Roche Holding AG CEO Severin Schwan said the success of recent new drug launches — notably Ocrevus for multiple sclerosis and cancer medicines Tecentriq and Perjeta — will enable the Swiss pharmaceutical group to offset the loss of patent exclusivity on a handful of its older blockbuster cancer drugs, helped by a lower U.S. tax rate in 2018.
The CEO said the introduction of Ocrevus was "a stunning success, an excellent launch." Despite the medicine only being introduced in the second quarter of 2017, sales still reached just shy of blockbuster status, coming in at CHF900 million for the three quarters in which it was available as a new multiple sclerosis treatment. Full year sales of Tecentriq came in at CHF487 million, while Perjeta had sales of CHF2.2 billion and Kadcyla at CHF914 million — all slightly above the forecasts of Jefferies analyst Jeffrey Holford, who rates Roche a "buy."
"Due to the success of recent product launches like Ocrevus, Tecentriq and Hemlibra, we will be able to compensate for the entry of biosimilars, maybe even grow our business," the CEO told reporters on a conference call following the group's full-year and fourth-quarter 2017 results. "We intend to keep our strong margins which we enjoy today."
Roche has battled generic competition to its highest selling drugs — so called blockbusters with sales of over $1 billion a year — including cancer treatments Rituxan and Herceptin, by launching a string of new treatments for diseases as diverse as hemophilia and multiple sclerosis during the year. The introduction of Hemlibra, the first new treatment for hemophilia to launch in decades, stepped up the level of competition in the rare disease market which is worth $10 billion in annual sales. Rivals in the hemophilia space include Novo Nordisk A/S, Sanofi and Shire plc. The Dublin-based group has sought an injunction in the U.S. to try to curb sales of Hemlibra, but Schwan said he was "very confident" of Roche's position with regard to the lawsuit, which is expected to come to court in mid-2018.
Bruno Bulic, an analyst at Baader Helvea who rates Roche a "buy," said in a note that the full-year results were at the lower end of expectations due to weakness in the diagnostics division in the second half of the year. "We expect the diagnostic division miss to overshadow the positive guidance and would recommend to buy Roche on weakness on the back of the guided core EPS high-single digit growth, in a supposedly weakish transition year."
Still, the recent U.S. tax overhaul will bring an unforeseen benefit, and Schwan said he expects the Basel, Switzerland-based group's tax rate "to come down to the low 20's" from the current 27%.
The dividend is also forecast to increase on the basis of projections of high-single-digit EPS growth for 2018.
The CEO said there was no change to the mergers and acquisitions strategy pursued by Roche in recent months; the group continues to seek external bolt-on opportunities that might complement existing products. "Ignyta is typical of a transaction we would look for," he said, referring to the $1.7 billion acquisition of the U.S. diagnostics group Dec. 22 which bulked up Roche's cancer business.
The strength of Roche's oncology business, with notable advances in its immuno-oncology franchise during the year, may position the Swiss drugmaker ahead of rivals in the highly competitive area of pioneering IO medicines, in particular those targeting the most common form of lung cancer. Tecentriq is in eight late-stage trials either alone or as a combination treatment for cancer, the first of which are expected to read out this year.
