Turning innovation into patient benefit Karl Mahler Head of Investor Relations
London, December 2015 This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as ‘believes’, ‘expects’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘estimates’, ‘future’ or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this presentation, among others: 1 pricing and product initiatives of competitors; 2 legislative and regulatory developments and economic conditions; 3 delay or inability in obtaining regulatory approvals or bringing products to market; 4 fluctuations in currency exchange rates and general financial market conditions; 5 uncertainties in the discovery, development or marketing of new products or new uses of existing products, including without limitation negative results of clinical trials or research projects, unexpected side-effects of pipeline or marketed products; 6 increased government pricing pressures; 7 interruptions in production; 8 loss of or inability to obtain adequate protection for intellectual property rights; 9 litigation; 10 loss of key executives or other employees; and 11 adverse publicity and news coverage. Any statements regarding earnings per share growth is not a profit forecast and should not be interpreted to mean that Roche’s earnings or earnings per share for this year or any subsequent period will necessarily match or exceed the historical published earnings or earnings per share of Roche. For marketed products discussed in this presentation, please see full prescribing information on our website – www.roche.com All mentioned trademarks are legally protected 2 Performance update
Innovation and efficiency
Improving the standard of care
Outlook
3 Q3 2015: Sales growth for fifth consecutive year
10%
8% 8% 7% 7% 6% 6% 6% 6% 6% 6% 5% 5% 4% 5% 4% 4% 4% 4%
2% 2% 0% 0% 1% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 14 15 15 15
All growth rates at constant exchange rates (CER) 4 HY 2015: Strong underlying Group core operating profit & margin
% of sales 40'7% 41'0% 39'2% (+0.4%p 38'5% excl. filgrastim*) 38'1%
+2% at CER (+7%*)
CHFbn 9'5 9'4 9'2 8'3 8'6
HY 2011 HY 2012 HY 2013 HY 2014 HY 2015
CER=Constant Exchange Rates 5 * Excluding sale of filgrastim rights in 2014 at CER 2014: Dividend and payout ratio further increased
CHF Dividend payout ratio (%) 10'00 56.0 55'3 54'7 9'00 54'5 8.00 8'00 51'6 2014 payout ratio: 56.0% 48'6 7'00 44'8 6'00 38'8 34'5 5'00 31'9 4'00 3'00 2'00 1'00 0'00 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Payout ratio calculated as dividend per share divided by core earnings per share (diluted); Note: For 1995, a special dividend was paid 6 1 out compoundto mark F. Hoffmann annual growth-La Roche’s rate 100th anniversary in 1996 Performance update
Innovation and efficiency
Improving the standard of care
Outlook
7 Roche strategy: Focused on medically differentiated therapies
Regulators: Pharma Dia Optimised benefit / risk ratio Payors: Focus Optimised benefit / cost ratio
MedTech
Premium Premium for innovation OTC Generics
Differentiation
8 Roche/Genentech: Sustained record of cutting edge scientific discoveries
25 Research Publications in Cell, Science, or Nature
20 20
15 16 14 10 12 10 9 9 9 10* 8 5 4 3 4 4 4 0
9 (* through Oct. 2015) Roche’s strategy remains unchanged Success hinges on excellence in innovation & execution
• Focus investment on differentiated molecules
• Continuously improve processes
10 Diversified approach towards innovation Belief: Exploring broad BUT prioritizing rigorously
We invest more than Research engines identified a growing others in the early stage n° of diverse solutions to patients’ needs
% of budget dedicated R&D phases # of NME’s entering Pre-clinical 19 18
R & Early D 54% 60% 11 Industry avg.
