News: A Healthy Forecast for Pharma: Roche's CEO Weighs In

Aug. 25, 2011

Severin Schwan thinks the skeptics are wrong. Those who shun the pharmaceutical sector for its lack of prospects don't understand the potential created by a rapidly growing understanding of genetics and molecular biology, and the new drugs that will follow.

"There are people who would argue that all the low-hanging fruits have been harvested and that the pharmaceutical industry is at an end," Mr. Schwan says.

But the chief executive of Roche Holding AG, the world's seventh-largest drug firm by sales, is an informed optimist. "I believe there are enormous opportunities in this industry as we are only now beginning to understand how diseases are working," he says during an interview at the company's headquarters in the Swiss city of Basel.

Eight months ago, such confidence from the 43-year-old Austrian, who took over Roche's top job in 2008, would have met with disbelief from investors. The Swiss company had just embarked on a 2.7-billion-Swiss-franc ($3.4 billion) restructuring that is set to last two years. The revamp was needed in the wake of the failure of more than half a dozen drugs in development, including the shelving of diabetes compound taspoglutide, which had promised to become a blockbuster with more than $1 billion in annual peak sales.

The series of setbacks saw Roche's share price fall 20% in 2010. Investors feared that, coupled with the U.S. health-care reform, drug-price cuts in Europe and increased regulatory scrutiny of its cancer drug Avastin as a breast-cancer treatment and its eye medicine Lucentis, the Swiss giant's potential for growth had evaporated. Even the restructuring plan, announced in November, which involves shedding 4,800 jobs and aims to save around 2.4 billion Swiss francs in costs from 2012 onward, left many investors unimpressed as growth concerns remained acute because of the growing insecurity about new drugs in its pipeline.

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