Roche (Genentech)

R&D chief Hal Barron

The world's biggest biotech - Roche (Genentech)

2012: $10.1 billion (9.55 billion Swiss francs)
2011: $8.81 billion (8.32 billion Swiss francs)
Change: Up 13.7% (constant exchange rate)
As a percentage of sales: 21%
R&D chief: Hal Barron

Last year marked a major turning point for Roche ($RHHBY) R&D. Not only did the pharma giant shut down its big facility in Nutley, NJ, laying off hundreds of staffers, it also brought in a new chief for its European R&D ops, which clearly haven't measured up in recent years.

What has measured up for Roche is Genentech, now its star research house. Just last year Genentech scored two big wins--on Perjeta (pertuzumab) and Erivedge (vismodegib). Zelboraf for BRAF V600 mutation-positive metastatic melanoma--approved by the FDA in 2011--was launched in Europe. Then it quickly followed up early in 2013 with an OK for T-DM1, a breakthrough antibody-drug conjugate that will extend the lives of women with breast cancer. When you consider that last year's 39 new drug approvals marked a longtime high for the industry, you can see how a few significant approvals in a 12-month timeframe represents gung-ho progress.

Recognizing the need for some serious change on the home front, Roche turned to John C. Reed at the Sanford-Burnham Medical Research Institute to take over Pharma Research & Early Development, better known in the company as pRED. It's going to have to do much better if it ever expects to rival gRED, Genentech.

While Genentech has been advancing a new generation of biologics, pRED was preparing the high-profile belly flop that resulted from the spectacular failure of dalcetrapib, Roche's big shot at a meagblockbuster heart drug that foundered for the same reasons that scuttled Pfizer's big effort in the same niche.

Genentech, though, has become a leading player in the explosion of new cancer drugs that has shaken the biotech industry. Traditionally, cancer drugs have had a woeful record of setbacks in the clinic. But as the biology of cancer has become better understood, the company's investigators have been able to zero in on important new breakthrough approaches in oncology. And with Roche's backing, it has the resources not only to bring in the best and brightest investigators, it also has a clear understanding of how next-gen combos will be able to keep late-stage cancer patients alive longer, while offering even more hope for early-stage patients.

In a big way Genentech's addition to the Roche business has reshaped the company's future, while fitting neatly into the international giant's big take on diagnostic technologies that can match patients and therapies. At a time when many analysts had expected Roche's rigid Swiss standards to squelch innovation, the creative side of the company's mind has emerged dominant in its corporate psyche. And its success has enabled Roche to maintain one of the biggest biopharma R&D budgets in the world.

Significantly, Roche's move to the top of the big spenders list is only temporary. The big jump in gross R&D expenses had a lot to do with $630 million in R&D restructuring expenses associated with closing down Nutley. Roche plans to keep its "core" costs--$8.97 billion in 2012 compared to $8.55 billion in 2011--in line with its basic cost structure. So there won't be any sudden plunges, either. 

For more:
Longtime Roche chairman is stepping aside. Who's up next?
Report: Booming Genentech plans 600 new hires in 2013
Roche/Genentech's breakthrough T-DM1 wins blockbuster OK for breast cancer
Roche grabs rights to Chiasma's PhIII rare disease drug in $595M deal

Roche (Genentech)

Suggested Articles

Medimmune’s Ronald Herbst, Ph.D., has followed a series of other AstraZeneca and its biologics arm staffers out the door.

The takeover will give Alexion two clinical-phase medicines in development in complement alternative pathway-mediated rare diseases.

Last year, Eli Lilly spent $1.6 billion to get its hands on Armo Biosciences and its lead asset, pegilodecakin. Today, that drug flopped.