Late D 46% 40% & <<< &
Industry avg Roche 2011 2012 2013
External sources: Investment split based on the CMR Pharmaceutical R&D Factbook (data from 10 companies, 2014); Number of entries into Pre-clinical for Industry based on data from KMR, data for 2011-2013. 11 However, we set a high bar for our R&D pipeline … Targeting clear differentiation in areas of unmet need
Assessment for late stage entry candidates & line extensions Total sales potential
Illustrative
high
Greater
differentiation Sales
Threshold Unmet Unmet medical need
low low Clinical differentiation high Time Continued
Disqualified 12 Roche’s strategy remains unchanged Success hinges on excellence in innovation & execution
• Focus investment on differentiated molecules
• Continuously improve processes
13 We are also driving operational efficiencies Select examples R&D
Lean Protocol Design Sourcing Strategy Partnerships
Rethinking protocol design Outsourcing transactional Industry consortium to reduce complexity clinical operations roles (20 companies) to drive trial efficiency
All programs Other topics: Risk based Implementation 2014-15 implementing lean monitoring, industry wide – savings start 2016 protocols registries, etc.
Resulting in ~100m per year in savings
14 We are also driving operational efficiencies Select examples Technical Operations
Network Complexity Continuous process efficiencies reduction improvement Improve capacity planning Remove >40% of all Implement lean principles, across the network & align presentations by stream- e.g. to decrease end-to-end to future needs lining the EP1 portfolio cycle time by up to 50%3
(<0.1% sales impact2)
Value
Need
Optimize utilization & Focus resources on Do the same increase reliability key value driver with less
Source: 1. Established Products 2. In 2016 3. For processes in scope 15 Achievements: Innovation Above-average R&D success rate
Likelihood of launch from phase 0
12 Roche Industry 10 8% 8
6 5%
4
2
0 02-06 03-07 04-08 05-09 06-10 07-11 08-12 09-13 10-14
Despite some set-backs, Roche continues to stay ahead of the industry
Note: Success rates calculated at the project/indication level for overlapping 5-year periods (9 data points between 2002-14) based on KMR data (with 13 Industry peers and Roche). From 2009 all Genentech projects are included; before that only those opted-in by Roche. 16 Achievements: Productivity Doubled number of projects at same costs
Late stage development costs & number of projects
+90%
2010 2011 2012 2013 2014 Filing Ph3 Ph0-2 Pharma Development Spend
Excludes Chugai, pRED and gRED, Medical Affairs and PTD Source: Roche internal development data 17 Performance update
Innovation and efficiency
Improving the standard of care
Outlook
18 New growth opportunities outside oncology
gantenerumab
alectinib ocrelizumab ACE910 crenezumab
Cotellic atezolizumab lampalizumab taselisib NMEs venetoclax lebrikizumab olesoxime etrolizumab
2015 2016 2017 Post 2017
Herceptin + Perjeta atezolizumab + chemo
Gazyva Gazyva
ine ine
l extensions Oncology/hematology Neuroscience Ophthalmology Immunology 19 The 7 steps of the Cancer-Immunity Cycle guide our prioritization framework for Atezolizumab
Step 1: Release of Cancer Cell antigens: - ex: Atezo + chemo, Gazyva, aCD40
Step 2 & 3: Cancer antigen presentation & priming and activation - ex: Atezo + interferon, OX40
Steps 4 & 5: Trafficking & inflitration of T cells to tumours - ex: Atezo + Avastin, aCSF1R,
Steps 6 & 7: Recognition of cancer cells by T cells & killing of cancer cells - ex: Atezo + Meki, IDOi, aOX40
Chen and Mellman. Immunity 2013 20 Atezolizumab: Pivotal programs by disease
