Roche, the king of anti-cancer

Roche

Table of Contents

Company introduction

From a small soap factory on the banks of the Rhine to the number one in the global diagnostics field, the number one in the global oncology field, the leader in the field of transplantation and virology, and the second in the global biotechnology field, Roche’s (ticker: RHHBY) track record is amazing enough.

As a company that invests a lot of resources in research and development in the world, Roche’s scientists have won the Nobel Prize three times. In 2021, among the 15 pharmaceutical companies with the largest R&D investment in the world (Endpoints News released The End points R&D15 list), it will continue to rank first with US$15.7 billion in R&D investment (sales accounted for 23%).

Company history

Hoffmann-Roche and his wife ran a factory that produced goods such as soap, and they named the factory after their surname Roche. In 1896, they entered the field of pharmaceutical production with the introduction of the antibacterial disinfectant Airol.

Standing in front of future

It was the time of the industrial revolution, but many drugs were processed in small workshops. Hoffman had long predicted that the future of pharmaceuticals would belong to industrialized brand companies, and only new drugs with uniform efficacy and quality could conquer users. Not only did he realize the importance of patents, but Switzerland’s limited land area also made them look at the international market early in the morning.

Roche pharmacist Carl Schaerges and chemist Emil C.Barell first discovered iodine in thyroid extract, which became the first invention patent obtained by Roche. After obtaining the first patented product, Roche’s development direction gradually became clear: research and develop new drugs, obtain patents, try to occupy the market during the protection period, and form a brand effect.

In 1898, Roche launched an over-the-counter cough syrup with its own active ingredient Thiocol, an orange-flavored syrup that was an instant success. In 1904, Roche Pharmaceuticals extracted digitalis glycoside from digitalis to treat heart disease. These two drugs became Roche’s early cash cows and evergreen trees, not only bringing huge profits to the company, but also attracting money for as long as 60 years.

In 1905, Roche started its global expansion, transferring all manufacturing to its factory in Grünzach, Germany to expand production. By 1914, Roche had expanded operations in Basel, Grenzach, Milan, Paris, Berlin, Vienna, St. Petersburg, London, New York and Yokohama.

Diversification

After Hoffman’s death, Roche established an industrial laboratory in Basel for the development of synthetic processes, breaking away from the previous barriers of simply extracting drugs. Roche encountered the first drug in its history with annual sales of more than $1 million—the barbiturate drug Allonal, an analgesic, sedative, and hypnotic.

In 1934, the method of artificially synthesizing vitamin C provided by Nobel Prize winner Tadeusz Reichstein made Roche the first company in the world to produce synthetic vitamin C on a large scale, and soon thereafter successfully synthesized vitamin A, vitamin B1, and vitamin C. E. Vitamin K.

Roche created a “vitamin era”, achieved unexpected rapid growth, and successfully turned around, becoming famous.

During the years of expansion, Roche has fulfilled its wish to have its own production bases and R&D institutions all over the world. It has become the world’s largest vitamin business, and vitamins have surpassed pharmaceuticals to become the company’s profit pillar.

Roche started as a chemical company, so it has been covering chemical products such as perfumes and cleaning products in its century-old history. The sweetness of the vitamin business has made the company pay more attention to this part of the business.

In 1945, Roche established Pantene and its affiliated cosmetics company, entering the cosmetics industry. At that time, driven by Avon (ticker: AVON) , the personal care and beauty industry in the United States was in full swing. Roche had a vicious vision and made Pantene “born” in the United States and obtained a wealth green card.

Roche soon realized the problem of over-reliance on the vitamin business and strengthened drug research.

In 1950, Roche developed the drug Remyphen for the treatment of tuberculosis, which was hailed as a “miracle drug” by the American “Time” magazine. This drug seems to have opened a door of wealth for Roche. When developing this drug, Roche also discovered the antidepressant iproniazid (iproniazid), and also discovered a benzodiazepine compound methamphetamine. Capable of calming without causing drowsiness.

In 1962, Roche launched the first anticancer drug fluorouracil, pioneering the field of cancer chemotherapy.

Boosted by the successful development of benzodiazepines, Roche’s Diazepam (Valium stability) was launched in 1963, becoming the first “blockbuster” in human history with annual sales of US$1 billion. Today, diazepam is still the first choice for clinical sedatives. The great success of Valium has enabled Roche to establish a global reputation in psychotropic drugs.

