Roche Holding AG, the biggest maker of oncology medicines in the world, raised its 2019 outlook after reporting higher-than-expected third-quarter results — boosted by a 50% jump in China sales and a strong performance from new medicines for multiple sclerosis and hemophilia.
The Basel, Switzerland-based pharmaceutical giant said sales in China advanced at more than 50% in the first nine months of the year, reaching a "high watermark" due to the Chinese government undertaking a major geographic expansion of cancer treatments Mabthera and Herceptin, especially into rural areas. In January, CEO Severin Schwan said China was "at an inflection point" after a 27% rise in sales in 2018, making it Roche's second-largest market.
"(China) is also a bit of a one-time phenomenon," said Bill Anderson, head of the pharmaceuticals business, on a conference call with the CEO and reporters following the results. "On the other hand we've got our new medicines launching in China at an increasing pace, so we look forward to continued strong growth, but greater than 50% is hard to achieve."
Roche has introduced a raft of new medicines to compensate for the loss of patent exclusivity on a number of its blockbuster cancer drugs, including Avastin, Herceptin and Rituxan. While these have succumbed to generic competition in Europe, where sales in the period were down 1%, the drugmaker benefited from the absence of biosimilar versions in the U.S. market. Anderson said the impact of biosimilars is likely to be seen in the U.S. during the fourth quarter once Amgen Inc.'s Avastin competitor gains steam and other copy cats launch.
"We believe the impact of biosimilars [in the U.S] will be significant," Anderson said. "We think biosimilars are a healthy part of the overall biopharmaceutical innovation model, in the sense that when older drugs go off-patent, it makes sense that there are new sources available for patients."
Still, Anderson said he was optimistic about the growth prospects for Europe despite the flat performance, as momentum is growing in its new medicines. Multiple sclerosis drug Ocrevus had third-quarter sales of CHF929 million, slightly lower than consensus expectations at CHF947 million, while Hemlibra for hemophilia had sales of CHF 386 million, well above Wolfe Pharma's CHF360 million forecast, thanks to strong demand in the U.S.
Cancer medicine Tecentriq saw sales more than double thanks to new indications, including triple-negative breast cancer and non-small cell lung cancer.
Schwan said he was confident the Spark Therapeutics Inc. deal, which has been delayed by a number of regulatory requests for information, would close by the end of the year and said there was no fundamental change in the company's overall M&A strategy. "We will continue looking for bolt-on acquisitions to complement our franchises with new products and technologies, and if new opportunities arise we'll certainly have a look at them," Schwan said on a conference call with reporters after the results.
Roche shares were up 0.1% at CHF290.55 by 11:59 am London time.
"We rate Roche at buy as we see potential for the shares to re-rate as investors gain comfort that the impact of biosimilar pressures is manageable with further upside from tecentriq in early cancer and from its emerging pipeline outside of oncology," said Deutsche Bank analyst Richard Parkes in a note to clients ahead of the results.