Severin Schwan

Severin Schwan
Schwan in 2012.
Born	Severin Anton Schwan 1967-11-17November 17, 1967 (age 58) Hall in Tirol, Austria
Nationality	Austrian, German, Swiss
Education	Akademisches Gymnasium Innsbruck University of Innsbruck (Mag. iur.; Mag. rer. soc. oec., 1991; Dr. iur., 1993) University of York University of Oxford
Alma mater	University of Innsbruck
Occupation	Business executive
Years active	1993-present
Employer	Roche Holding AG (1993-present)
Company	Roche Holding AG
Title	Chairman of the board of directors, Roche Holding AG
Term	2008-2023 (CEO) 2023-present (chairman)
Predecessor	Franz B. Humer (CEO and chairman)
Successor	Thomas Schinecker (CEO)
Known for	Longest-serving chief executive of a major Western pharmaceutical company Full acquisition of Genentech Building Roche into the leading oncology and diagnostics group
Children	3

Severin Anton Schwan (born November 17, 1967) is an Austrian business executive who served as chief executive officer of the Roche Group from 2008 to 2023 and has been chairman of the board of directors of Roche Holding AG since March 2023.

Schwan joined Roche as a trainee in Basel in 1993 and has spent his entire career at the company, an unusual pattern among the chief executives of large pharmaceutical companies. He ran the diagnostics division before being appointed to lead the group at the annual general meeting on March 4, 2008, in succession to Franz B. Humer.

His fifteen years as chief executive made him the longest-serving head of a major Western pharmaceutical company. The defining transaction was the acquisition in 2009 of the publicly held minority of Genentech, the Californian biotechnology company in which Roche had held a majority stake since 1990, for $95.00 per share, or about $46.8 billion. The purchase, completed after a contested tender offer and financed by what was then among the largest corporate bond issues ever undertaken, gave Roche full ownership of the research organisation that produced most of its cancer medicines.

Under Schwan, Roche became the largest oncology company in the world and the largest in vitro diagnostics business. He introduced medicines including the multiple sclerosis treatment Ocrevus, the haemophilia treatment Hemlibra, the cancer immunotherapy Tecentriq and the spinal muscular atrophy treatment Evrysdi, and acquired Foundation Medicine, Flatiron Health, Ignyta and Spark Therapeutics. The last of these brought Roche Luxturna, the first gene therapy for an inherited disease approved in the United States.

The later part of his tenure was more difficult. The three drugs that had carried Roche's revenue for a decade, Herceptin, Avastin and Rituxan, lost exclusivity and were eroded rapidly by biosimilars, and several large clinical trials failed. Roche's diagnostics division had an exceptional period during the COVID-19 pandemic, supplying tests at very large volume, which offset the decline temporarily.

Thomas Schinecker succeeded him as chief executive on March 15, 2023, and Schwan was elected chairman of the board the day before, succeeding Christoph Franz.

Early life and education

Family and schooling

Severin Anton Schwan was born on November 17, 1967, in Hall in Tirol, Austria, to an Austrian-German family. He holds both Austrian and German citizenship and was granted Swiss citizenship in 2020.

He attended the Akademisches Gymnasium Innsbruck, the oldest secondary school in the Tyrol.

Universities

Schwan studied two subjects concurrently. He read economics at the University of Innsbruck, with periods at the University of York in England and at the University of Oxford, and law at the University of Innsbruck. He completed both in 1991 with master's degrees, taking the titles Mag. iur. and Mag. rer. soc. oec.

He obtained a doctorate in law in 1993.

The combination of legal and economic training, and the absence of a scientific or medical degree, is characteristic of a particular type of European pharmaceutical executive and distinguishes him from contemporaries such as Vas Narasimhan at Novartis, who is a physician.

Career

Early years at Roche

Schwan joined Roche in 1993 as a trainee at the head office in Basel and remained with the company for his entire career.

He held positions in several countries across both of Roche's divisions. His assignments included finance and controlling roles, a period as head of finance for the diagnostics business in Germany, and leadership of Roche Diagnostics operations in Belgium and then in the Asia-Pacific region, based in Singapore.

Head of Diagnostics

Schwan was appointed head of the Roche Diagnostics division in 2006, joining the corporate executive committee.

The division was the larger of Roche's two businesses by unit volume and the smaller by profit, and its strategic value lay in the connection between diagnostic testing and the selection of patients for targeted medicines. Schwan's later emphasis on what the company called personalised healthcare, matching a treatment to a molecular characteristic identified by a test, derived from this period.