Going deep in diseases where we have strong scientific rationale
Lung Bladder KIDNEYKidney Breast FIR and BIRCH IMpower 130&150 IMvigor 210 IMmotion 150 IMpassion 131 Dx+ mono 1L non-sq. combo 1L cis-inel. & 2L 1L combo 1L combo POPLAR IMpower 111 IMvigor 211 IMmotion 151 2L+ mono 1L sq. Dx+ mono 2L mono 1L combo OAK IMpower 131 IMvigor 010 2L mono 1L sq. combo Adj. IMpower 110 IMpower 010 1L non-sq. Dx+ mono Adj. Dx+ mono
Phase 2 Rolling filing initiated Phase 3 Data in 2016 Data in 2017
cis-inel.=cisplatin ineligible patients 21 New growth opportunities outside oncology
gantenerumab
alectinib ocrelizumab ACE910 crenezumab
Cotellic atezolizumab lampalizumab taselisib NMEs venetoclax lebrikizumab olesoxime etrolizumab
2015 2016 2017 Post 2017
Herceptin + Perjeta atezolizumab + chemo
Gazyva Gazyva
ine ine
l extensions Oncology/hematology Neuroscience Ophthalmology Immunology 22 Three major types of Multiple Sclerosis
Relapse-Remitting (RRMS) Mainly inflammatory (60-65%) Clearly defined relapses (attacks) with remissions initially returning • High unmet need: to baseline but gradually result in sustained disability • high efficacy therapies have major safety issues • diagnosis and classification is Inflammatory / Degenerative Secondary Progressive difficult, often retrospective and (SPMS) (20-25%) can take 2-5 years Initial RRMS followed by disability accumulation. Still experience
relapses which eventually stop • Treatment decisions concentrated Disability
Relapse No Relapse mainly in MS centers/hospitals
• Advocacy groups powerful in access Mainly degenerative Primary Progressive (PPMS) (10-15%) Slow but nearly continuous worsening of disease from outset (no relapses)
Time 23
Adapted from Lublin 1996, Arnold 2004 Ocrelizumab: Active in both RMS & PPMS
:
RMS
PPMS:
• Selective depletion of a B cell subset leaving the ability to generate new B cells intact
PPMS • Administered IV twice yearly
RMS=relapsing forms of multiple sclerosis (MS) which includes patients with RRMS and SPMS with superimposed relapses; RRMS=relapsing-remitting MS; SPMS=secondary progressive MS; PPMS=primary progressive MS; 24 Multiple Sclerosis: Improvements over SoC driving market growth
Global sales (lc) USDm
20,000 19,420 18,999
Tecfidera 15,855 Orals Aubagio 15,000 13,955 Gilenya*
12,323 New Lemtrada 11,053 10,084 biologics Tysabri 10,000 8,930
6,932 Betaseron 5,803 Rebif 5,036 ABCRs 5,000 4,406 Avonex Copaxone
,0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q2 2015
Source: Evaluate Pharma Multiple Sclerosis report, October 2015; * Includes Imusera sales; SoC=standard of care 25 New growth opportunities outside oncology
gantenerumab
alectinib ocrelizumab ACE910 crenezumab
Cotellic atezolizumab lampalizumab taselisib NMEs venetoclax lebrikizumab olesoxime etrolizumab
2015 2016 2017 Post 2017
Herceptin + Perjeta atezolizumab + chemo
Gazyva Gazyva
ine ine
l extensions Oncology/hematology Neuroscience Ophthalmology Immunology 26 Hemophilia A: Current treatment strategies
Episodic (on demand) treatment • Patients treated only when they bleed • Can be up to 30-60 times per year
Prophylaxis • Goal is to prevent bleeds • IV infusion 2-3 times per week • Can reduce bleed rate to 0-2 per year for non-inhibitor patients • Should be the standard, but is still not used in ~35% of patients (treatment burden, adherence, IV access issues)
27 Hemophilia A: There are significant limitations of current treatment options
FVIII market (USD 6.1bn in 2012)*
Others Recombinate 8.4 1 Hemofil M Helixate • Current FVIII treatments ReFacto AF/Xyntha Humate P
