SWISS MULTINATIONAL healthcare company F. Hoffmann-La Roche AG, known as Roche, is one of the oldest privately held family businesses with a 125-year history. Experts say once a family business achieves scale, it should be entrusted to professionals. Fortune India caught up with members of the founding family, André Hoffmann, vice-chairman and board member, and Dr. Jörg Duschmalé, board member, to talk about the future of healthcare and family-professionals relationship at Roche. André, who turned 63 this year, is great-grandson of founder Fritz Hoffmann. Interview by P.B. Jayakumar.
This edited Q&A has been condensed for space and clarity.
In Roche's history, the two world wars brought massive disruptions. Similarly, Covid-19 was disruptive for humanity and businesses. What lessons have you learnt? How is healthcare going to change, not only for Roche, but for entire humanity?
We have to be prepared for exceptional events. The beauty of having 125 years of experience is ability to adapt to what is going to happen next. The big lesson is that the next step is important and we must be ready to take it.
You mean a pandemic may come again?
It is safe to think it will come, rather than it can come. I commit a lot of my time to issues such as nature conservation and sustainability. One of the things becoming clearer is the sort of disruptions we are seeing in the living world, mostly in big mammals and forests, are happening at micro, biological levels, too. Every time humanity interferes with micro, biological communities, it gives pathogens or other organisms an opportunity to jump from one to another. So, waves of infections, coming quicker than in the past, is a valid hypothesis.
Roche started with innovations in pain management, vitamins and anti-depressants and then got big into cancer and diagnostics. A decade ago, you acquired Genentech and since then have moved into gene therapy and digital medicine in a big way. Which way is drug research headed?
Let me start by looking at history. You are correct. We went from 'small molecule' pills to biologics. We are now starting work on gene therapy. It is interesting to see what is biologically possible nowadays. I am convinced personalised drugs will be the future. We have 1,00,000 employees globally and they are the brightest minds in our set-up, which has four pillars —pharmaceutical, diagnostics, diabetes care and digital medicine. Interplay of these four with scientific programmes will determine the next big thing.
Roche's main legacy has been chemical molecules that gave humanity some big drugs. It has limitations. Now, we are talking about biotech as the future. Do you think small molecules will remain relevant? Or will biologics dominate?
It's difficult to look in the crystal ball. What is important is to have capacity for innovation. If small molecules suddenly become appropriate for a particular pathology, you should have research programmes on small molecules as well as talent pool to focus where latest technology can be used.
Some of your big cancer drugs which gave you billions of dollars in revenues have lost patent protection. Which drugs are going to change the course for Roche?
It's difficult to say. In drug research, you have to keep eyes and ears open to know if a discovery you are following has been already made. I have no horse to place my bet. As we move faster into diseases, we will likely enter more personalised treatments.
I will give you an example of the Covid-19 pandemic. We were not particularly researching that pathogen as we are not a vaccine manufacturer. But when the pandemic came, we were able to react quickly, particularly in India, by contributing some of our anti-viral drugs. Our monoclonal antibody technology was found useful in controlling the infection. We also developed testing, which is important for long-term management of the disease. We were also able to decipher diagnostics for early tracking of the virus. So, we will be able to do many things if we follow science.
Do you feel business pressures, a fear my company has not done well in, say, last quarter?
It is important to think that business is successful for the next generation, not the next quarter. But to the question about business pressures on the owning family, I would like to emphasise that as business grows, you can no longer control its every step. One of the operating principles as an owner is to delegate day-to-day operations to the team that enjoys your trust. At the same time, you have to deserve their trust. Yes, there is pressure, but driven by principles and rules, not numbers.
Roche is 125 years old. How do you avoid family disputes?
One of the main reasons Roche is still active and leading the industry for this long (now in 5th generation) is our dissociation from day-to-day management. When you can retain long-term thinking and such a structure, you don't have to be involved in everyday decisions. Family ownership is not the right way to run a business. It's better to have professional management.
Even though you are disassociated from everyday governance, how influential are the family's views when it comes to decision-making by board and top officials?
We have a structure. There is only one level of ultimate responsibility, and it's the general assembly. One level below is board of directors while one level lower than that is executive committee. These two committees run the company. The board sets the strategy and identifies members of board of directors while general assembly selects board of directors. So, this way, you have an indirect hold on strategy, activity and business direction, but don't necessarily get involved in exact definition of management.
In India, most private businesses are family-run. When generation change happens, newer generation wants to diversify into emerging areas. Roche has remained true to healthcare. How?
