Roche CEO sees generic co's, innovators as winners

* Roche sees innovators, big generic companies as winners

* Says says will focus on development, not diversification

BOSTON, Dec 2 (Reuters) - Roche Holding AG's ROG.VX Chief Executive Severin Schwan believes the survivors in the pharmaceuticals sector will be large generic drugmakers, and companies who make innovative new products.

Speaking at the The Boston College Chief Executives’ Club of Boston, Schwan said that companies who try to be all things to all people or whose new products are not significantly different from existing drugs, will disappear.

“There will be those companies who will be very focused on generics, and within this group I expect a lot of consolidation,” he said on Thursday.

“A second group, including ourselves, will go for innovative new medicines. In this field you will have a lot of companies, some big players, some smaller players.”

Any company that is not able to benefit from economies of scale, such as a large generic drugmaker, or from a life-saving new medicine that insurers and governments will pay for, will suffer.

“The crowded middle will disappear,” he said.

Schwan said that while some companies are pursuing diversification strategies, Basel, Switzerland-based Roche will focus on developing novel drugs, especially those for which a companion test can determine which patients will respond to it best.

Roche's approach differs from that of Novartis AG NOVN.VX and GlaxoSmithKline Plc GSK.L which are including diversification in their arsenal for battling the "patent cliff" that will expose an increasing number of drugs to generic competition.

Roche is putting more of its eggs in one basket. It spends more on research and development than any of its competitors, but has seen its shares fall nearly 21 percent this year, following a series of setbacks for its top-selling cancer drug Avastin and several experimental products.

The company recently laid out plans to slash 4,800 jobs worldwide, or about 6 percent of its workforce and is planning to sell some of its sites in the United States.

Productivity in the pharmaceutical sector has dwindled over the years and an increasing number of once big-selling drugs are losing patent protection.

Most pharmaceutical companies have been unable to make up for that lost revenue through the introduction of new products of their own, and have been forced to license or acquire products from the biotech sector.

Roche, which in 2009 purchased the 44 percent of biotech company Genentech it did not already own, is betting that combining diagnostics and pharmaceuticals will give it a leg up in the race to develop personalized medicines.

“There is nothing new about the concept of personalized medicine,” he said. “What has changed is the quality of the diagnostics.” (Reporting by Toni Clarke; Editing by Tim Dobbyn)


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