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Roche Holdings Ltd. (RHHBY - Analyst Report) recently reported sales results for the first nine months of 2012. The company’s revenues for the first nine months of 2012 climbed 4% from the year-ago period, driven by growth in both its segments – Pharmaceuticals Division and Diagnostics Division.

All growth rates mentioned below are on a year-on-year basis and at constant exchange rates.

Sales for the Pharmaceuticals Division climbed 4%, driven by strong sales of MabThera/Rituxan (up 10%), Avastin (up 6%) and Herceptin (up 12%). Pegasys (up 18%), Xeloda (up 10%) along with recently launched Zelboraf, Erivedge and Perjeta also added to the division’s revenues.

Revenues from the Diagnostics Division went up 4%, attributable primarily to a 15% increase in the Tissue Diagnostics segment, a 9% rise in the Professional Diagnostics segment and a 4% jump in the Molecular Diagnostics segment.

2012 Outlook Reiterated

The company reiterated its forecast for 2012. Roche continues to expect total revenue and revenue from the Pharmaceuticals Division to grow in the low-to-mid single digits in 2012. Sales from the Diagnostics segment are expected to surpass market growth. Moreover, Roche anticipates earnings to experience high single-digit growth in 2012 despite the unfavorable market environment.

Pipeline Update

Roche received positive results on 11 of its 14 late-stage candidates in the first nine months of 2012. In August 2012, Roche filed for approval of its HER2-positive metastatic breast cancer treatment, trastuzumab emtansine (T–DM1), in the US as well as Europe. The approval of T–DM1 will strengthen Roche’s HER2 franchise. Roche has partnered with ImmunoGen, Inc. (IMGN - Snapshot Report) for the candidate.

The company also noted that due to slower-than-expected enrollment in the phase III trial of ocrelizumab for multiple sclerosis, the filing is expected in 2015. The company plans to file for approval of lebrikizumab in after 2016.

In the fourth quarter of 2012, Roche plans to initiate a phase III trial evaluating the combination of the MEK inhibitor (RG 7421) and Zelboraf BRAF mutation-positive metastatic melanoma. Further the company intends to initiate two phase III trials with aleglitazar for reducing cardiovascular morbidity and mortality in high-risk patients with type II diabetes during this period.

Our Recommendation

Roche currently carries a Zacks #1 Rank (short-term Strong Buy rating).

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