Roche
is now back in the top 10 league of global pharmaceutical
companies following the merger of its Japanese subsidiary
with Chugai - and is maintaining an independent stance as
Basel neighbour Novartis edges closer to its dream of creating
a Swiss powerhouse...
Roche
back in the top 10!
The
alliance between Roche's wholly-owned subsidiary Nippon
Roche and Chugai became effective on October 1 2002, in
a move that both companies were careful to describe as a
friendly alliance rather than an acquisition. The new enterprise,
now the fourth-largest pharmaceutical group in Japan, increases
Roche's share of the Japanese market from 1% to 4%.
IMS
MIDAS
data reveals that Roche has since moved up several ranking
positions and re-entered the top 10, where its absence has
been noted for several years.
Top
10 corporations worldwide
(12 months
to September 2002)
| Corporation |
Rank
|
Market
Share (%) |
| Pfizer |
1 |
7.3 |
| GlaxoSmithKline |
2 |
7.1 |
| Merck
& Co |
3 |
5.1 |
| Johnson
& Johnson |
4 |
4.6 |
| AstraZeneca |
5 |
4.6 |
| Novartis |
6 |
4.0 |
| Bristol-Myers
Squibb |
7 |
3.7 |
| Aventis |
8 |
3.6 |
| *Roche |
9 |
3.1 |
| Pharmacia
Corp |
10 |
3.0 |
Source:
IMS MIDAS
*Note: IMS MIDAS data incorporates 100% of Chugai sales due
to its 50.1% ownership by Roche, and are backdated to before
the merger date
Roche's
unique entry into Japan Roche's
deal with Chugai represented the first-ever acquisition
of a Japanese drug company by a foreign firm, and making
the agreement unique, autonomy has been promised to Chugai
- despite Roche's controlling stake.
In an
interview in January 2003, IMS asked William Burns, Head
of Roche's Pharmaceuticals Division, how the relationship
with Chugai was going and if he believed that Roche had
opened the door for further merger activity in Japan?
"So far it's worked and we're off to a good start but I
don't think it's a model that's easy to duplicate. There
are few relatively pure play companies like Chugai that
have their own product range and conduct their own research.
A number of the senior pharma managers in Roche have worked
in Japan and feel comfortable in the country which, together
with the fact that Osamu Nagayama and Franz Humer have strong
mutual trust, has built excellent relationships between
Roche and Chugai," commented Burns, adding, "Also,
we managed to demonstrate through the Genentech model that
we can make this more 'arms length' relationship work and
Roche will be the partner of first choice where Chugai requires
one for overseas business."
Later
in January 2003, Merck & Co opened a tender offer for
the remaining 49% stake of Banyu, and analysts say that
several western companies have expressed a desire to gain
a stronger foothold through alliances after years of building
networks. This could raise pressure on Japan to open up
its long protected $50 billion market.
Novartis
eager to create a Swiss powerhouse
In January
2003, Novartis revealed that it had raised its voting
stake in Roche from 21.3% to 32.7%, which falls just
short of the one-third threshold that would trigger a mandatory
public offer. Novartis has said that this was a long-term
move and although it intends to hold on to the stake for
an indefinite period, would not raise its holding above
33.3% to force a merger.
Daniel
Vasella, Novartis' Chairman and CEO, has said that Novartis
is very interested in merging with Roche and believes that
the combined entity would have leading positions in pharmaceuticals,
diagnostics, generics and over-the-counter/consumer health
products, and that the companies were complementary in areas
of innovation.
Leading
10 Corporations worldwide - Novartis/Roche merger scenario
(based
on sales for 12 months to September 2002)
Source:
IMS MIDAS
According
to IMS MIDAS data, the combined company would rank in second
place, with Novartis overtaking GlaxoSmithKline, Merck &
Co, Johnson & Johnson and AstraZeneca, and Roche additionally
overtaking Aventis and Bristol-Myers Squibb in the league
tables.
Roche
staunchly independent
The
future of this relationship hinges on the Hoffman and Oeri
families, who, under Roche's two-tier capital structure,
control most of the votes - although they own less than
10% of the equity. The families have signalled that they
do not intend to sell their controlling stake to Novartis.
Andre
Hoffmann, one of two family members on the Roche board,
stated in a rare newspaper interview that mega-mergers rarely
live up to their promise. He added that a merger with Novartis,
or another competitor, would not make sense for the company
or for Basel, the home town of both Roche and Novartis.
At the
presentation of Roche's 2002 annual results in February
2003, CEO Franz Humer stated that: "A blocking vote
does not give Novartis any rights to a seat on the board
or any substantial influence on long or short term strategic
decisions of the company....a mega-merger with any company
is not part of Roche's strategy."
When
asked about Roche's stance on merging with Novartis, William
Burns replied: "There's not a compelling logic to put Roche
together with Novartis. A number of areas overlap. In addition,
I think that Switzerland would be well served in having
two major companies, not just one... we have the firm support
of the Hoffmann family pool (50.01%) to build our independent
future."
Dominating
transplantation
Looking
at specific therapy classes, a Novartis-Roche merger would
push Johnson & Johnson from its top spot to dominate
the immunosuppressive therapy (L4A) market with a share
of 35%. Novartis currently sits in third place with its
main product Neoral (cyclosporine), although
sales declined by 7% year-over-year to September 2002. Roche
tagged just behind with CellCept (mycophenolate
mofetil) and grew by 27% in this area over the previous
year. The Swiss entity may not be allowed to dominate with
both of these products however, presenting a further obstacle
to a merger.
Leading
five corporations in immunosuppressive market following
Novartis/Roche merger
(based on sales for 12 months to September 2002)
Source:
IMS MIDAS
The
leading therapy class for the combined entity would be L1X
'All other Cytostatics'. Merging with Novartis and its product
Glivec (imatinib) would strengthen Roche's
current leading position in this area with products MabThera
(rituximab) and Herceptin (trastuzumab).
As Roche presented its annual results in February 2003,
it was revealed that MabThera was Roche's first pharmaceutical
product to achieve sales of SFr2 billion, and that it is
now the company's leading product. Rituximab was developed
by IDEC and Genentech, and is marketed as Rituxan
in the US.
A
promising future following recent setbacks
IMS
asked William Burns if there was anything in Roche's pipeline
that could have blockbuster potential. Burns commented that
Roche's immediate assets are Fuzeon (enfuvirtide) for HIV,
Pegasys (alpha-interferon) for hepatitis C and NeoRecormon
(erythropoietin beta) for anaemia, which he believes will
become a SFr2 billion brand and become Roche's second or
third leading product.
Pegasys
is currently being rolled out, and accumulated sales of
SFr94 million over the last six months of 2002; according
to Roche, Pegasys is already showing improved tolerability
and fewer side-effects over Schering-Plough's rival PEG-Intron
product. Fuzeon, licensed from Trimeris, is the first HIV
drug to work outside the cell and Roche revealed in February
2003 that it will be priced at €52 per daily treatment
in Europe (€19,000 a year): European and US approval
is expected in the first half of 2003.
Burns
also pointed out a number of promising Phase II/III candidates
for the 2004-2006 timeframe, including:
- CERA,
a second-generation erythropoietin
-
an insulin sensitiser which could be a differentiated
molecule
-
an alpha1 adrenergic antagonist for stress incontinence
in women, a significant unmet medical need
Burns
concluded: "I personally feel that we've turned our corner
and we...re back on the ascendancy... Roche has around 53
molecules in its portfolio, and the challenge is to make
sure that organically we keep feeding it, through alliances
and good business development. I think we've demonstrated
that we can do that." |
