) core earnings came in at $3.88 per American Depositary Receipt
(ADR) in 2013, up from $3.69 per ADR reported in 2012, but missed
the Zacks Consensus Estimate of $4.05 per ADR.
Revenues of $50.9 billion also missed the Zacks Consensus
Estimate of $51.7 billion.
All growth rates mentioned below are on a year-over-year basis
and at constant exchange rates.
Roche's revenues in 2013 grew 6% from 2012 to CHF 46.8 billion
driven by solid demand for its cancer drugs and increased sales
of its clinical laboratory diagnostic products, especially
Roche reports business in two divisions: Pharmaceuticals and
Sales of the Pharmaceuticals division increased 7% to CHF 36.3
billion, driven by strong sales of oncology drugs. Both the
U.S. and emerging markets reported solid growth while Europe and
Japan were sluggish.
Sales of the HER2 breast cancer franchise, which consists of
Herceptin, Perjeta and Kadcyla, increased 14%. The franchise was
further boosted by key approvals in 2013 - Kadcyla in the U.S.
and EU and Perjeta in the EU. In Oct 2013, Perjeta was approved
for use in treatment of HER2-positive breast cancer prior to
surgery (neoadjuvant setting) in the U.S.
The sharp rise in Avastin sales (+13%) 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 (+6%) was also strong. Roche's hematology
franchise was boosted in 2013 by the approval of Gazyva in the
U.S. for the treatment of chronic lymphocytic leukemia (CLL). We
note that Gazyva is being studied for additional indications such
as non-Hodgkin's lymphoma (NHL) and has also been filed for
approval in Europe.
Sales of rheumatoid arthritis (RA) drug Actemra/RoActemra were
up 30%. Lucentis, indicated for wet age-related macular
degeneration (AMD), was up 15%. However, sales of drugs such as
Pegasys (indicated for hepatitis B and hepatitis C) declined 19%
due to the expected launch of triple-combination and
Revenues from the Diagnostics division went up 4% to CHF 10.5
billion driven by solid performance of the professional
diagnostics (+8%) unit. Tissue diagnostics (+7%) also performed
impressively in 2013. However, diabetes care was down 3% due to
reimbursement cuts in the U.S. and intensified pricing pressure.
Molecular Diagnostics grew 2%. New introductions in 2013 include
cobas 8100 and a new HPV test for cervical cancer.
Roche expect sales in 2014 to increase in the low to
mid-single digits. Roche expects core earnings per share to grow
at a higher rate than sales in 2014. Roche expects to further
increase its dividend in 2014. We note that the Board of
Directors has proposed a 6% dividend increase to CHF 7.80 per
In 2013, Roche received positive data from eight candidates
which have now moved into late-stage development - six candidates
in oncology, etrolizumab for inflammatory bowel disease, and
lampalizumab for the eye disease geographic atrophy (an advanced
form of dry AMD).
We remind investors that Roche has stopped developing
aleglitazar due to safety signals and lack of efficacy following
a regular safety review. Roche was developing the candidate to
treat acute coronary syndrome (ACS) in patients suffering from
type II diabetes.
Meanwhile, Roche expects to file Avastin for the indication of
cervical cancer in the EU and the U.S. in 2014.
2013 results missed our estimates. 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.
Nevertheless, 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 ophthalmology.
Roche currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the pharma industry include
). All three carry a Zacks Rank #1 (Strong Buy).
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