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 is increasingly looking outside oncology to help bolster sales. One of its most important new drugs, Ocrevus, targets multiple sclerosis. 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 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. The company is leaning heavily on noncancer drugs like the multiple-sclerosis drug Ocrevus and hemophilia treatment Hemlibra, to plug that gap, according to a recent investor presentation.
Overall, revenue from Roche's cancer franchise is forecast to fall 12% over the next six years, according to market-research company Evaluate Pharma. Over the same period, the data tracker expects the broader cancer market to nearly double in size.
Roche's growing reliance on nononcology 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., Glaxo- SmithKline PLC and Astra- Zeneca 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 stock.
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 cancer.
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 spending, 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 market.
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.”
Roche is projected to lose its top spot in the cancer-drug market as sales of its key medicines decline and rivals pile into the sector.
BY DENISE ROLAND