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ROCHE DIAGNOSTICS: PARTNERING AT SCALE
Research Consultant Polina
Bochukova prepared this case
under the supervision of
Professor James Henderson as
a basis for class discussion
ather than to illustrate either
effective or ineffective handling
of a business situation.
ROTKREUZ, OCTOBER 2018. Frank Desiere, head of strategy and
usiness development, Centralized and Point of Care Solutions (CPS)
at Roche, the Swiss healthcare giant, was talking to Matthias
Essenpreis, chief technology officer for the diagnostics division:
We have made great strides in establishing a partnering relationship
with Certe, one of our lab customers in the Netherlands but, gosh,
Matthias, you remember, it took so much effort. How can we scale this
new approach?
In mid-2017, Certe, a €75 million multi-site laboratory chain in the
Netherlands, approached Roche as part of a competitive tendering
process on how it saw the future of diagnostics services and the potential
for partnering (given all the digitalization trends). Roche proposed an
initial day on visioning and a three-day design thinking workshop
involving strategy, consulting, R&D and business development with the
Dutch affiliate to kickstart their 10-year journey (with the hopes of
winning the contract). Certe agreed to this initial step. The three-day
workshop was organized to explore co-creating innovations to meet the
future needs of customers and patients in one of Certe’s market segments:
hospital intensive care units (ICU). Desiere continued:
The design thinking workshop with Certe was a very positive
experience and a real success story from an innovation and customer
uilding point of view. With this work we were able to differentiate our
capabilities and establish Roche as Certe’s prefe
ed partner for the next
decade. One of the ideas we imagined with Certe during the workshop,
which seemed crazy at the time, is now part of a prototype, which we
are developing with GE Healthcare. That’s why I’m interested in
conceptualizing the framework and rolling it out to other customers
Essenpreis nodded:
Indeed, this work was a real win-win-win. It created value not only for
Roche and for Certe but also for Certe’s customers (the hospitals). But
we can’t work with all our customers on new ideas, and then implement
all of them. It would be impossible.
Copyright © 2019 by IMD - International Institute for Management Development, Lausanne,
Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means without the prior written permission of IMD.
Distributed by The Case Centre North America Rest of the world
www.thecasecentre.org t XXXXXXXXXXt XXXXXXXXXX
All rights reserved e XXXXXXXXXX e XXXXXXXXXX centre
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- 2 - IMD-7-2094
Healthcare and Diagnostics in Transformation
As the 21st century progressed, not only was the global population growing and aging, leading
to increased disease prevalence, but older people, especially in developed countries, strived to
lead active and healthy lives well into their 70s, 80s and 90s. The confluence of these drivers
meant that demand for healthcare continued to grow. Global healthcare expenditure was
projected to reach US$8.7 trillion by 2020, up from $7 trillion in 2015, placing further pressure
on stretched national healthcare systems.1
At the same time, the ongoing digital revolution and improved diagnostics was driving a
adical transformation in healthcare,
inging solutions that were improving research and
development (R&D), patient involvement and care, outcomes and cost-efficiency.2 Key
developments in technology – such as the Internet of Things, machine learning, robotics, and
ig data – were enabling significant progress in healthcare technology, applying sophisticated
analytics to further personalized healthcare. (Refer to Exhibit 1 for an overview of the key
trends impacting the healthcare industry). As a result, diagnostic and treatment strategies with
unprecedented precision were beginning to emerge. The age of personalized healthcare was
increasingly becoming a reality in screening healthy people, diagnosing the disease early with
tests, stratifying which medicines to take based on a specific genotype, and finally monitoring
whether the medicine was in fact working. In vitro diagnostics was a critical part of that
journey – representing 2% of the total cost of healthcare but influencing 70% of clinical
decision making. (Refer to Exhibit 2 for the key steps in the in vitro diagnostics industry.)
Several critical trends were impacting the in-vitro diagnostics industry, which covered
laboratories, hospitals, emergency rooms, clinics, and the home as key market segments. The
drive toward further centralization for large-scale diagnostics testing and increased lab
integration within these core locations (covering numerous different types of tests using
different technologies including immunoassays, hematology, liquid biopsy, molecular and
tissue diagnostics) were all to increase productivity and reduce throughput costs. Concu
ently,
decentralized point of care solutions (rapid diagnostics) – for the hospital, intensive care unit,
medical clinic, ambulance and home – were rapidly increasing in demand. Finally,
digitalization enabled a drive toward better clinical decision making through various digital
support tools such as lab integration, clinical and lab decision support tools, and algorithms.
(Refer to Exhibit 3 for a summary of these key trends.)
Roche: A Global Leader in Healthcare
With a history of more than 120 years, Roche, headquartered in Basel, Switzerland, was the
third largest pharmaceutical company worldwide, active in over 100 countries.3 In 2017 it
employed some 94,000 people across the globe and discovered, produced and marketed
innovative pharmaceuticals and diagnostics that treated 137 million patients. During the same
year, 19 billion tests were conducted with Roche instruments all over the world. The company
posted sales of CHF 53.3 billion in 2017, representing a growth rate of 5% over the previous
year. During the same period operating profit grew 3%, a reflection of the company’s strong
underlying business performance. (Refer to Exhibit 4 for company financial highlights for the
period XXXXXXXXXX).
1 The Economist Intelligence Unit. World Industry Outlook. Healthcare and Pharmaceuticals, June 2016
– referenced in Roche’s 2017 annual report
2 Roche 2017 annual report
3 This section summarizes information provided in the 2017 company annual report and company
website.
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The combined strengths of pharmaceuticals and diagnostics under one roof had made Roche
uniquely positioned as the leader in personalized healthcare – a strategy that aimed to fit the
ight treatment to each patient in the best way possible. Roche was the world’s largest biotech
company, with differentiated medicines in oncology, immunology, infectious diseases,
ophthalmology and diseases of the central nervous system. It was also the world leader in in
vitro diagnostics and tissue-based cancer diagnostics, and a frontrunner in diabetes
management.
As an innovation-focused company, Roche was at the forefront of driving new product
developments in diagnostics and pharmaceuticals. Two-thirds of its R&D budget was focused
on combining targeted therapies with companion diagnostics. In 2017, Roche invested CHF
10.4 billion in R&D.
Roche’s operating businesses were organized into two divisions: pharmaceuticals and
diagnostics. The pharmaceuticals division comprised the two business segments Roche
Pharmaceuticals and Chugai. Genentech, acquired in the 2010, and originally a third segment
had been integrated into Roche Pharmaceuticals. A global leader in cancer treatments, Roche
had been at the forefront of cancer research and treatment for over 50 years, with medicines
for
east, skin, colon, ovarian and numerous other cancers. In 2017, sales in the
pharmaceutical division increased 5% to CHF 41.2 billion. The recently launched medicines
Ocrevus, Tecentriq and Alecensa contributed