Roche's return to prominence in the primary care market will wait until at least 2006, the company indicated during a July 24 analyst meeting in Zurich.

Once Roche has a better feel for clinical candidates now coming out of Phase II, the company will decide whether and how aggressively to rebuild its primary care sales operations, Roche Pharmaceuticals Division President William Burns said.

"In this industry, you have to go where your products take you," Burns said. "Right now, our portfolio key drivers are in specialty care."

However, if Roche sees projects moving into Phase III that are attractive primary care opportunities, the company "can build, and we have the time to build, the army that we would need for 2006-7," Burns said.

He listed three examples of drugs that could drive Roche's decision about ramping up in primary care: R483 for diabetes, R411 for asthma and the alpha 1 agonist R450.

"How clinically differentiated is that insulin sensitizer?" Burns asked. "Does that product for asthma avoid the need for steroids? Does the stress urinary incontinence product make a significant difference? If the answers to those questions are yes, then we can build."

Roche is gearing up for one major primary care launch in the near term, the projected 2005 introduction of the osteoporosis agent Boniva (ibandronate). However, Burns noted, Roche has signed up GlaxoSmithKline as a co-promotion partner and so will not have to ramp up significantly on its own.

"That is a share-of-voice market," Burns said. "It is sheer noise level up against Merck [ Fosamax ] and sheer noise level up against Aventis/Procter & Gamble [ Actonel ]," he said.

"That is why we partnered with GlaxoSmithKline. I think that the stage is set so that we can do the job that is required with Boniva with the right size army."

The drug was approved by FDA in May in a once-daily oral formulation; Roche and marketing partner GlaxoSmithKline, however, are waiting to develop longer term dosing before launch (¹ Also see "Roche/GSK Boniva Launch Will Await Less Frequent Dose Approval" - Pink Sheet, 26 May, 2003., p. 20).

Burns indicated that Roche is looking at a potential once-a-month dose. Fosamax and Actonel are approved for once-weekly dosing.

Roche declared itself quite comfortable with the specialty market focus.

CEO Franz Humer described Roche as "uniquely positioned to confront" what the company sees as a "very unstable environment" driven by global pricing pressures.

"We are much better positioned than most of our competitors who have a very significant stake in the primary care market," Humer said. "The costs in the primary care market are increasing steadily. The primary care market is much more exposed also in the U.S. to price pressures, competition and to fast genericization."

"With our specialty franchises...we don't need 1,000 salesmen, or 1,500 salesmen for every new product launch," Humer noted. "We can therefore afford to put the money into the development of those molecules with additional indications....That is the way to build very successful specialty franchises."

Roche has "unique competitive positions with most of our drugs," Humer declared. "We are not surrounded by 10 or 15 competitors. We have unique profiles."

Finally, "more than 30% of our sales are...coming from monoclonal antibodies and true biotech products," Humer noted. "We are really the second-largest biotech company in the world. That also gives us a very significant amount of protection against the rapid intrusion of generics."

Roche does expect FDA and the European Union to develop approval pathways for generic or "comparable" biotech products, but Burns maintained that commercial and regulatory issues will minimize the impact.

In touting the advantages of a specialty focus, Roche is in part making a virtue of necessity. After establishing its U.S. business based on the benzodiazepines (most notably Valium ), Roche evolved primarily into a hospital marketing company behind the antibiotic franchise Rocephin .

Roche scaled up in the U.S. in the late 1990s to compete in the primary care market with the calcium channel blocker Posicor and the diabetes agent Xenical .

However, Posicor was withdrawn due to drug interactions, and Xenical failed to live up to expectations. (Sales of Xenical were down 14% during the first half of 2003.)

After changing U.S. management, Roche pared back its primary care sales force in 2001 to concentrate on specialty markets (² Also see "Roche Pares Back To Specialty Care: U.S. Sales Force Will Be Cut By 24%" - Pink Sheet, 4 June, 2001., p. 14).

Roche does have one more near-term patent hurdle, the expected launch of generic versions of Rocephin in 2005. However, that will be the company's "last major patent expiry" in the near term, Humer said.

"All in all, I believe we have set up a unique strategy by focusing on diagnostics and [specialty] pharmaceuticals," Humer concluded.

"Diagnostics is, interestingly enough, much less exposed to those price pressures than the pharma side," Humer noted. "Diagnostics is also not as exposed to patent expiries as the pharma side is, so that is a much more stable business."

Another aspect of Roche's strategy that makes the company unique is its alliance with Genentech.

Most of the questions during the analysts meeting focused on projects brought to Roche by Genentech, including Idec's Rituxan (marketed by Roche in Europe as MAbThera ), Genentech/OSI's Tarceva and Genentech's Avastin .

Roche's most recent biotech mega-deal, the acquisition of a controlling interest in Chugai, also helped the company post strong sales and profit growth for the first half of the year (³ Also see "Roche Tries Genentech Formula In Japan: Chugai Deal Follows 1990 Model" - Pink Sheet, 17 December, 2001., p. 6).

Roche Specialty Market Focus Provides Refuge In “Unstable Environment”

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