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Roche affirms FY guidance as Q3 sales beat on back of China, legacy cancer drugs

Roche Holding AG reiterated its earnings guidance for the full year as the Swiss pharmaceutical and diagnostics group reported a 7% increase in sales for the third quarter driven by strong growth in China and a resilient performance from some of its older cancer medicines that have lost patent exclusivity.

Sales figures for the Basel, Switzerland-based group beat consensus expectations by 2% thanks to advances from a clutch of new medicines and less attrition from older drugs challenged by new generic copies.

Hemlibra, the recently launched hemophilia medicine that received extended approval from U.S. regulators earlier this month, came in at CHF56 million in the quarter, against analyst expectations of CHF49 million, while Tecentriq had sales of CHF204 million, compared with expectations of CHF198 million. Roche's multiple sclerosis treatment Ocrevus posted gains of CHF633 million, compared with the estimated CHF621 million.

"The majority of the beat was delivered by strong performances from Rituxan, Avastin and Herceptin," a Jefferies analyst, Ian Hilliker, said in a note to clients. "Encouragingly, this was driven by a strong pick up in international markets, with growth in China being called out," said Hilliker, who rates the stock a "buy."

Berenberg analyst Alistair Campbell said he does not expect analysts to adjust their forecasts following the third quarter results today, given that the sales beat was driven by the legacy oncology drugs. He rates Roche a "buy."

Roche has 15 so-called new molecular entities in late-stage development that, along with Hemlibra and recently introduced cancer medicines Perjeta and Kadcyla, are positioned to make up for some of the losses resulting from patent expiries for crucial blockbuster biologic drugs Herceptin, Rituxan and Avastin. The Swiss group also said it expects recent regulatory reforms and a speedier approvals process in China to drive continued growth in the region.

"In China we have very good growth, obviously China is a big part of what's driving our 8% growth in the international business," said Daniel O'Day, head of Roche's pharmaceuticals business, on a conference call with reporters following the third-quarter numbers.

"And its largely driven by the fact that we have our three medicines Avastin, Herceptin and MabThera (Rituxan), now broadly reimbursed within the China environment ... [This] bodes well for not only our oncology portfolio but our broader portfolio of transformational medicines in terms of getting them to patients, more in line with what we see in the U.S. and in Europe," O'Day added.

Multiple sclerosis treatment Ocrevus is the most prescribed medicine for the disease in the U.S. and is set to attain over CHF2 billion in sales in its first year after launch. Roche CEO Severin Schwan said it has been the most successful drug launch ever in the history of Roche.

"Given the strong uptake of our newly launched medicines and our overall product pipeline, I am confident in our ability to continue our growth beyond this year," the CEO told reporters.