Even as Roche’s pharma group prepares for further biosimilar erosion, a decline in COVID-19 product revenues and key readouts, it’s welcoming a new leader.
Teresa Graham, currently head of global product strategy for Roche pharma, will become the division’s new CEO next month, Roche said Thursday. Simultaneously, Roche is elevating Levi Garraway, chief medical officer, to the executive committee.
In her new role, Graham will replace Thomas Schinecker, who is serving as a transitional pharma head after Bill Anderson left at the end of 2022. Schinecker, previously Roche’s diagnostics chief, is slated to become the CEO of the entire Roche group in March.
Graham is taking over during what portends to be an eventful year at Roche’s drugs business.
The “most significant impact” for the company, as Schinecker put it during an investor call Thursday, is that Roche expects to lose 5 billion Swiss francs ($5.5 billion) in COVID product sales across pharma and diagnostics in 2023 as demand wanes. That equates to about 8% of the company’s total sales haul of 63.3 billion Swiss francs in 2022.
On the pharma side, revenues from Actemra for severe COVID slid 22% in 2022 to CHF 2.7 billion. And the Regeneron-partnered COVID antibody Ronapreve is likely seeing the last of its days as the drug loses its power against new coronavirus variants.
Because of the projected sharp decline in COVID product sales, Roche expects a low-single-digit decrease in group sales in 2023 at constant exchange rates.
On top of COVID-related declines, biosimilars are expected to eat away CHF 1.6 billion in sales in 2023. Those losses will hit Roche’s three legacy oncology blockbusters Avastin, Herceptin and Rituxan. In 2022, the biosimilars caused a CHF 1.9 billion damage to Roche’s revenues.
To hedge the biosimilar challenge, Roche has turned to newer drugs. But the company’s efforts to replenish its portfolio have hit several setbacks.
Roche’s Alzheimer’s disease candidate gantenerumab flopped in November, and TIGIT inhibitor tiragolumab also failed to impress on the progression-free survival marker in a high-profile lung cancer trial.
An interim analysis of overall survival data from tiragolumab’s SKYSCRAPER-01 trial is expected in February, outgoing CEO and chairman-to-be Severin Schwan told investors during the call. But if the drug fails on the final analysis about six months after that, Roche will need to take a serious look at its pipeline. As a Credit Suisse analyst noted during the call, the clinical setbacks, along with a relatively healthy balance sheet, raise the question of whether now is the time for Roche to bolster its late-stage pipeline with M&A.
“It’s always interesting to bring in opportunities from the outside, and we keep looking for opportunities,” Schwan said. “But there’s also a price to be paid. And what we have seen in the past is, in particular for late-stage opportunities, it was difficult to justify it from a business case point of view.”
In the few cases where Roche did move on a late-stage asset, the outcome hasn’t always played out in its favor. For example, Roche just took a CHF 700 million impairment based on sluggish sales from cancer drug Gavreto, Schwan told investor on the call. Roche paid $775 million upfront to obtain the RET inhibitor from Blueprint Medicines less than two months before its FDA approval in 2020. In 2022, the drug only generated CHF 26 million.
Elsewhere, Roche’s Polivy faces some uncertainty at the FDA. The regulator plans to convene an advisory committee meeting in March to discuss the antibody-drug conjugate’s potentially practice-changing use in frontline diffuse large B-cell lymphoma, an indication that analysts have predicted $2 billion in peak sales.
It’s not immediately clear why the FDA is calling the meeting. Roche previously delayed its filing in the U.S. after the FDA had asked for longer follow-up.
Roche appears confident it can win that expansion for Polivy. Even before the FDA weighs in, the influential National Comprehensive Cancer Network has in January included Polivy’s frontline use on its guidelines with a category 1 recommendation, the highest level, Schinecker noted.
In solid tumors, Tecentriq has become a key pillar of Roche’s oncology business. The PD-L1 inhibitor just reported a positive phase 3 readout as an adjuvant therapy in post-surgery treatment of liver cancer. But Roche on Thursday pushed back the timeline for another data report for Tecentriq used both before and after surgery in early-stage non-small cell lung cancer. The company now expects data in 2024 instead of 2023 after an interim analysis suggested the trial continue for longer.
Also in lung cancer, Merck’s rival Keytruda just won a broad label in adjuvant NSCLC, putting more pressure on Tecentriq’s first-in-class—but narrower—approval in the setting.
Still, Schinecker called the Keytruda data “a bit counterintuitive,” noting how the drug for some reason performed better in the PD-L1-negative group than in the PD-L1-positive population. Tecentriq does have first-mover advantage, and in its approved PD-L1-positive use, the Roche drug has shown better efficacy than Keytruda in their separate trials, Schinecker said.