Prescription IR at Roche

What do a handful of doctorates, a slew of MBAs, three global offices, many tongues and a surfeit of openness make? The IR team at Basel-based Roche Holdings, of course.

The doctorates, MBAs and language skills are appropriate enough for a group of IROs who have to hold their own against equally well-qualified analysts and investors around the world; and the global spread obviously reduces accessibility problems.

Anyway, none of these is unusual, but the openness is. Switzerland, famed for secrecy, is home to an IR team whose charm, gregariousness and straightforwardness are at once striking and refreshing. This is encouraged by its leader, Dr Karl Mahler, who sets the tone and has not been afraid to build a team of IROs who might threaten a lesser mortal. But Mahler is first among equals, rather than ruler of the roost, so personalities are strong, knowledge eclectic and the atmosphere full of humor and self-confidence.

It all helps explain the popularity of the team with the investment community, leading to numerous awards from this magazine over the years and culminating in Mahler collecting the trophy for best IRO in Europe in 2009. One comment from the survey nicely elucidates what Mahler himself brings to Roche’s IR: ‘Karl Mahler is frank and responsive with a deep understanding of the business. His ability to impart his knowledge means speaking to him is every bit as good as speaking to the chief executive or CFO.’ For the record, Mahler reports to the CFO.

The Roche team leader must also be able to manage a group of spirited individuals around the world. Mahler does this by means of a matrix, which puts individuals in charge of both an area of expertise and a geographical area.

For example, Dianne Young does the IR for Roche’s diagnostics business (20 percent of the group) in Europe, as well as sustainability communications. Kathee Littrell, based at Genentech in California, heads the science support division that handles IR for the global research activities. ‘They answer awkward questions about the science behind Avastin, say, or clinical trials; and they hold R&D and science days to address issues like these,’ Mahler says. Across the country, at Roche’s office in Nutley, New Jersey, Thomas Kudsk Larsen looks after the company’s North American IR.

The team numbers 16: eight in the US, eight in Basel. For them all, life at Roche is stimulating, challenging and enjoyable. For those who are based in Basel and have aesthetic sensibilities, there is the added pleasure of working in a charming townhouse next to the company’s main administrative building, itself a fine example of Bauhaus architecture with a staircase to die for. All the original features remain, and are set off by works of art that could grace the walls of a world-class art gallery, and indeed are lent to such institutions from time to time.

Working environment
So much for the physical environment, what about the working one? Let’s put it this way: if anyone still thinks irony is the preserve of the English, they haven’t met Mahler. Asked what he does, he responds cheerfully: ‘I sit at the top while the others do the work.’ In terms of management style, Mahler’s isn’t quite management by teasing but anyone unable to laugh at him/herself should not apply to work for him.

In terms of chronology, Mahler began with a PhD in economics, and soon joined Ciba-Geigy, the Swiss company that later transmogrified into Novartis. ‘By the end of my five years there, in 1991, I was head of investment planning and strategy,’ he recounts. It was a rapid rise, which Mahler, in his relentlessly self-deprecating manner, puts down to luck. For some no doubt equally fortuitous reason, Ciba-Geigy then dispatched him to Freiburg to establish a cancer research hospital. ‘It was a chance you get once in a lifetime,’ says Mahler: a chance to fail as much as to succeed. He managed to do the latter.

Next followed four years in China, in roles ranging from strategy and pharmaceuticals to animal health. In 2001 Mahler moved back to Europe to a finance job in Strasbourg, where he worked closely with IR and in due course joined the IR department. There he stayed until 2003, the year he became head of IR at Roche, which then had a team of just three and no US office.

Fast forward to 2010 and Mahler’s greatest recent challenge has been the financing of the acquisition of Genentech last year through a bond issue. ‘We’d never done anything like it before because we’d never needed money,’ he notes. ‘So we went to the bond market and said, We need money and it said, Who are you?’  

Indeed, it’s a completely different client base, one that’s more balance sheet-oriented and more concerned with ratings, security and so on. Even so, the Roche team persuaded the market of its case. ‘The issue raised a total of SFr48 bn: $16 bn in the US, €16 bn in the Eurozone; £2 bn in the UK; the rest in Swiss francs,’ says Mahler.

No quick fixes
The more general challenge, he adds, is the company’s long development cycles, typically 10 years: ‘Our horizons are long term while the markets are ever more short term. The challenge is bridging these.’ So what about pension funds? Mahler says these are also growing more short term. ‘The investors who are the most long term right now are the hedge funds, believe it or not,’ he says. ‘I know it sounds crazy. But we have had some US hedge funds invested in Roche for four years now.’

It’s clearly an attractive story: a growth stock from a soundly managed and extremely secure company that is also cash-generative and pays good dividends.

But good IR requires more than having a good story to tell, which is where the good humor, openness and professionalism of the IROs come in. Mahler is the first to acknowledge the value of his team, and he’s right to be proud. Here’s how one investor described IR at Roche in 2009: ‘There is a high standard of communications from the entire IR team at Roche. It is constantly adapting its methods of keeping in touch with the needs of the financial markets.’


Nicolas Dunant
Nationality: Swiss
Qualifications: PhD in biochemistry
Career: Academic research, New York; small biotech company in Zurich; sell-side analysis, Zurich – where he ‘got to know Roche and Karl’
Roche: IRO, Basel; joined 2007 ‘because I wanted to gain more industry experience, and to use my scientific knowledge and my financial experience’  
On his job: ‘You meet some investors and analysts again and again – people with scientific qualifications, MBAs and so on – who you know how to talk to. But with others you have to adapt to their level. You have to change your language according to their knowledge. I enjoy educating a generalist as much as I do talking in extreme detail about a clinical trial or about a molecule with a specialist. Sometimes a generalist will ask a question in a way that may get right to the nub of the issue. You can make good or bad investment decisions with a lot of knowledge or with little knowledge.’

Thomas Kudsk Larsen
Nationality: Danish  
Qualifications: MBA in finance
Career: IRO at Novozymes in Denmark 2000-2005  
Roche: Head of North American IR in Nutley, NJ  
On his job: ‘The dialogue is much more fun in the US; the intellectual challenge is higher. There is a different approach to investing: they are more demanding, they deploy more resources – more analysts, more people – and try to understand things better. Of course, you still meet ignorant ones, but if you compare the average European investor with the average American investor, the American is smarter. I always say I have the best job in the company – but don’t tell anyone.’  

Dianne Young
Nationality: Australian
Qualifications: BSc in immunology
Career: Research, Australia and Austria; marketing at Amersham
Roche: IRO, Basel. Originally in sales in Australia; IRO since 2003, handling sustainability and diagnostics
On her job: ‘It’s great being close to the action – it’s a bit of a drug, actually – and having so much variety. IR is involved in everything. I do my own thing in diagnostics but the sustainability side means working with every department, and learning a lot. I hear fantastic stories.’