By Denise Roland
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 29, 2019).
Many pharmaceutical companies expect cancer treatments to drive
growth in the coming years. One notable exception: the world's
largest cancer-drug maker.
Switzerland's Roche Holding AG has enjoyed almost two decades as
an unrivaled force in oncology. Now, with more companies piling
into the space and its top-selling drugs losing sales to lower-cost
copies, that is about to change.
Roche's cancer franchise generated double the sales of its
nearest competitor in 2018 but is expected to shrink over the next
few years. Companies with little or no history in cancer drugs are
now posing competition. And the pending combination of Celgene
Corp. and Bristol-Myers Squibb Co. is set to create a rival that
will soon knock Roche off its top spot.
Roche has dominated the cancer-drug market since 2002, largely
thanks to its partnership with California biotech Genentech, which
it took full ownership of in 2009. Genentech developed Roche's
top-selling trio -- Herceptin, Avastin and Rituxan -- that have
generated sales of more than 240 billion Swiss francs ($235
billion) over the past 15 years. More than 60% of Roche's
pharmaceutical revenue comes from cancer drugs.
But lower-cost copies are now starting to erode those sales.
Roche expects to lose 10 billion francs of annual revenue from
Herceptin, Avastin and Rituxan by 2022. Overall, revenue from
Roche's cancer franchise are forecast to fall 12% over the next six
years, according to market-research company EvaluatePharma. Over
the same period, the data tracker expects the overall cancer market
to nearly double in size.
Roche is increasingly looking outside oncology to help plug the
gap. The company is counting on Ocrevus, a drug for multiple
sclerosis, to replace nearly half the lost sales, according to a
recent investor presentation. It also is looking to buy growth,
recently acquiring gene-therapy company Spark Therapeutics Inc. in
a bid to build its presence in hemophilia. It expects that deal to
close in the coming weeks.
Roche's growing reliance on non-oncology drugs doesn't mean the
company is retreating from cancer, according to Bill Anderson, head
of its pharmaceuticals division. "We are not backing down one inch
from cancer, " he said in an interview. "We are making every
investment in cancer that we think is advisable to make."
But a recent flood of spending on cancer research by many of
Roche's rivals means the competition to develop new drugs, and win
market share, is much tougher than in the past.
Rivals who were previously more rooted in general medicine, like
Pfizer Inc., GlaxoSmithKline PLC and AstraZeneca PLC, are pivoting
to cancer, spurred by recent scientific breakthroughs, a permissive
regulatory system and the potential of high returns.
Between 2007 and 2017, the number of cancer drugs in late-stage
clinical trials surged more than 60% to 710, according to IQVIA, a
health-care data provider.
"Oncology has been a growth area for our industry and will be
for quite some time," said Brad Loncar, a health-care investor who
developed an exchange-traded fund of cancer immunotherapy
companies. "They are losing their leadership role at a time when
the space itself is at a special moment." Mr. Loncar doesn't hold
Roche executives say they believe the company still has an edge
over the rising competition. Mr. Anderson said Roche's cancer
pipeline spans a broader range of approaches to attack cancer than
many of its competitors. He also cited the company's investment in
data as giving it an advantage in developing new drugs.
"Cancer is getting crowded; there are too many people chasing
too few targets," he said. "I wouldn't invest in those companies.
But I love our investment."
However, the impact of competition was clear over the past few
years in the market for a new class of drugs known as
immunotherapies, which boost the immune system's response to
Merck & Co. -- which has a shorter history in cancer -- beat
Roche to dominate the immunotherapy space despite the two companies
starting to test their drugs in patients within months of each
other in 2011. Merck moved faster with clinical trials for its
drug, Keytruda, which received its first regulatory approval in
2014, two years before Roche's Tecentriq. Keytruda now outsells
Tecentriq by a factor of 10.
"They outspent us between five and 10 times across the board,"
said Daniel Chen, who led the Tecentriq research-and-development
program until leaving Roche last year to join a biotech startup.
Roche would have had to jettison other promising programs to match
Merck's spend, which was a "very difficult trade-off," he said.
Roche's strategy was to run fewer, more targeted clinical trials
shaped by scientific understandings amassed from years of
immunotherapy research, according to Dr. Chen. While that gave it
an advantage in certain areas -- he says Roche was the first to
recognize the potential of combining immunotherapy with
chemotherapy -- Merck went on to become the clear leader in the
Still, Roche executives aren't shaken by the company's laggard
position in immunotherapy. "This has been characterized by many as
a race," said Chief Medical Officer Sandra Horning, in an
interview. "We think of it as more of a marathon."
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
April 29, 2019 02:47 ET (06:47 GMT)
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