Mon, Oct 24, 2005 - Page 11 News List

Roche making a killing on Tamiflu

VACCINE PRODUCTION As panic spreads about the possibility of an avian flu epidemic, Swiss pharmaceutical giant Roche is accused of putting profits before people

THE OBSERVER , LONDON

While Roche is coming under intense scrutiny, the financial community is hugely supportive of the company. After all, today it is possibly Europe's best performing drug firm thanks to its investment in biotechnology companies way before other drug majors.

Much of its profits are due to its 55 percent stake in Genentech, the US biotechnology company behind targeted cancer drugs such as MabThera and Avastin. The company has strengthened its diagnostic division and is leading moves to tailor drugs to individual patients through the use of new technologies.

Denise Anderson, head of healthcare at Kepler Equities, says: "They have made paradigm changing moves. They think more carefully about trends. They just started talking about healthcare IT. Right now they are in a sweetspot where successful drugs are coming on stream and I expect that to last for a good few years."

Roche has resolutely rejected merger offers. Novartis, its bigger rival, also from Switzerland, bought a near third share in the company four years ago. It has long been thought that this was a prelude to a merger that would produce a national Swiss champion.

But the three family clans believe mergers yield no value and divert management's energy away from day-to-day business.

Though it is Fritz Gerber and Andre Hoffman who sit on Roche's board and look after the interests of the families, Roche is run by Franz Humer, who earns ?5.4 million -- the third biggest basic salary of any publicly quoted executive in Europe.

"The Hoffman family don't need money," says an informed insider. "For them it's a prestige thing. They are typically Swiss. They are conservative and do things for the long term."

But others believe that a new generation of Roche heirs will not block a merger, as the need to create a buttress against US giant Pfizer and UK rival GlaxoSmithKline deepens.

While the pharmaceuticals industry emerged in Europe with aspirin being discovered at Bayer in Germany, its center of gravity has shifted to the US, attracted by its research scientists and lack of price controls.

But Switzerland has a reserve of scientific expertise -- Swiss drug research papers receive more citations even than US ones.

Although its expertise is not disputed, the firm has been no stranger to controversy. In the 1970s, Stanley Adams, a Roche employee, handed over documents to the European Economic Community (EEC) as it was then, detailing how the company kept the price of vitamins high with the explicit collusion of its supposed rivals. But an EEC bungle identified Adams. Roche decided to prosecute and he was imprisoned under tough Swiss commercial secrecy laws. His wife then committed suicide. Twenty years later, Roche was at it again -- marshalling a price-fixing cartel in exactly the same product. It was fined more than US$500 million by US and EU competition regulators.

The firm has also been singled out by health campaigners for dragging its feet in allowing AIDS-devastated countries in Africa to get access to vital medicines. It was one of the 39 companies that threatened to take South Africa to court to overturn its right to produce cheap copies of expensive brand-name anti-HIV drugs.

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