Roche has a big problem. With competition threatening some of its older and most lucrative biologic drugs, the Swiss pharmaceutical giant expects that, between 2023 and 2028, sales from these assets will have declined by roughly $8 billion.
Despite this looming danger, Roche’s leaders have, at least publicly, put on a brave face. They’ve reshaped the company’s structure and research priorities, and assured shareholders that new products and a handful of experimental medicines should more than make up for the financial losses. Some of those assets were developed internally, but others came from a recent tear of dealmaking.
Critical investors could argue Roche’s dealmaking is a bit scattered. The company’s main interests span five research fields, from oncology, immunology and neuroscience to cardiometabolic and ophthalmology. But perhaps expectedly, Boris Zaïtra, the longtime head of business development for Roche Group, doesn’t see it that way.
“We make sure we try to look at everything that's available,” Zaïtra said. “The art is to make sure your funnel is efficient. You don't want to miss something, but you also cannot boil the ocean.”
Zaïtra, who Roche appointed as head of corporate business development last year, spoke to BioPharma Dive about the tenets of the company’s dealmaking strategy. He also explained why Roche hasn’t done supersized acquisitions lately, and how it plans to tap into the rapidly advancing Chinese biotechnology market.
The following conversation has been edited and condensed for clarity.
BIOPHARMA DIVE: You were Roche’s head of business group development for 12 years, a period which brought the rise of immuno-oncology, the ups and downs of cell and gene therapy, and, more recently, a bit of a resurgence in neuroscience and a huge push into obesity drugs. How has Roche’s BD strategy changed over that time?
BORIS ZAÏTRA: I'm not sure the strategy would have changed. The biggest change I witnessed is the reorganization we did last year, where we decided to bring my team and the partnering team into one team — corporate business development — which basically provides under one umbrella end-to-end BD capabilities.
Why did we do that? There are internal factors and external factors. On the internal side, you’ve heard of our “One Pharma” strategy, the bar on R&D excellence. We went through quite a long process to make sure we really define what we are after. Our ambitions are clear. They are high.
On the external side, what I would say is the innovation across therapeutic areas, across modalities, across geographies is very exciting, but that's a huge space to search. It's really important to be structured, to be systematic, to be rigorous, to make sure that everybody knows how they fit, what we want to do, what's our risk appetite.
All things being equal, executing a deal today is probably more challenging than it was four or five years ago. It's more complicated, it's more competitive, it's more expensive, it's more intimidating, it’s more sophisticated.
Outside of Televant, Roche hasn’t made a $5+ billion acquisition in quite some time. In fact, the company seems much more interested in smaller research partnerships. Do you see the average size of your deals changing anytime soon?
ZAÏTRA: If you look at our size as a company and our financial means, yes, it's been a while since we have been in a deal environment where we would max out. I think that's been a constraint.
In terms of looking ahead: if you take 2023 and 2024, I think that's a relatively good representation of what we aspire to continue doing. 2023 with Carmot and Televant, you have more late-stage, building up capabilities in an accelerated way. In 2024, it was a bit more spread. Regor was Phase 1 oncology, CDK4/6 with ADCs.
There is recognition that we also have to take a portfolio approach. We have to invest in early-stage, mid-stage and late-stage.
By design, you would want to place many more bets at an early stage, because it also takes more of those to make it all the way through. We clearly aspire and hope that we will be doing deals across the spectrum.
An analyst once told me that larger, acquiring companies have an internal ceiling for things like premiums. Your Poseida deal had a premium over 200%. Do premiums and things like that influence your team’s BD decisions?
ZAÏTRA: The answer is yes and no. When we do deals, we have to be comfortable with the valuation we pay. You’re referring specifically about public deals. In the case of public deals, you have a price reference, and then there is a premium being paid. If the deal happened, it means the seller and the buyer reached an agreement on price.
We're sophisticated players. We look at trading multiples. We look at transaction multiples of similar deals. It's not always easy, but at least we’ve got benchmarks. We do the bottom-up valuation, really looking at the prospects, the platforms, the compounds, assuming they make it all the way to market with the probability adjusted. We do a deal where we can justify the value.
There is a benchmark for premium. Typically, you will pay the average, which is in the 60% to 80% branch. Where the data gets a bit more complicated with respect to premium is when you get into smaller [deals]. First, the comparisons are a bit more complicated. And when you get to the sub-$1 billion market cap, then you’ve got liquidity [considerations].
The smaller deals tend to attract sometimes some of the highest premiums. That's because perhaps the valuation attributed by the market was not fully reflective of the intrinsic value of the asset.
One trend that’s accelerated is the number of deals involving assets from China. Roche itself recently inked deals with the Chinese biotechs Regor, Innovent and Zion Pharma. What’s driving this, do you expect it to continue and how will it impact biotech in the U.S.?
ZAÏTRA: China is establishing itself as the second largest place of innovation outside of the U.S. We saw an inflection point last year, which was really outlined by the deals which happened. And it was not only the deals which happened in 2024, but also, if you take the example of bispecifics, the PD1/VEGF [drugs]. You had the Akeso-Summit relationship and the readouts, which put a huge focus on what's happening in China.
I don't know if this will change, but my sense is: to create innovation, you need to create an ecosystem. You need the entrepreneurs, you need the capital, you need the science, you need the universities. You need all that ecosystem to work in a very synergistic way. You don't create that out of nowhere. So when it happens, to that level of maturity, my sense is this is pretty real and pretty solid. I don't think this will necessarily change.
The trend I'm seeing more is people wanting to ensure they are equipped to screen and to tap into that market. Because it is a bit more complicated. That market is not highly intermediated. The opportunities — they are not in databases. You really have to go on the ground. And if you take a given target, you have potentially 10, 20 companies working on that target. So then, the art becomes to know all of those companies, and then to filter through which of those are really interesting.
To exploit the potential of that market, from a BD perspective, you need to be equipped for that. It's less interrogated, less sophisticated, less mature, probably, as a BD market than the U.S. is.
One of the main areas people think of when they think of Roche is oncology. What do you see as the role for these emerging PD-1/VEGF drugs? Are you convinced they’ll be the next big thing in immunotherapy?
ZAÏTRA: It's very difficult to comment. What is for sure is some data that has been published has been very impressive. The questions we need to answer are: Do we understand exactly what is happening? What exact mechanism? Because those components are not new. VEGF is not new. PD-1 is not new. So what makes it so special when you bind them the way they've been bound as bispecifics?
There are now tens of companies getting into this space. Unless I'm wrong, I don't think there's been a lot of disclosure of overall survival data. Clearly, as we know in that space, overall survival will always be very important.
I think it's very exciting, and let's see how things unfold. I think maybe later this year, at latest, there will be more data that will shed a better light as to how big of an opportunity these will be for patients.