In 1963, Roche acquired Givaudan, a leading perfume and fragrance manufacturer. In 1964, it acquired the famous French perfume company Roure Bertrand Dupont.

In 1953, Roche had only 7,000 employees. By 1965, its number of employees had ballooned to 19,000.

Roche has also begun to expand beyond the pharmaceutical field. It entered into electronic medical devices, medical publishing, and agrochemicals. In Nutley, USA, Roche opens a new diagnostics division. It became one of the few companies that profited from diversification.

In 1968, the Institute of Immunology in Basel, Switzerland was established, with a luxurious team led by several Nobel Prize winners. Roche dominated the crowd with absolute technological advantages, and laid the foundation for future achievements in the field of biopharmaceuticals and diagnostics.

Although it performed well in the diversification strategy, Roche did not have the last laugh. Roche, who was indulging in staking, soon began to suffer from the pain of diversification.

In 1973, the first oil crisis broke out, and Roche Chemicals, which was overly dependent on overseas, was deeply affected. Misfortunes never come singly. The British Competition Commission believes that Roche’s stable price is too high, and requires a price reduction of 50%-60%, and the return of excess profits of 30 million US dollars; countries such as Germany, the Netherlands, Australia, Sweden, and South Africa have successively carried out lawsuits with Roche for many years. tug of war.

1976, a poisonous gas leak occurred in Roche’s It

In 1976, a poisonous gas leak occurred in Roche’s Italian subsidiary, which eventually caused an explosion. The explosion caused about 1,800 hectares of land and vegetation to be polluted, thousands of birds and animals died concentratedly within a few days, and 120,000 residents suffered from heat rash, headache, diarrhea and vomiting.

What is more painful than the direct injury is Roche’s secretive and irresponsible attitude. In 1978, the devilish Roche was spurned by everyone and was almost on the verge of bankruptcy, with its market value dropping to about $3.5 billion.

Cross the strategic fork

Roche’s diversification is a drag on drug development. The clichéd thinking of the R&D personnel made the problem even worse. Throughout the 1970s, Roche only marketed two drugs. In order to quickly fill the vacancies in the product line, Roche has launched a technology introduction and cooperative development R&D model. In order to manufacture drugs that meet market needs, companies even force developers to go to the market.

Then Roche started a decades-long centralization process to solve its own big but not strong problem, and began to focus on strategy. Roche has integrated the enterprise and reorganized into four core business units of “pharmaceuticals, vitamins and fine chemicals, diagnostics, flavors and fragrances”.

Throughout the 1980s, pharmaceuticals and diagnostics began to take the lead.

In 1982, the famous antibiotic product Rocephine (cephalosporin antibiotic) came out, and it became Roche’s best-selling drug just 5 years later.

In 1986, Roche’s first interferon product, the anti-viral and anti-tumor Roferon-A, was put on the market. It can induce cells to enter an anti-viral infection state, and can also neutralize the virus by regulating the immune system, or eliminate the virus that has been infected. Infected cells, thereby significantly inhibiting and clearing the virus. Interferon has opened a new chapter in human anti-virus, and also opened the era of Roche’s leadership in the field of interferon.

In 1987, Roche Diagnostics Division also launched the CobasBio/Mira random biochemical analyzer, and Roche Diagnostics revenue began to gradually lead the world.

In order to consolidate its dominant position in the field of biotechnology, in 1990, Roche acquired nearly 60% of the shares of the biotechnology company Genentech at a low price of US$1.537 billion. This acquisition became Roche’s bargaining chip in the 1990s relying on biotechnology to turn the market against the wind.

In the 1990s, when competitors fought for large-scale mergers and acquisitions in order to seize the vast pharmaceutical market, Roche plunged headlong into the field of patient care, looking for new drugs to treat various difficult and miscellaneous diseases, new diagnostic technologies, and predictive monitoring technologies. In the field of anti-AIDS, it has successively launched several main products such as Hivid, Invirase and Viracept.

Roche has also developed a series of innovative drugs for cancer treatment: Herceptin for the treatment of metastatic breast cancer, Rituximab for the treatment of chronic lymphocytic leukemia, etc. The Diagnostic Division has launched a series of products in various medical testing fields: CobasIntegra, an analyzer for clinical chemistry and immunochemistry, Cobas Core I, an analyzer for immunochemistry, etc.

