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Roche's China-driven growth grinds to halt amid COVID-19 diagnosis delays


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Roche's China-driven growth grinds to halt amid COVID-19 diagnosis delays

Roche Holding AG said the COVID-19 pandemic continues to impact medical diagnoses and the uptake of its drugs in China, bringing growth to a halt in one of the Swiss pharmaceutical and diagnostics group's biggest markets.

The impact of the pandemic has been between $1 billion and $2 billion so far, from missed doctors' appointments and diagnoses to delays in switching to new therapies, Bill Anderson, CEO of Roche Pharmaceuticals, said. In China, while much of life has returned to normal, the healthcare system's capacity has been diminished. Price cuts introduced for some of Roche's medicines last year were intended to expand access and drive large increases in volume, but the region ultimately saw only a moderate uptick.

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Roche Pharmaceuticals CEO Bill Anderson
Source: Roche

"Our sales growth is rather modest practically flat so far this year, and what that reflects is some continued gains in volume [in the pharma business], but offset by price decreases," Anderson told reporters on an Oct. 15 conference call following third-quarter results. "And so we see that ongoing impact on our business."

In January, Roche Holding CEO Severin Schwan forecast continuing double-digit growth in China thanks to strong demand for the company's cancer medicines. China is the second-largest market for pharmaceuticals after the U.S., worth some $120 billion a year, according to a 2019 Deutsche Bank estimate. The introduction of an accelerated approval system for medicines and growing demand for novel cancer therapies and other innovative drugs, which are increasingly reimbursed by state-sponsored insurance plans, made it an attractive target for expansion for many European drugmakers, including AstraZeneca PLC and Novartis AG.

Basel, Switzerland-based Roche Holding reported third-quarter 2020 sales below analyst expectations, with group sales of CHF14.70 billion, against Jefferies' estimate of CHF14.98 billion and consensus of CHF15.28 billion. Biosimilar erosion impacted a clutch of Roche's former blockbuster cancer medicines, including Avastin, Herceptin and Rituxan marketed as MabThera in the EU and was especially aggressive in the U.S., Anderson said. While the impact of the biosimilar erosion could exceed CHF4.7 billion in 2020, Roche nevertheless reiterated guidance for the full year.

Ocrevus and Hemlibra exceed expectations

The world's biggest maker of cancer medicines beat third-quarter sales forecasts for multiple sclerosis medicine Ocrevus CHF1.2 billion against Berenberg's CHF1.09 billion estimate and hemophilia therapy Hemlibra, at CHF572 million, compared with SG Cowen's CHF510 million prediction. Roche also introduced three new medicines in the quarter compared with an average of two per year over the past decade. Among the new therapies approved by the U.S. Food and Drug Administration is Evrysdi, or risdiplam, an oral treatment for spinal muscular atrophy in adults and children aged two months and older. The medicine will compete with fellow Basel-based drug giant Novartis' SMA gene therapy, Zolgensma.

"It's been a very, very eventful quarter," Anderson said.

While Roche's diagnostics business is expected to see a continued impact from COVID-19 until the end of the pandemic due to patients deferring hospital appointments, the unit has simultaneously benefitted from the portfolio of new tests it has developed for the virus. Molecular diagnostics grew by 124% in the third quarter, and virology saw a more than 233% jump in sales.

Roche said it has increased overall production of its SARS-CoV-2 tests fourfold, and investment in expanding its production capacity for polymerase chain reaction tests in the next year will create more than 1,000 new jobs in the U.S. and Europe.