“We have one of the best portfolios”

Mr. Schwan, Roche will soon not only have a new CEO, but at the same time the two business divisions, pharmaceuticals and diagnostics, will also have a new boss. Isn’t that a bit too much all at once?

But on the contrary. My move from CEO to Chairman of the Board of Directors is characterized by great continuity. With the appointment of Thomas Schinecker in March, an internal successor who has spent his entire professional career at Roche and knows the company very well will take over as CEO. We were also able to fill his previous position as head of the diagnostics division with Matt Sause from our own ranks, a proven manager with broad international experience.

What expectations do you have of the pharmaceuticals division – which is significantly more important in terms of sales – whose manager Bill Anderson is now surprisingly leaving the company after only four years in office?

We wanted to announce the successor at the head of the pharmaceuticals division before the general meeting in March. We have very good internal candidates.

Mr. Anderson left of his own accord, right?

Yes.

Because not he, but Mr. Schinecker will become CEO?

Bill Anderson is in his mid-50s and has decided to continue his career outside of Roche. Bill has been with Roche for 17 years and we have also worked closely together personally for many years. I regret his decision, but I understand it. I don’t want to speculate further here.

“Of course it’s very disappointing when an approval study for such an important drug is negative.”

Roche recently failed with the active substance gantenerumab against Alzheimer’s. Does the change at the top of the pharma division offer a chance for a fresh start?

This switch has nothing to do with gantenerumab at all. Of course, it is very disappointing when an approval study for such an important drug comes back negative. But we always knew that the development risks in this area are very high.

A positive result would have given Roche the prospect of billions in revenue. How is the company coping with this setback?

On average, only one in ten drugs makes it through clinical development. Setbacks are part of business. But for a balance sheet you have to look at the entire portfolio. With the cancer drugs Avastin, Herceptin and Mabthera, half of our pharmaceutical sales received competition from generic products within a short period of time. This created enormous pressure, which we managed to master impressively thanks to the successful launch of new preparations in oncology, neurology and most recently in ophthalmology. Not to sound arrogant, but we have one of the best portfolios in the pharmaceutical industry. The new drugs are growing at double-digit rates.

The failure with gantenerumab was not the only one in Roche research recently. The market value has fallen by a fifth since the beginning of the year. Has Roche got caught in a negative spiral?

Looking back a little further shows that we have had a strong performance in the stock market for a long time. The coronavirus pandemic has provided us with significant additional revenue in the antibody cocktail and diagnostic test business. Sales in this area literally exploded, we earned around 7 billion Swiss francs last year. We are now feeling a significant decline, which is also reflected in the share price.

“When was the last time you were tested for Sars-CoV-2?”

Is business with the pandemic over?

The prediction we made when we announced our third quarter results has come true. The volume in the business with corona tests and therapies to treat the viral disease has fallen significantly. Or to put it in a nutshell: When was the last time you were tested for Sars-CoV-2?

Even in China, test centers are now closing in droves.

In China, however, foreign companies are not licensed for vaccinations or tests related to the pandemic. Unfortunately, we do not have access to the market here.

Market observers complain that Roche, like Novartis, has not yet managed to launch a very large drug with sales of over 10 billion dollars. Could the new eye remedy Vabysmo fall into this category?

We do not provide estimates for future peak sales. But Vabysmo has the potential to become a very big drug for Roche. I am convinced of that. The successful launch in the USA and now also in the first other countries, including Switzerland, is going extremely well.

The current superstar of the pharmaceutical industry is the US corporation Eli Lilly. He has far overtaken Roche in terms of market capitalization this year. What makes the company, which employs less than half as many people as Roche, so successful?

Lilly is a fine example of how medical breakthroughs can be achieved with new therapies. At the same time, the company had to overcome long dry spells in the past. But it always remained connected to science, even if certain investors were skeptical and wondered if anything would come of it. I have great respect for this company.

How do you rate Roche’s research activities? In view of the recent failures, aren’t there any fundamental changes to be made?

Of course, I would have wished that we would have been as successful with gantenerumab as we were with the cancer immunotherapy tiragolumab – in the first attempt. For tiragolumab, we expect additional study results in the coming year, which could still provide strong arguments for treatment with this drug. At the same time, Roche generally has a strong pipeline. I hope that we can show some positive results in the near future.

And organizationally, Roche is still in the right place. Aren’t there too many duplications?

We have worked intensively on the structures throughout the group, and Bill Anderson also played a major role in this, in order to streamline the organization in order to become more flexible and faster. This has allowed us to invest significantly more resources in research and development.

Sometimes less is more in research. Is this department’s budget too generous?

It’s true that we spend more on R&D than any other company. Expenses are also high relative to sales. But that is our strategy. Roche wants to differentiate itself through scientific excellence. We therefore also consciously maintain a close proximity to the academic world.

“If you sit back, that’s the beginning of the end.”

So there is no need for action, such as job cuts?

No, definitely not the latter. But in principle there is of course always a need for action, to question oneself and to improve. When you sit back, that’s the beginning of the end.

Will there be another dividend increase for shareholders for 2022?

Yes, we have already communicated that. I can also continue to confirm the outlook for the current year as a whole.

On the other hand, 2023 is likely to be another year of transition.

This is not a complicated calculation. Just look at the Corona sales, that will be a good 6 billion francs this year. Already in the fourth quarter, that revenue fell massively, and barring anything unforeseen, next year will have a base effect. But the underlying business is growing excellently.

A look into the future: You have already indicated that Roche will one day have a third pillar in the data sector alongside pharmaceuticals and diagnostics. Can you quantify that and will we see any substantial changes in these activities next year?

This is strategically important, but still very early. On the one hand, we offer digital tools for decision-making for doctors or other companies, such as tools with AI algorithms for image diagnostics in pathology. The second area is the evaluation of health data: not only from clinical trials, but also from clinical practice. Here are the customers in the life science industry. But this business is not yet relevant to our balance sheet today. This is really something very long-term.

“It goes without saying that the CEO is expected to set new priorities and also have the necessary freedom to do so.”

In the spring you will move to the top of the Board of Directors. Will things just continue as before under President Schwan?

Roche has had good experiences with this model. My predecessors Fritz Gerber and Franz Humer were both CEOs before they moved to the presidency. This approach stands for continuity and is of course also strongly influenced by the founding families, no question. But it goes without saying that the CEO is expected to set new priorities and also have the necessary freedom to do so.

The Basel-Vevey axis will also be strengthened again: after Peter Brabeck and Paul Bulcke, Mark Schneider will be another Nestlé CEO on Roche’s supervisory board.

It’s great to have the head of an international group on the board as a sparring partner, especially as he, as a former Fresenius CEO, also knows the healthcare industry.

In recent years, Nestlé has also increasingly dealt with the topic of health.

There’s a huge difference between healthy eating and drug development. From a business point of view, these are completely different worlds.

How much time does it take to serve on the Roche Board of Directors?

So if you only include the meetings and mandatory events, it should be around ten days. There are also extraordinary meetings, for example when a decision has to be made on an important business transaction.

What do you think of when you see what has happened at Credit Suisse over the past few months and weeks, where you were Vice Chairman of the Board of Directors until spring?

I cannot and do not want to comment on the current events, but the development is disappointing. However, I am convinced that the bank, which is going through a really difficult phase, will find its way out of the crisis.