6.0 6.1 6% − Limited half-life of only 8-12 hrs 5.3 5.5
USSbn − Frequent IV injections − Induce neutralizing antibodies, which inhibit their function
2009 2010 2011 2012 2018
By-passing agent market (USD 2.1bn)*
FEIBA VH 1 NovoSeven 2.6 • Current bypassing treatments 2.1 2.1 1.9 − Much shorter half-life of ~4-6 hrs 1.7 3%
− Multiple frequent IV infusions USSbn − Long infusion times (30+mins) for FEIBA − Unstable efficacy compared to FVIII
2009 2010 2011 2012 2018
*Company reported sales; 1EvaluatePharma consensus analyst estimates 28 ACE910 can address the major medical needs for both inhibitor and non-inhibitor patients
ACE 910
On-demand treatment Prophylaxis treatment Less frequent & SC
1-3 times/bleeding event, IV 3 times/week, IV injection
INHIBITOR
- NON Inhibiting Factor VIII antibodies in 20-30% of the patients
Immune Tolerance Induction No potential to 70-80 % success rate induce FVIII inhibitor
limitation due to very high cost and heavy burden for patients
On-demand treatment with Prophylaxis with by-passing INHIBITOR by-passing agents agents Potentially more 2-3h intervals, IV Every other day, IV effective prophylaxis
29 Performance up-date
Maximising existing franchises
New growth opportunities
Biosimilars
Outlook
30 Current biosimilar trends So far, sales have not achieved initial expectations
400 MAT 870 CHFm (June 2015) ,377 (CAGR 25.5%) 350 ,315 ,317 300 ,267
,254
250 ,219 Infliximab 200 Somatropin 150 Filgrastim Sales in CHFm in Sales ,119 ,95 Epo 100 ,80 ,57'0 50 ,0'6 ,6'3 0 MAT Jun 2013 MAT Jun 2014 MAT Jun 2015
*Excludes US as no biosimilars have been approved in the US so far (Omnitrope was approved under the 505(b) pathway) 31 IMS Health; MAT=moving annual total Generics vs biosimilars Clear divide in uptake; complex market drivers
Market share 100% Driven by price and patient offering Somatropin1 9 innovators, one biosimilar 80% Efficacy visible only longer term No switching
EPO 2 60%
40% Payer driven: 7 biosimilars Filgrastim1 Efficacy visible immediately High turnover of patients 20%
Diovan (Novartis) 3 Small molecule Zyprexa (Eli Lilly)3 0% Virtually disappear Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Sources: IMS Biosimilar Dashboard, IMS & Roche analysis 1 Volume market share based on EU5 average; 2 Volume market share based on average of France & Germany EPO; 32 3 Data based on % remaining sales in EU Despite 10 years of experience in the EU,
uptake of biosimilars differs across countries
penetration of accessible market of accessible penetration
Biosimilar
Reference: Assessing biosimilar uptake and competition in European markets. Report by the IMS Institute for Healthcare Informatics. 33 HGH=human growth hormone; EPO=Erythropoietin; G-CSF=Granulocyte-colony stimulating factor Performance up-date
Maximising existing franchises
New growth opportunities
Biosimilars
Outlook
34 Multiple major pivotal trials reading out near term Significant filing and launch activities ahead
Market Incremental Year Molecule Indication opportunity infrastructure Alectinib ALK+ NSCLC Low to medium
2015 Cotellic/Zelboraf Melanoma Low Venetoclax Hematology (CLL 17p del)* Low Ocrelizumab Multiple Scelerosis Medium Atezolizumab NSCLC, bladder (2/3L) Medium 2016 Lebrikizumab Asthma, AD, IPF, COPD Large APHINITY Adj HER2+ breast cancer Low GOYA NHL (aggressive) Low ACE 910 Hemophilia A Low to medium Lampalizumab Geographic atrophy Low to medium 2017 GALLIUM NHL (indolent) Low Atezolizumab+chemo NSCLC (1L) Low Taselisib (PI3Ki) HER2-/HR+ breast cancer Low to medium 2018 Idasanutlin (MDM2) Acute myeloid leukemia Low to medium
