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Roche (RHHBY) 2020 Earnings Down Due to Biosimilars, COVID-19
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Swiss pharma giant Roche Holding AG’s (RHHBY - Free Report) performance in the fourth quarter and 2020 was disappointing as the core pharmaceuticals business was adversely impacted by competition from biosimilars and the coronavirus pandemic. Nevertheless, a surge in COVID-19 diagnostics tests somewhat offset this decline.
Roche’s stock has gained 3.1% in the past year compared with the industry’s growth of 3%.
The company reported total sales of CHF 15.4 billion in the fourth quarter of 2020, up 1% from the year-ago quarter.
Sales in 2020 came in at CHF 58.3 billion, down 5% from last year, due to the negative impacts of the coronavirus outbreak. Earnings per share came in at CHF 19.16 in 2020, down from CHF 20.16 in 2019.
The company reports results under two divisions — Pharmaceuticals and Diagnostics. All growth rates mentioned below are on a year-over-year basis and at constant exchange rates.
Sales at the Pharmaceuticals division were down 2% to CHF 44.5 billion due to stronger-than-expected biosimilars competition for legacy drugs like MabThera/Rituxan, Herceptin and Avastin (an estimated combined CHF 5.1 billion of sales reduction in the United States, Europe and Japan) and the COVID-19 pandemic. Nevertheless, the decline was partially offset by growth in new drugs (launched since 2012), including Tecentriq, Hemlibra, Ocrevus, Kadcyla and Perjeta.
The Diagnostics division sales were up 14% to CHF 13.8 billion driven by COVID-19 testing. However, routine testing declined as COVID-19 caused delayed patient visits to physicians.
2020 in Detail
Herceptin sales fell 34% to CHF 3.7 billion due to biosimilar competition in the United States, Europe and Japan. Sales in the United States also declined due to the switch to Kadcyla (treating HER2-positive breast cancer) in the adjuvant setting.
Perjeta sales grew 18% to CHF 3.9 billion due to increased demand for adjuvant, early breast cancer therapy. Kadcyla sales soared 34%, driven by increased demand owing to its usage in the early breast cancer setting.
Sales of Avastin, approved for multiple oncology indications, were down 25% due to biosimilar competition in the United States, Europe and Japan.
Sales of Rituxan/MabThera (blood cancer and rheumatoid arthritis) declined 31% due to the launch of biosimilars in the United States, most EU markets and Japan as well as market contraction due to COVID-related restrictions.
Sales of Ocrevus, used to treat two forms of multiple sclerosis, rose 24% to CHF 4.3 billion on continued global growth.
Immuno-oncology drug, Tecentriq (for advanced lung cancer, urothelial cancer and breast cancer) recorded 55% year-over-year sales growth to CHF 2.7 billion, driven by the inclusion of new indications — extensive-stage small cell lung cancer (ES-SCLC) and triple-negative breast cancer and unresectable or metastatic hepatocellular carcinoma.
Sales of lung cancer drug, Alecensa, surged 40% on solid growth across all regions.
Performance of the immunology franchise was driven by 32% growth in arthritis drug Actemra/RoActemra sales as a number of countries included this medicine in their treatment guidelines for severe COVID-associated pneumonia. Asthma drug Xolair recorded 2% growth.
Gazyva/Gazyvaro sales grew 21%. Sales of hemophilia A drug, Hemlibra, surged 68% to CHF 2.2 billion, fueled by strong uptake in the United States and Europe despite COVID-19 restrictions having some impact on potential new patients.
Sales of ophthalmology drug, Lucentis, were down 16% as patients delayed their visits to physicians due to the COVID-19 pandemic. Roche has a collaboration agreement with Novartis (NVS - Free Report) for this drug.
Esbriet, indicated for idiopathic pulmonary fibrosis, were up 4% driven by increased use in indications other than IPF in the United States.
Revenues at the Diagnostics division rose owing to 90% growth in Molecular Diagnostics, driven by molecular COVID-19 tests. However, routine testing decreased as a result of delayed regular health checks and medical appointments. In 2020, Roche developed 15 solutions for SARS-CoV-2 diagnosis including both molecular and immunodiagnostic tests for clinical laboratory and point of care. Roche expects that these new tests as well as the existing diagnostics menu for critical care will continue to boost the division as large parts of the population are yet to be vaccinated and COVID-19 medicines are still not widely available.
2021 Guidance
Sales are expected to grow in low- to mid-single digits. Core earnings per share are estimated to rise broadly in line with sales.
Pipeline Progress
Tecentriq in combination with Avastin was approved for unresectable hepatocellular carcinoma (a form of liver cancer) in EU and China.
In 2020, Roche entered into a number of new partnerships, including with Gilead (GILD - Free Report) , Regeneron (REGN - Free Report) and Atea, to develop, manufacture and/or distribute molecules that potentially can both treat and prevent COVID-19.
Roche has entered into a partnership with Regeneron for its antiviral antibody cocktail (casirivimab and imdevimab) for COVID-19.
In December, Elecsys Anti-SARS-CoV-2 S antibody test received the Emergency Use Authorization (EUA) from the FDA.
Our Take
Roche’s performance in the fourth quarter and 2020 was dismal as COVID-19 disruptions and biosimilar competition weighed on the pharmaceuticals business, which comprises roughly 75% of the revenues, and offset growth in Ocrevus, Perjeta, Tecentriq and Hemlibra.
Nevertheless, demand for Roche’s diagnostic tests is expected to remain consistent as the pandemic continues and should positively impact performance in 2021.
