Tamiflu Sales Decline Hits as Roche Posts 4% Q1 Revenue Dip

Swiss pharmaceutical giant Roche has had a slow first three months of the year, with group turnover rising by a meagre 2% year-on-year (y/y) in local currencies and dropping by 4% y/y in reporting currency to 10,855 million Swiss francs (US$10,826 million), on the back of adverse currency effects. The growth slowdown was most noticeable in the pharmaceutical division, whose revenues were nearly stagnant at 8,568 million Swiss francs. Indeed, pharmaceutical revenues grew by an unremarkable 1% y/y in local currencies. On the other hand, the diagnostics division turned in a respectable performance, with sales rising by 9% y/y in local currencies to 2,287 million Swiss francs. Roche's diagnostic division has outperformed the market and also gained momentum, as it now represents 21% of the group's revenues.

Mixed Review for Roche's Portfolio

The Winners

Once again, Roche's oncology products fuelled the group's sales as they collectively grew by 15% y/y. MabThera (rituximab) remains Roche's jewel, with sales growing by 17% y/y due to its continually increasing use in patients with indolent and aggressive non-Hodgkin's lymphoma and as a maintenance therapy for relapsed follicular lymphoma. Breast-cancer treatment Herceptin (trastuzumab) continued its progression, with sales growing by 11% y/y. Recent Japanese approval should further increase Herceptin's turnover. Anti-angiogenic treatment Avastin (bevacizumab) recorded an impressive 35% y/y boost in sales after its indications were extended in Europe and Japan last year.

Other growth drivers include osteoporosis drug Bonviva (ibandronate) and oncology treatment Tarceva (erlotinib), whose sales respectively grew by 56% y/y and 28% y/y in the first quarter of the year. The former benefited from its European launch while the latter should progress on the back of its recent Japanese approval.

The Losers

Meanwhile, sales of influenza treatment Tamiflu (oseltamivir) plummeted by a whopping 64% y/y. The plunge is explained both by a high baseline for the first quarter of 2007 and slowing demand as government stockpiles near completion (see Switzerland: 12 October 2007: Roche Braced for Tamiflu Sales Slowdown as Government Stockpiles Reach Saturation). Anaemia treatment NeoRecormon/Epogin (epoetin beta) continued its slow decline as sales dropped by 13% y/y due to biosimilar competition in Europe and increasing global price pressure (see France: 13 September 2007: EPO Cutbacks Hit Europe as 9% Price Reduction Imposed in France). Finally, weight-loss drug Xenical (orlistat) experienced an 11% y/y decline as Roche feels the sting from the over-the-counter (OTC) status granted to rival drug Alli (GlaxoSmithKline, U.K).

Outlook and Implications

Despite a slow start to the year and a drop in revenues for a number of key products, Roche has confirmed guidance for 2008 at a high single digit growth rate (see Switzerland: 30 January 2008: Oncology Portfolio Drives 10% Sales Growth for Roche in 2007). In 2007, Roche turned in a strong first quarter performance with revenues growing in the high double digits, therefore setting a high baseline for this year (see Switzerland: 18 April 2007: Oncology Drugs Boost Roche's Q1 Sales Growth to 17%). Nevertheless, there could be a few hurdles on the way to Roche meeting its full year guidance.

First of all, sales of key products such as Tamiflu, NeoRecormon/Epogin and Xenical are expected to carry on declining. On one hand this is no surprise for the influenza treatment, which was once instrumental to Roche's revenue growth, and the group would have made contingency for this in its full year guidance. On the other hand, Roche might not have anticipated the delays in the U.S. launch of anaemia drug Mircera (methoxy polyethylene glycol-epoetin beta). Mircera is Roche's next generation anaemia treatment and could have filled the gap in revenues left by declining sales of NeoRecormon/Epogin. Mircera's new once-monthly formulation offers patients the added convenience that could help the drug reach blockbuster status. Nevertheless, the drug cannot be launched onto the U.S. market for now as it has been found to infringe rival company Amgen's (U.S.) patents (see United States: 24 October 2007: Door Slams Shut on Roche's Hopes of U.S. Launch for Mircera and Switzerland: 16 April 2008: Roche Fights U.S. Mircera Injunction), and the delay could have an impact on Roche's bottom line that the company has not factored in.

Secondly, the rise in sales for immunomodulatory drug CellCept (mycophenolate mofetil) could be cut short as the U.S. FDA is currently probing Roche on potential links between the drug and occurrences of progressive multifocal leukoencephalopathy (PML)—a rare deadly brain disease (see Switzerland: 11 April 2008: U.S. FDA Looks Into PML Reports for Roche, Novartis Transplant Drugs). If a definite link is found, it could have a devastating effect on the drug's sales.