Roche diagnostics head to take helm of Swiss pharma giant

By Ludwig Burger

(Reuters) -Roche's head of diagnostics, Thomas Schinecker, is to take over as group chief executive next year, replacing Severin Schwan, who will become chairman after rejuvenating the Swiss drugmaker's suite of treatments.

Chairman Christoph Franz will not seek re-election after nine years as non-executive board chairman at the next annual shareholder meeting in March 2023, the Swiss drugmaker said in a statement on Thursday.

Austrian-born Schwan, who became CEO in 2008, oversaw a strong share price performance as Roche diversified away from its traditional focus on cancer, offsetting revenue loss due to cheap biotech copies of established oncology medicines Herceptin, Avastin and Rituxan that once accounted for about half of drug sales.

The long-term share gains allowed him to secure a milestone deal last year with rival Novartis, which sold its nearly one-third voting stake in Roche back to its cross-town rival for $20.7 billion, entrenching the dominant role of the Roche family shareholders.

Schwan, one of Europe's best-paid corporate executives, said the changeover has long been in the making under the controlling families' supervision and it was a result of "long term planning and the continuity, which certainly also reflects our capital structure".

In a separate release, Roche said first-half adjusted operating income rose a better-than-expected 9% on higher sales of diagnostic tests and pharmaceuticals.

Core operating income, which is adjusted for one-off effects, gained 9% to 12.67 billion Swiss francs ($13.07 billion), above market consensus of 12.1 billion francs.

In a sign of oncology gradually taking a lesser role, haemophilia treatment Hemlibra and multiple sclerosis drug Ocrevus continued to drive growth.

Under Schinecker's leadership, the diagnostics business met a surge in demand for COVID-19 test kits during the pandemic, which has been easing during the second quarter.

His promotion is a reflection of a "fantastic, outstanding track record" during this phase, Schwan told journalists in a call, adding that it did not mean a strategic rerating of the Swiss group's two business pillars, drugs and diagnostics was on the cards.

Roche reaffirmed that sales of COVID-19 medicines and diagnostics would decrease by about 2 billion Swiss francs this year to around 5 billion francs, even as new coronavirus subvariants fuel a resurgence in infections.

A World Health Organization official warned this week that Europeans must accelerate vaccine uptake and bring back mask wearing.

The guidance reflected a cautious stance amid great uncertainty, said Schwan, but he encouraged "the financial community to model different scenarios".

Schinecker will likely fight an uphill battle to further boost drug development because a key cancer drug candidate tiragolumab in May failed to meaningfully slow disease progression in patients with the most common form of lung cancer.

Late stage trial results on drug development venture gantenerumab against Alzheimer's disease will be keenly followed by investors, but Roche's leadership has sought to curb expectations for the read-out, due later this year.

(Additional reporting by Patricia Weiss and Alexander Huebner, editing by Kirsti Knolle and Rachel More)