Europe's economic jitters will clean out the health-science industry, leaving global generic as well as innovative drugmakers among the survivors, the head of Swiss drugmaker Roche predicted on Wednesday.

Fresh healthcare spending cuts in several European countries following the debt crisis triggered by Greece are expected to hurt the pharmaceutical sector.

"We will see dramatic changes in the industry," Chief Executive Severin Schwan said at a news conference. "If pressure increases you will have suddenly winners and losers and you have a lot of enterprises that will be squeezed out."

Survivors would be generic drugmakers with economies of scale needed to handle the volumes of the cheaper copies of branded drugs, as well as drugmakers that find medicines with improved outcomes compared with available drugs.Those in the middle, with little differentiation, would be wiped out.

"I'm sure of that," Schwan said.

The economic crisis has only strengthened the conviction of the world's largest maker of cancer drugs to stick to its guns, said Schwan.

Roche is focused on drugs that can prolong and improve the quality of lives to such an extent that governments and patients will be prepared to pay for them, he said. Among Roche's innovative drugs is trastuzumab-DM1 which showed such promising mid-stage Phase II trial results on women with advanced breast cancer that the U.S. Food and Drug Administration (FDA) encouraged Roche to submit it for approval.

"It is imminent," Schwan said about the U.S. filing, adding the drug's launch could take place in the beginning of 2011, if approved. Roche will still need to conduct Phase III studies.  Drugmakers usually file for approval after final trial outcomes.

Biosimilars A Different Ball Game
Some of Roche's rivals, like French peer Sanofi-Aventis, have diversified their business by expanding in areas like over-the-counter drugs or generics, or, as some are looking at, into biosimilar drugs - generic versions of biotech drugs.

Merck & Co has created a biosimilars unit and AstraZeneca has said it would be in the field to some degree. Generic drugmaker Sandoz, part of Novartis has three biosimilars on sale in Europe. Schwan acknowledged that the arrival of biosimilars posed a challenge but said it would be one that would be easier to handle than traditional generics because the threshold for launching a biosimilar was much higher.

Traditional generic drugs are copies of chemical entities while biosimilars can never be true copies because they are based on living cells. Generic drugmakers need to run clinical trials to prove their version of a biosimilar is efficient and safe, and will also need to create their own sales force to address physicians who will not easily switch patients from the original version.

"It's a different ball game and we expect a much lesser penetration of biosimilars," Schwan said.

Israel's Teva Pharmaceuticals and its partner Lonza are working on developing a similar version of Roche's blockbuster antibody drug Rituxan, also called MabThera. The biosimilar could be launched in 2014.

In addition, Roche's blockbusters MabThera and Herceptin could become vulnerable to biosimilars as they lose their patent protection in a several European countries in 2014 and 2015.