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Roche (RHHBY) 2020 Earnings Down Due to Biosimilars, COVID-19
Swiss pharma giant Roche Holding AG’s (RHHBY - Free Report) performance in the fourth quarter and 2020 was disappointing as the core pharmaceuticals business was adversely impacted by competition from biosimilars and the coronavirus pandemic. Nevertheless, a surge in COVID-19 diagnostics tests somewhat offset this decline.
Roche’s stock has gained 3.1% in the past year compared with the industry’s growth of 3%.
The company reported total sales of CHF 15.4 billion in the fourth quarter of 2020, up 1% from the year-ago quarter.
Sales in 2020 came in at CHF 58.3 billion, down 5% from last year, due to the negative impacts of the coronavirus outbreak. Earnings per share came in at CHF 19.16 in 2020, down from CHF 20.16 in 2019.
The company reports results under two divisions — Pharmaceuticals and Diagnostics. All growth rates mentioned below are on a year-over-year basis and at constant exchange rates.
Sales at the Pharmaceuticals division were down 2% to CHF 44.5 billion due to stronger-than-expected biosimilars competition for legacy drugs like MabThera/Rituxan, Herceptin and Avastin (an estimated combined CHF 5.1 billion of sales reduction in the United States, Europe and Japan) and the COVID-19 pandemic. Nevertheless, the decline was partially offset by growth in new drugs (launched since 2012), including Tecentriq, Hemlibra, Ocrevus, Kadcyla and Perjeta.
The Diagnostics division sales were up 14% to CHF 13.8 billion driven by COVID-19 testing. However, routine testing declined as COVID-19 caused delayed patient visits to physicians.
2020 in Detail
Herceptin sales fell 34% to CHF 3.7 billion due to biosimilar competition in the United States, Europe and Japan. Sales in the United States also declined due to the switch to Kadcyla (treating HER2-positive breast cancer) in the adjuvant setting.
Perjeta sales grew 18% to CHF 3.9 billion due to increased demand for adjuvant, early breast cancer therapy. Kadcyla sales soared 34%, driven by increased demand owing to its usage in the early breast cancer setting.
Sales of Avastin, approved for multiple oncology indications, were down 25% due to biosimilar competition in the United States, Europe and Japan.
Sales of Rituxan/MabThera (blood cancer and rheumatoid arthritis) declined 31% due to the launch of biosimilars in the United States, most EU markets and Japan as well as market contraction due to COVID-related restrictions.
Sales of Ocrevus, used to treat two forms of multiple sclerosis, rose 24% to CHF 4.3 billion on continued global growth.
Immuno-oncology drug, Tecentriq (for advanced lung cancer, urothelial cancer and breast cancer) recorded 55% year-over-year sales growth to CHF 2.7 billion, driven by the inclusion of new indications — extensive-stage small cell lung cancer (ES-SCLC) and triple-negative breast cancer and unresectable or metastatic hepatocellular carcinoma.
Sales of lung cancer drug, Alecensa, surged 40% on solid growth across all regions.
Performance of the immunology franchise was driven by 32% growth in arthritis drug Actemra/RoActemra sales as a number of countries included this medicine in their treatment guidelines for severe COVID-associated pneumonia. Asthma drug Xolair recorded 2% growth.
Gazyva/Gazyvaro sales grew 21%. Sales of hemophilia A drug, Hemlibra, surged 68% to CHF 2.2 billion, fueled by strong uptake in the United States and Europe despite COVID-19 restrictions having some impact on potential new patients.
Sales of ophthalmology drug, Lucentis, were down 16% as patients delayed their visits to physicians due to the COVID-19 pandemic. Roche has a collaboration agreement with Novartis (NVS - Free Report) for this drug.
Esbriet, indicated for idiopathic pulmonary fibrosis, were up 4% driven by increased use in indications other than IPF in the United States.
Revenues at the Diagnostics division rose owing to 90% growth in Molecular Diagnostics, driven by molecular COVID-19 tests. However, routine testing decreased as a result of delayed regular health checks and medical appointments. In 2020, Roche developed 15 solutions for SARS-CoV-2 diagnosis including both molecular and immunodiagnostic tests for clinical laboratory and point of care. Roche expects that these new tests as well as the existing diagnostics menu for critical care will continue to boost the division as large parts of the population are yet to be vaccinated and COVID-19 medicines are still not widely available.
2021 Guidance
Sales are expected to grow in low- to mid-single digits. Core earnings per share are estimated to rise broadly in line with sales.
Pipeline Progress
Tecentriq in combination with Avastin was approved for unresectable hepatocellular carcinoma (a form of liver cancer) in EU and China.
In 2020, Roche entered into a number of new partnerships, including with Gilead (GILD - Free Report) , Regeneron (REGN - Free Report) and Atea, to develop, manufacture and/or distribute molecules that potentially can both treat and prevent COVID-19.
Roche has entered into a partnership with Regeneron for its antiviral antibody cocktail (casirivimab and imdevimab) for COVID-19.
In December, Elecsys Anti-SARS-CoV-2 S antibody test received the Emergency Use Authorization (EUA) from the FDA.
Our Take
Roche’s performance in the fourth quarter and 2020 was dismal as COVID-19 disruptions and biosimilar competition weighed on the pharmaceuticals business, which comprises roughly 75% of the revenues, and offset growth in Ocrevus, Perjeta, Tecentriq and Hemlibra.
Nevertheless, demand for Roche’s diagnostic tests is expected to remain consistent as the pandemic continues and should positively impact performance in 2021.
Roche currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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