Oncology Neuroscience Ophthalmology Immunology
Small: up to CHF 0.5 bn medium= CHF 0.5 to CHF 1bn large > CHF1bn 35 NSCLC=non-small cell lung cancer; CLL=chronic lymphocytic leukemia; AD=atopic dermatitis; IPF=idiopathic pulmonary fibrosis; COPD=chronic obstructive pulmonary disease; NHL=non-hodgkin’s lymphoma; * first indication Positive outlook Strong pipeline mitigates biosimilar impact
NME launches Sales Venetoclax, Alectinib, Cotellic, Ocrelizumab, Atezolizumab, Lebrikizumab, ACE910, Lampalizumab
Pipeline
Biosimilars MabThera, Herceptin, Avastin
Marketed products
2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
36 Planned key data presentations in H2 2015
Vienna, 25-29 Sep Barcelona, 7-10 Oct San Francisco, 18-21 Nov San Antonio, 8-12 Dec
Atezolizumab Ocrelizumab Atezolizumab Atezolizumab • UBC: IMvigor 210 Ph II1 • RMS: OPERA I / II Ph III • Melanoma: Combo with • TNBC: Combo with • NSCLC: POPLAR Ph II1,2 • PPMS: ORATORIO Ph III Zelboraf Ph Ib abraxane Ph Ib • NSCLC: BIRCH Ph II1 (abstracts submitted) (abstracts submitted) • NSCLC: Chemo combos update2 Cobimetinib + Zelboraf • BRAF+Melanoma: Alectinib coBRIM efficacy update 2 • ALK+NSCLC: Ph II update (abstracts submitted)
1 “Data not yet in-house; planned to be submitted to an up-coming congress”; 2 Potentially at World Conference on Lung Cancer (WCLC) 2015 UBC=Urinary Bladder Cancer; NSCLC=Non-Small Cell Lung Cancer; RMS=Relapsing forms of Multiple Sclerosis; 37 TNBC=Triple Negative Breast Cancer 2015 outlook
Group sales growth1 Low to mid-single digit
Core EPS growth1 Ahead of sales growth2
Dividend outlook Further increase dividend in Swiss francs
1 At constant exchange rates 38 2 Excluding sale of filgrastim rights in 2014 Appendix
39 Range of treatment options in RMS Varying efficacy and safety profiles
ILLUSTRATIVE
More
Alemtuzumab Natalizumab Natalizumab Unmet need
(JCV+) (JCV-)
Dimethyl
Fingolimod fumarate EFFICACY
Teriflunomide ABCRs (Interferons and Copaxon) Less Less / Later SAFETY/ USE More / Earlier
Orals New biologics ABCRs
RMS=relapsing forms of multiple sclerosis; ABCR=Avonex®; Betaseron®; Copaxon®; Rebif®; 40 Source: Adapted from Hauser SL, et al. Ann. Neurol. 2013;74(3):317-327 New growth opportunities outside oncology
gantenerumab
alectinib ocrelizumab ACE910 crenezumab
Cotellic atezolizumab lampalizumab taselisib NMEs venetoclax lebrikizumab olesoxime etrolizumab
2015 2016 2017 Post 2017
Herceptin + Perjeta atezolizumab + chemo
Gazyva Gazyva
ine ine
l extensions Oncology/hematology Neuroscience Ophthalmology Immunology 41 Severe asthma: High unmet need in growing market
Global asthma market 2014 vs 2020
• Approx. 300m patients worldwide and Biologics Small Molecules growing strongly • 5-10% asthma patients have severe 11% 29% disease, and ~30% of severe disease is uncontrolled despite maximal therapy • Over 4.5m severe asthmatics with 2014 2020 uncontrolled disease 1 biologic 6 biologics
Shifting clinical practice
Note: Market shares based on value (sales); Source: Evaluate; defined by daily use of ≥500ug ICS + LABA 42
Asthma: Biologic market expected to grow strongly to CHF 5bn by 2020
New biologics with Biomarkers: New guidelines different MoAs within 5yrs Emergence of phenotyping
Periostin 1 2 3 X inhaled OCS biologic Eosinophils
IgE
1 2 3 inhaled biologic OCS
Source: 1. Decision resources, Asthma (Moderate to Severe), April 2014. Timeframe considered = when mepolizumab, reslizumab and 43 lebrikizumab will be available; 2. Evaluate pharma, analysis on January 28th 2015; OCS=oral corticosteroid; MoA=mechanism of action Doing now what patients need next