has in the breast cancer market.

Another top cancer drug prospect is pertuzumab, which posted impressive results among breast cancer patients when combined with Herceptin. Some analysts have pegged prospective sales at $2 billion a year. And Roche has been swinging for the fences on a cholesterol program.

Roche research chief Jean-Jacques Garaud believes that despite the troubled history of CETP inhibitors (remember torcetrapib?), the pharma giant's HDL drug dalcetrapib has the potential to earn upward of $10 billion a year. And Garaud shrugged off the prospects of Merck's rival HDL drug anacetrapib, which has done even better in the clinic at boosting levels of "good" cholesterol.

Like some of its multinational competitors, Roche has also been investing in China, hoping to see big returns as that enormous market opens up. 

Roche is perhaps best known, though, for its checkbook. It bought out Genentech for $47 billion to add that company's powerhouse R&D operation, but failed to make a $6.7 billion bid stick when it recently tried to snag Illumina ($ILMN).

In the world of CEO Severin Schwan, the buyouts are intended to help distinguish the giant from its rivals. And the stakes are enormous. For a pharma company to succeed in the future, he insists, it will need to be truly innovative, coming up with new therapies that cash-strapped payers will be willing to provide to patients. Any company that doesn't measure up, he adds, will be dead.

The problem with much of Schwan's thinking, though, is that the giant isn't always all that nimble. Analysts began fretting over productivity at Genentech the day Roche bid on the company. And while it sees a big future in sequencing, Roche has found out just how hard it is to stay on the cutting edge of a fast-changing technology.

Chances are, though, that a few big approvals over the next two years will keep analysts respectful of Roche's pipeline potential.

Roche - The Biggest R&D Spenders In Biopharma
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