), a leader in oncology drugs, reported encouraging sales results
for the first nine months of 2013.
Sales increased 4% from the year-ago period, driven by growth
in both its segments - Pharmaceuticals Division and Diagnostics
All growth rates mentioned below are on a year-on-year basis
and at constant exchange rates.
Results in Detail
Sales for the Pharmaceuticals Division climbed 7%, driven by
strong sales of MabThera/Rituxan (+6%), Avastin (+13%) and
The HER2 franchise continues to perform well (+13%). We note
that the HER2 franchise includes Herceptin and recently launched
drugs like Perjeta and Kadcyla. Roche launched Kadcyla in the
U.S. in Feb 2013 while Perjeta obtained approval in Europe in Mar
2013. Perjeta was launched in the U.S. in Jun 2012.
The sharp rise in Avastin sales was due to the recent label
expansion for various indications - ovarian cancer in Europe,
colorectal cancer in the U.S. and Europe and newly diagnosed
glioblastoma in Japan.
Sales of rheumatoid arthritis drug Actemra/RoActemra surged
33% driven by increased demand. Lucentis, indicated for wet
age-related macular degeneration (AMD), was up 13%.
However, sales of drugs such as Pegasys (indicated for
hepatitis B and hepatitis C) declined 19% due to the expected
launch of triple-combination (second generation) and
interferon-free therapies by 2013 end/ early 2014. Roche expects
a continued decline in Pegasys sales going forward.
Revenues from the Diagnostics division increased 4% to CHF 7.7
billion driven by solid performance of the Professional
Diagnostics (+7%) unit. Tissue Diagnostics (+6%) also performed
impressively. However, Diabetes Care declined yet again (-2%) due
to the restructuring activities undertaken by the unit for
2013 Outlook Backed
Roche continues to expect sales in 2013 to increase in line
with 2012 growth rates. Roche expects core earnings per share to
grow at a higher rate than sales in 2013. Roche expects to
further increase its dividend in 2013.
Roche's HER2 franchise was further strengthened when the
Committee for Medicinal Products for Human Use (CHMP) in Europe
recommended the approval for Kadcyla in advanced HER2-positive
breast cancer. A decision is expected by year end.
Moreover, the U.S. Food and Drug Administration (FDA) granted
accelerated approval of Perjeta for the neoadjuvant treatment of
HER2-positive breast cancer prior to surgery. Further, the
subcutaneous formulation of Herceptin was approved in Europe
thereby significantly reducing administration time and related
Meanwhile, Roche is strengthening its immunology/ophthalmology
portfolio with the development of new compounds such as
etrolizumab (phase III) for inflammatory bowel disease and
lampalizumab (anti-factor D) for geographic atrophy, an advanced
form of dry AMD (currently in phase II).
The traction in the company's hematology franchise is also
encouraging with GA101 (obinutuzumab) being accepted by the FDA
for priority review with approval expected by Dec 2013. The
candidate has also been filed for approval in Europe.
Roche currently carries a Zacks Rank #1 (Strong Buy). Given
the solid performance so far in 2013, we believe the company is
likely to achieve its annual targets. Roche's efforts to develop
its portfolio beyond oncology are impressive.
Right now, other stocks that look attractive include
). All three carry a Zacks Rank #2 (Buy).
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