Chief executive of Roche, 2008-2023

Appointment

Schwan was appointed chief executive of the Roche Group at the annual general meeting on March 4, 2008, succeeding Franz B. Humer, who remained chairman until 2014. He was 40.

Genentech

Roche had held a majority interest in Genentech since 1990 but had left it to operate as an independent, separately listed company with its own research culture, an arrangement generally credited with preserving Genentech's productivity. Genentech had developed Herceptin, Avastin and Rituxan, which by 2008 were among the best-selling medicines in the world and the foundation of Roche's pharmaceutical business.

In July 2008 Roche offered $89.00 per share for the roughly 44 percent of Genentech it did not own. Genentech's special committee rejected the price as inadequate and negotiations reached an impasse.

Roche took the offer directly to shareholders in January 2009, launching a hostile tender at $86.50 per share, a reduced price reflecting the collapse in equity markets, valuing the minority at about $42 billion. The reduction was criticised as opportunistic and the offer attracted little support. Roche raised it to $93.00 per share, or about $45.7 billion, in March 2009.

Agreement was reached on March 12, 2009, at $95.00 per share in cash, a total of approximately $46.8 billion for the equity not already held.

The financing was as significant as the transaction. Roche raised about $42 billion in the bond markets in February and March 2009, in dollars, euros and pounds, across maturities from one to thirty years, at a point when credit markets were barely functioning. It was among the largest corporate bond programmes ever completed and it was widely reported as a signal that high-quality corporate issuers could still raise size.

Roche subsequently retained Genentech's South San Francisco site as an independent research and early development centre, an arrangement intended to preserve the culture that had produced its medicines while integrating manufacturing and commercial operations.

Buying back the Novartis stake

Novartis had held a substantial voting stake in Roche since 2001, acquired by its then chairman Daniel Vasella in an unsuccessful attempt to merge the two Basel companies. The holding was a persistent complication in Roche's governance.

Roche repurchased the stake for about $20.7 billion in a transaction agreed in 2021, removing the overhang and cancelling the shares.

Products

Roche introduced a series of medicines under Schwan that diversified it away from its three principal cancer drugs:

• Perjeta and Kadcyla in breast cancer, which extended the franchise built by Herceptin.
• Ocrevus, approved in 2017, the first treatment shown to be effective in primary progressive multiple sclerosis, which became one of the company's largest products.
• Hemlibra, approved in 2017 for haemophilia A, a prophylactic antibody given by subcutaneous injection that displaced factor VIII replacement for many patients.
• Tecentriq, an immune checkpoint inhibitor approved in 2016, which entered a market already occupied by products from Merck and Bristol Myers Squibb.
• Evrysdi, approved in 2020, an oral treatment for spinal muscular atrophy.

Acquisitions

Schwan pursued a strategy of acquiring diagnostic and data businesses alongside therapeutics. Roche bought Foundation Medicine, the genomic profiling company, taking full ownership in 2018; Flatiron Health, which assembles clinical data from oncology practices, in 2018 for about $1.9 billion; Ignyta in 2018; and Spark Therapeutics in 2019 for about $4.3 billion.

Spark brought Luxturna, a gene therapy for an inherited retinal disease and the first such treatment approved in the United States. The acquisition was completed after an extended regulatory review in the United States and United Kingdom.

Biosimilar erosion

The principal commercial challenge of Schwan's later years was the expiry of protection on Herceptin, Avastin and Rituxan, which had together generated roughly a third of group revenue.

Biosimilar competition arrived in Europe from 2017 and in the United States from 2019 and eroded sales faster than most forecasts had anticipated. Herceptin sales fell by more than half following the first American biosimilar. Roche reported that combined sales of the three drugs were on track to decline by about 2.5 billion Swiss francs, some $2.6 billion, in 2022 alone.

The newer products largely replaced the revenue, and pharmaceutical sales rose about 3 percent year on year in the first half of 2022 to roughly $23 billion, but the transition compressed the company's growth rate and weighed on its share price.

COVID-19

Roche Diagnostics had an exceptional period during the pandemic. The division supplied molecular and antigen tests at very large volume and developed antibody tests, and the associated revenue was among the largest of any diagnostics company. Actemra, a Roche antibody originally approved for rheumatoid arthritis, was authorised for use in severely ill COVID-19 patients.

The revenue was understood at the time to be temporary and it fell away from 2022, an effect Schwan described in investor presentations as a known and planned-for reversal.

Clinical setbacks

Several large programmes failed during the later years of Schwan's tenure. Gantenerumab, an antibody against amyloid in Alzheimer's disease, missed its primary endpoints in two phase three trials reported in November 2022, a result Schwan described publicly as a disappointment. Tiragolumab, an anti-TIGIT antibody on which Roche had placed substantial expectations in lung cancer, failed to meet key endpoints. Etrolizumab produced mixed results in inflammatory bowel disease and was discontinued.