Roche was founded to improve life of patients in the backdrop of the cholera epidemic in late 19th century with the idea of standardising medicines which, back then, were brewed in back rooms of pharmacies. That idea has remained intact for 125 years. We are driven by passion for improving lives of patients, cutting-edge scientific development and translating scientific discoveries into products to improve life of patients. Focus on patients has helped the company stay true to its founding values.
Most companies' focus is on making money. What are your family's priorities and ethics? What are the sustainability and humanitarian efforts?
The purpose of Roche is not to make money. It is to do what patients need next. To do this, we need profitability, so investing in innovations is part of the process. To put it bluntly, we are there to help the patient, not to help the world with charity. We need to be profitable for that. Second, as a family, we need to think about generations and focus on innovation and long-term investing for patients. And we need to invest in human capital, we need best talent, we need best framework to allow people who work for Roche to find happiness in the way they work.
Affordability of healthcare is a big challenge. How do you approach that?
We have set a 10-year ambition to deliver three-five times medical value to patients at half the cost to society. If we have to deliver, access is essential. Now, pricing is an important part of this question. Looking at hurdles to access, we cannot solve this problem as a company. A global corporation like ours will have to partner with all potential stakeholders at local level, especially in geographies such as India. Innovating and creating the drug is not enough. It's also about marketing and distribution and collaboration with the system, which we take very seriously.
We discussed movement of healthcare towards personalised or gene therapy-based innovations. In that case, will costs go up further?
It's an important point. It's certainly something to which I cannot give a conclusive answer right now. Historically, healthcare has very much worked on the assumption that we do whatever is scientifically possible in order to solve issues.
Which are the areas that will see growth in future?
Biology is discovering new ways to do all sorts of things. The same thing is happening in AI, nanotechnology, etc. We are seeing conversion of new technologies towards building a different world.
A lot of global tech companies like Google are investing in healthcare. Will computers, AI and data analytics play a key role in detecting and curing diseases?
The flow of information we are generating as an industry needs to be analysed to understand diseases and deliver treatments better. Now, if we accept the principle that there are winners and losers, we would like to see a future where collaborations develop, where we can talk to different companies together and provide service to the patient. I am not a great advocate of domination. I prefer collaboration.
You are involved in a lot of sustainability initiatives. What is your vision related to the life of humanity other than healthcare services? Carbon footprint is going to be a big challenge. What is your vision of efforts you are going to take?
This is something probably close to my heart, not only within the company but society as a whole. When you talk climate change, you are talking about plastic in oceans, loss of fish in oceans, acid inflation in agricultural fields, pollution of water bodies, etc. If you are a company trying to think 100-125 years ahead, it is important to find solutions to this because otherwise you will be out of customers. You need to create long-term thinking for the planet. So, you talk about carbon footprint, but that's just one small element. Every student of complex systems will know that if you privilege one variable, if you manage just one variable, the rest of the system suffers.
Where will India stand in your global scheme of research and development?
For a lot of IT industries, for a long time, India was the place to go as it was the lowest cost provider. Today, we are coming because there's innovation here, real talent that you cannot find anywhere else, which justifies Roche putting more effort into what's happening in Pune where Roche Solutions is building a big presence as India conducts more clinical trials.
In a family business, how can you ensure that values and systems move to next generations with same intensity and vision? Do you train your next generation for this?
The best way to make this work is by trusting a general principle — when you ask the right questions, you usually get good answers. But if your focus is retaining as much wealth as possible and maximise dividend, you will not get the right answers. The company contributes to society, stakehol- ders. We will not be able to do that if we focus on just measuring. For next generation, for me, the real issue is to emphasise the values we follow.
What is the framework for this? How often does the family meet?
Without going into technological details, we meet often, we talk a lot, and that's the key. We need to meet. We need to communicate to ensure we are on same wavelength.
Keeping the family together and indoctrinating values is important. It is about listening, about affection, about growing together as a group. It is about creating and sharing memories between distant cousins who may not necessarily meet every day. The whole thing works both ways. Yes, it is important for the company that we get this right, but the company also serves as a common compass for the family to reunite time and again behind something, behind shared purpose of treating patients globally.
We have to emphasise that success of the company doesn't mean dividends and quarterly numbers. It means how we are living our values. If I walk into family meetings and say we are going to sell weapons, I think they will push back. It is important that we exert our shareholder rights together as a family. We are not involved in executive running of the company. In order to run a company like Roche, we need the best talent managers we can find on the planet.