In the second half of the 1990s, the company further aggressively merged and launched new products at a faster speed. For example, Corange was acquired in 1997, and 100% controlling interest in Genentech was acquired in 1999.

Roche, which opened the door to wealth in medicine and diagnostics, ushered in the moment of making a lot of money, but in comparison, the other two businesses were very weak, and vitamins even held back the Roche Group.

In 1998, the Roche Group’s four major areas of revenue accounted for 58% of pharmaceuticals, 19% of diagnostics, 15% of vitamins and fine chemicals, and 8% of flavors and fragrances. Not only has the sales and profits of vitamins declined year by year, Roche, which once occupied more than half of the global vitamin share, engaged in price monopoly with 8 vitamin manufacturers in order to obtain high profits, and was fined 2.887 billion Swiss francs by the European Union.

The monopoly fine that Roche handed over because of its greedy behavior directly took away half of the company’s net profit that year.

Stripping is imminent. Roche sold Pantene to Procter & Gamble of the United States as early as 1985. In 2000, it accelerated the divestiture of perfume and essence, vitamins and fine chemicals.

The leading position in gene technology and biotechnology makes Roche stand out in the competition of personalized medicine. In 2006, the sales of its tumor drugs accounted for 46% of the company’s pharmaceutical revenue, becoming the “big brother” of the global pharmaceutical industry, especially occupying an unshakable dominant position in the field of anti-tumor drugs.

While other drugmakers have struggled to hit double-digit growth targets, Roche has handily delivered rapid profit growth. Only then did many pharmaceutical companies realize the great charm of biopharmaceuticals, and began to follow in Roche’s footsteps.

In view of Roche’s steady performance in anti-cancer drugs, people joked: “The giant of flowing water, the iron Roche.” Of the top 10 global sales of anticancer drugs in 2021, Roche alone will account for half of them.

In 2021, Roche’s Perjeta (launched in 2012, a drug for treating breast cancer) will have revenue of US$4.28 billion, Tecentriq (launched in 2016, for the treatment of bladder cancer and other diseases) will have revenue of US$3.58 billion, and Avastin (launched in 2004, for the treatment of colorectal cancer) cancer and other diseases) revenue of $3.3 billion. Herceptin, which was launched in 1998, and Rituximab, which was launched in 1997, will still have sales of US$2.91 billion and US$2.77 billion in 2021. These drugs will become an important part of Roche’s 2021 revenue of 67.712 billion US dollars.

In addition, 1/4 of Roche’s business comes from medical diagnostic services and diagnostic products, which is more in line with the development trend of personalized medicine in the future, endowing Roche with stronger competitiveness and a broader imagination space in the future. Through the acquisition of a series of top companies such as FMI and Flatiron, Roche has actively deployed in the fields of genomics, real-world data and digital biomarkers, and has gradually established its closed-loop competitiveness in diagnostics and drugs.

From the research and development of interferon products that regulate the autoimmune system, to Roche’s continuous efforts in diagnosis and medicine for personalized medicine, it seems that it has won the wisdom of traditional Chinese medicine and is trying to open it in a new way. It is said that “the end of Western medicine is Chinese medicine”, which may be the secret guidance for Roche to become a general victorious in the field of difficult and miscellaneous diseases.

High research and development costs

More than 15% of Roche’s annual sales revenue is invested in scientific research, which is a well-deserved leader among its peers. In 2021, Roche’s R&D investment will reach 15.7 billion US dollars, accounting for 23% of sales, ranking first again.

Traditional investors have never favored long-term projects, but the shares of Roche are mainly in the hands of the founding families Hoffman and Oli. They care more about the growth and inheritance of the company, so they consider the 30-year development cycle. The long cycle is conducive to technological breakthroughs, and decisions can be made calmly, even if these decisions will not generate tangible benefits within 10-15 years.

Full trust in the R&D team is a major feature of Roche’s R&D. They will give the R&D team the greatest autonomy and decentralization. There is no global supervisor for R&D, and R&D centers around the world report directly to the CEO to avoid administrative processes that stifle innovation.

Roche has published a series of data: an average of 1 billion Swiss francs (about 7.28 billion yuan), 7 million hours, 6587 experiments, and 423 researchers can get a new drug.

Roche

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