The sequence prompted questions from analysts about the productivity of Roche's research organisation relative to its expenditure, which was among the highest in the industry in absolute terms.

Succession

Roche announced in 2022 that Schwan would step down as chief executive. Thomas Schinecker, who had led the diagnostics division, took the role on March 15, 2023, following the same path Schwan himself had taken.

Schwan had joined the board of directors in 2013 and was elected chairman at the annual general meeting on March 14, 2023, succeeding Christoph Franz. The move from chief executive to chairman is contrary to governance codes in several jurisdictions but is established practice at Roche, where Humer had done the same.

Other appointments

Schwan was a member of the board of directors of Credit Suisse from 2014 to 2022 and its vice chairman from 2017, stepping down from the vice chairmanship in March 2022, shortly before the crisis that led to the bank's acquisition by UBS in March 2023.

He served on the board of Chugai Pharmaceutical, the Japanese company majority-owned by Roche. He has been a member of the International Business Leaders Advisory Council for the Mayor of Shanghai since 2009 and its vice president since 2022, and he was vice president of the International Federation of Pharmaceutical Manufacturers and Associations from 2016 to 2020.

Business philosophy and management style

Schwan's central strategic proposition was personalised healthcare: that the value of a medicine is determined by the accuracy with which the right patients can be identified, and that a company owning both the therapeutic and the diagnostic can capture that value. Roche is the only large pharmaceutical company with a diagnostics division of comparable scale, and Schwan defended the combination throughout his tenure against the general industry trend towards focus and divestment.

He retained Genentech's research independence deliberately, on the argument that scientific productivity depends on culture and that integrating the research organisation into Roche's own would destroy what had been bought. The arrangement is frequently cited in management literature on the acquisition of innovative firms.

He favoured long tenure and internal promotion, having himself spent 30 years at the company, and Roche's senior management under him was drawn overwhelmingly from within. He also declined to manage to quarterly expectations in the manner common among American-listed peers, a latitude available to him because the Hoffmann and Oeri families retain a controlling voting bloc, which insulates Roche from activist pressure.

He described the company's approach to research spending as tolerating a high failure rate in pursuit of a small number of medicines that change practice, and defended it publicly after the Alzheimer's and TIGIT failures.

Controversies

The Genentech tender offer

Roche's decision in January 2009 to reduce its offer to $86.50 per share, below the $89.00 it had proposed the previous July, and to take the reduced price directly to shareholders, was criticised as opportunistic exploitation of a collapsed market by a majority holder against a minority it controlled. Genentech's special committee recommended rejection. The eventual price of $95.00 was above the original proposal, and commentary since has generally treated the outcome as fair to minority shareholders while regarding the tactics as aggressive.

Drug pricing

Roche's medicines have been the subject of pricing disputes in several countries during and after Schwan's tenure. The National Institute for Health and Care Excellence in England declined at various points to recommend Kadcyla and Perjeta at the prices offered, leading to protracted negotiations and confidential discounts. Campaigners in South Africa and India challenged patents and prices on trastuzumab. Schwan defended Roche's pricing on the basis that the revenue funds research with a high failure rate and that prices should reflect the clinical value delivered.

Credit Suisse

Schwan's service on the board of Credit Suisse, including five years as vice chairman, coincided with a period in which the bank suffered substantial losses connected to Archegos Capital Management and Greensill Capital, incurred regulatory penalties in several jurisdictions and passed through repeated changes of management. He left the vice chairmanship in March 2022, about a year before the bank's collapse and emergency sale to UBS. His role attracted criticism in the Swiss press as an example of the concentration of board positions among a small number of executives.

COVID-19 test pricing and supply

Roche faced criticism in 2020 over the allocation and pricing of COVID-19 tests, and in the Netherlands over its initial reluctance to disclose the composition of a buffer solution used in its test kits at a point when supply was constrained. The company subsequently released the formulation.

Compensation

Schwan's remuneration, among the highest of any executive of a Swiss-listed company, drew periodic criticism in Switzerland, particularly following the 2013 referendum on executive pay which introduced binding shareholder votes on remuneration. Roche's pay proposals were nonetheless consistently approved by shareholders.

Personal life

Schwan is married and has three children. He lives in Riehen, a suburb of Basel.

He holds Austrian, German and Swiss citizenship, having been granted the last in 2020 after more than two decades of residence in Switzerland.

External links

• Profile at Roche