) sales for the first quarter of 2014 came in at CHF 11.5
billion, up 5% from a year ago. In terms of dollars, sales
of $13.0 billion were in line with the Zacks Consensus
All growth rates mentioned below are on a year-over-year basis
and at constant exchange rates.
Quarter in Detail
Sales in the first quarter were driven by solid demand for its
recently launched drugs, Perjeta and Kadcyla, for HER2-positive
breast cancer and rheumatoid arthritis drug
Roche reports business in two divisions: Pharmaceuticals and
Sales of the Pharmaceuticals division increased 4% to CHF 9.0
billion, driven by strong sales of oncology drugs.
Sales of the HER2 breast cancer franchise, which consists of
Herceptin, Perjeta and Kadcyla, increased 17%. The franchise was
boosted by key approvals in 2013 - Kadcyla in the U.S. and EU and
Perjeta in the EU. The sharp rise in Avastin sales (+9%) was due
to its strong demand for the treatment of advanced ovarian cancer
in Europe, and colorectal cancer in the U.S. and Europe. Demand
for blood cancer and rheumatoid arthritis drug MabThera/Rituxan
(+3%) was also strong.
Roche's immunology and ophthalmology franchise continue to
gain traction. Sales of Actemra/RoActemra were up 23%. Lucentis,
indicated for wet age-related macular degeneration (AMD), was up
However, sales of chemotherapy drug Xeloda were lower due to
the generic competition in the U.S. and Europe.
Revenues from the Diagnostics division went up 7% to CHF 2.4
billion driven by solid performance of the Professional
diagnostics (+9%) unit and Molecular diagnostics (+4%). Diabetes
Care sales increased 5% despite a continued challenging and
volatile market environment while Tissue Diagnostics grew 4%. The
recent acquisition of IQuum will further strengthen Roche's
molecular diagnostics market portfolio.
Roche expects sales in 2014 to increase in the low to
mid-single digits. The company expects core earnings per share to
grow at a higher rate than sales in 2014. Roche intends to
further increase its dividend in 2014. We note that the Board of
Directors approved a 6% dividend increase to CHF 7.80 per share
in Mar 2014.
During the first quarter of 2014, the subcutaneous formulation
of MabThera was approved in Europe.
The U.S. Food and Drug Administration (FDA) approved Xolair
for an additional indication. Xolair is now approved in the U.S.
for the treatment of chronic idiopathic urticaria (CIU), in
adults and adolescents (12 years and above) with inadequate
response to H1-antihistamine treatment. We note that
) licensed Xolair from Roche. Roche markets Xolair in the
However, Roche suffered a few setbacks also in the
quarter. Roche's three phase III studies on schizophrenia
candidate bitopertin did not meet their primary endpoints and
hence were discontinued. Consequently, Roche conducted futility
analyses on the three remaining phase III studies on bitopertin
and decided to discontinue two of those studies and continue with
just one study (NightLyte).
Moreover, a phase III study on lung cancer candidate
onartuzumab was also stopped in the quarter due to a lack of
clinically meaningful efficacy. Nevertheless, Roche's
investigational immunotherapy candidate for lung cancer,
anti-PDL1 (RG7446), moved into phase III.
We are encouraged by Roche's first quarter performance. The
oncology portfolio looks solid as ever and we expect further
traction in 2014. We are also impressed by the company's efforts
to grow its portfolio beyond oncology to immunology and
However, Roche expects to face generic competition for key
drugs - Valcyte and Xeloda - in 2014. The loss from the
entry of generics for the overall portfolio in 2014 is estimated
at CHF1 billion.
Roche currently carries a Zacks Rank #3 (Hold). Investors may
consider other large cap pharmas like
). Both carry a Zacks Rank #2 (Buy).
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