Roche Holdings Ltd.'s
) core earnings came in at $2.02 per American Depositary Receipt
(ADR) in the first half of 2013, compared with $1.85 per ADR
reported in the year-ago period.
All growth rates mentioned below are on a year-over-year basis
and at constant exchange rates.
Roche's revenues in the first half of 2013 grew 5% from the
year-ago period to CHF 23.3 billion, driven by solid demand for
its cancer drugs and increased sales of diagnostic tests to
Roche reports business in two divisions: Pharmaceuticals and
Sales of the Pharmaceuticals division increased 6% to CHF 18.2
billion, driven by strong sales of Avastin (+12%) and
MabThera/Rituxan (+3%) along with solid uptake from the HER2
franchise (+11%). The sharp rise in Avastin sales was due to its
increased demand in the ovarian and colorectal cancer
We note that 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 the European Union in Mar 2013. Perjeta was
launched in the U.S. in Jun 2012.
Sales of rheumatoid arthritis (RA) drug Actemra/RoActemra were
Lucentis, indicated for wet age-related macular degeneration
(AMD), was up 9%. Moreover, strong sales of Tamiflu (+79%) due to
a severe flu season in North America further boosted sales.
However, sales of drugs such as Pegasys (indicated for
hepatitis B and hepatitis C) declined 20% due to the expected
launch of triple-combination and interferon-free therapies by
2013 end/ early 2014.
Revenues from the Diagnostics division went up 3% to CHF 5.1
billion driven by solid performance of the professional
diagnostics (+6%) unit. Tissue diagnostics (+6%) also performed
impressively in the first half. However, diabetes care was down
5% due to reimbursement cuts in major markets and intensified
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.
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.
Nevertheless, traction in the company's hematology franchise
was encouraging with positive data on obinutuzumab (GA101) and
RG760, which are being developed to treat non-Hodgkin's lymphoma
(NHL) and chronic lymphocytic leukemia (CLL).
GA101 was recently accepted by the U.S. Food and Drug
Administration (FDA) for priority review and an approval is
expected by end Dec 2013. The candidate has also been filed for
approval in Europe.
Meanwhile, Roche plans to move RG7601, which is being
developed in collaboration with
) into late-stage development after reporting positive phase I
data in Jun 2013.
Additionally, Roche is moving ahead with its novel non-small
cell lung cancer candidate RG7446 following promising phase I
Roche is also seeking FDA approval for the use of Perjeta
regimen before surgery (neoadjuvant treatment) in HER2+
early-stage breast cancer patients.
Given the solid performance in the first half of 2013, we believe
the company is likely to achieve its annual targets.
Roche currently carries a Zacks Rank #3 (Hold). Right now,
Johnson & Johnson
) look attractive. While Jazz Pharma carries a Zacks Rank #1
(Strong Buy), Johnson & Johnson carries a Zacks Rank #2
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