Sales Grow at Roche in 9M13 - Analyst Blog

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Roche ( RHHBY ), 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 Division.

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 Herceptin (+6%).

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 long-term profitability.

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.

Pipeline Update

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 treatment costs.

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.

Our Take

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 GlaxoSmithKline ( GSK ), Bayer ( BAYRY ) and Forest Labs ( FRX ). All three carry a Zacks Rank #2 (Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

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