Roche Q1 Performance Beats Forecasts, Sales Up 6%

Swiss pharmaceutical company Roche has yet again outperformed the global market in the first quarter of the year, posting a 6% year-on-year (y/y) growth in sales—as measured in the reporting currency—to 12.2 billion francs (US$11.6 billion). When measured in local currencies (LC), this amounts to a 9% y/y growth. Its pharmaceutical sales were up 6% y/y in the reported currency, and 10% in LC terms, to 9.7 billion francs, driven by strong growth in international markets (Asia-Pacific, Central and Eastern Europe, Middle East, Africa, Central Asia, Indian Subcontinent, Latin America, Canada, and others). International turnover increased by 27% y/y, to 2.5 billion francs. In the United States and Western Europe, sales were up by 2% y/y to 3.6 billion francs, and 3% y/y to 2.6 billion francs, respectively. However, in the Japanese market, sales were down by 13% y/y to 988 million francs. Roche's diagnostics franchise also continues to outpace the global market, with revenues up by 7% y/y, to 2.5 billion francs.

In the core pharmaceutical business, growth was driven by the company's oncology franchise; however, its virology franchise also significantly contributed to sales. Avastin (bevacizumab) continued its reign as Roche's best-selling drug, with sales up 18% y/y to 1.7 billion francs. MabThera/Rituxan (rituximab) came in second, with sales of 1.7 billion francs, up 13% y/y. Breast cancer drug Herceptin (trastuzumab) also continues to report strong sales growth, up 11% y/y to 1.4 billion francs. Despite strong sales in the United States, Western Europe, and the international market, sales of Herceptin were down 14% y/y in Japan. Xeloda (capecitabine) also performed well, with sales up 23% y/y to 352 billion francs

Sales of anti-viral drug Tamiflu (oseltamivir) were up 32% y/y to 517 million francs as Roche continued to fulfil government pandemic orders. Hepatitis drug Pegasys (peginterferon alpha-2a) was another strong performer, with sales of 441 million francs, up 15% y/y. Taking a closer look at products with declining performance, sales of anaemia treatment NeoRecormon/Epogin (epoetin beta) continue to tumble, down 8% y/y to 339 million francs. U.S patent expiration on CellCept (mycophenolate mofetil) continues to hit hard, and sales of the drug were down by 28% y/y to 357 million francs, with U.S. sales declining by 65% y/y.

Outlook and Implications

According to Roche's initial outlook for 2010, it expected pharmaceutical and diagnostic sales to grow at mid-single-digit rates in LC and its diagnostic division to grow significantly ahead of the market (see Switzerland: 3 February 2010: Roche Reports 22% Y/Y Fall in 2009 Net Income on Expenses Related to Genentech's Takeover). The company has confirmed this outlook, based on its first-quarter performance.

Roche has successfully secured a number of regulatory approvals in the first quarter. In the European Union, Xeloda (capecitabine) in combination with oxaliplatin has been approved as an adjuvant therapy for early-stage colon cancer in post-surgery patients, Tarceva (erlotinib) has been recommended as a first-line maintenance treatment in advanced or metastatic non-small-cell lung cancer, and Herceptin (trastuzumab) in combination with capecitabine or 5-fluorouracil and cisplatin has been approved for the treatment of patients with HER2-positive metastatic stomach cancer. Meanwhile, the U.S. FDA has granted approval for Rituxan as a first-line treatment for chronic lymphocytic leukaemia (CLL) as well as relapsed or refractory CLL. The long-awaited FDA approval for rheumatoid arthritis (RA) drug Actemra (tocilizumab) was also granted (see Switzerland: 11 January 2010: Roche Gains FDA Approval for Actemra; Strikes COPD Drug Development Deal with Galapagos). The approvals should therefore translate into revenue gains going forward, and similar regulatory approvals are planned in other markets where these drugs are not approved in the aforementioned indications.

Although Roche's oncology drugs are expected to continue to drive growth, the company has said that in the long term, it expects to strengthen its position in other therapeutic areas including cardiovascular, metabolism, inflammation, and central nervous system (see Switzerland: 19 March 2010: Roche Aims to Deliver Long-Term Growth Beyond Oncology). Avastin has been predicted to become the biggest selling drug in the world by 2014; however, the clinical programme for the drug has taken some recent hits. The drug failed to meet primary endpoints in Phase III trials for late-stage prostate cancer and stomach cancer (see Switzerland: 12 March 2010: Roche's Avastin Fails to Meet Primary Endpoint in Late-Stage Prostate Cancer). These would have potentially been lucrative markets that Roche could have tapped into; however, this is now unlikely to happen. Another clinical setback is the suspension of the clinical development programme for ocrelizumab in the treatment of seropositive RA.