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Roche Holding AG's (RHHBY - Free Report) reported sales of CHF39.4 billion in the first nine months of 2017, up 5% from the year-ago period.

 

Roche’s stock has gained 7.2% year to date compared with industry’s gain of 23.8%.

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 increased 5% driven by strong growth in Tecentriq, Ocrevus, Alecensa and Perjeta which was partially offset by lower sales of Tarceva, Tamiflu and Avastin. Diagnostics division sales climbed 5% primarily on the back of strong immunodiagnostic business.

Results In Detail

Herceptin sales improved 2% due to increasing demand in the United States and Brazil along with additional reimbursement approvals and broader use in China. Perjeta sales grew 17% following increased demand in the neoadjuvant and metastatic settings in Europe, the United States and Brazil. Sales of Kadcyla (+9%) were driven by increasing demand in the international markets.

Meanwhile, sales of Avastin decreased due to increasing use of cancer immunotherapy medicines in lung cancer.

Sales of Rituxan/MabThera (2%) were driven by growth in oncology as well as in the immunology segments. Growth in Gazyva/Gazyvaro (40%) was strong despite increasing competition in chronic lymphocytic leukemia.

Recently launched drugs, Tecentriq for bladder cancer and Alecensa for lung cancer are off to a strong start. Tecentriq, Ocrevus and Alecensa contributed CHF 0.9 billion of new sales.

Performance of the immunology franchise was driven by increased sales of Actemra/RoActemra (13%), and strong uptake of Esbriet (11%) and Xolair (17%). Increasing use of Actemra/RoActemra as a single agent and in the subcutaneous formulation were the key growth drivers.

However, sales of Tarceva declined (17%) due to growing use of other therapeutic options. Sales of Xeloda (2%) continue to be hit by generic competition. Sales of Tamiflu also declined 12%.

Revenues at the Diagnostics division climbed 5% on the back of solid performance of the Centralised and Point of Care Solutions (7%) unit, which was in turn, propelled by Immunodiagnostics (13%). Tissue Diagnostics (13%) and Molecular Diagnostics (3%) also performed impressively.

However, Diabetes Care sales declined 2% as sales continue to be impacted by challenging market conditions, particularly in North America.

2017 Outlook Reiterated

Roche now expect sales to grow in mid-single digits. The company expects core earnings to grow in tandem with sales. The company intends to further increase its dividend in 2017 in local currency.

Pipeline Progress

Roche continues to expand cancer immunotherapy drug Tecentriq’s label. Tecentriq was approved in the United States as monotherapy for the treatment of patients suffering locally advanced or metastatic bladder cancer who have been previously treated with platinum-containing chemotherapy or who are considered ineligible for cisplatin chemotherapy, regardless of PD-L1 status. 

Arthritis drug RoActemra was approved for the treatment of giant cell arteritis. Gazyvaro in combination with chemotherapy was approved for previously untreated advanced follicular lymphoma. The FDA also approved Actemra intravenous injection for the treatment of chimeric antigen receptor (CAR) T cell-induced severe or life-threatening cytokine release syndrome in patients two years of age and older.

Our Take

Roche performance in the first nine months of 2017 was strong driven by contribution from newly launched drugs. The label expansion of key drugs will further drive growth. However, sales of Avastin and Tarceva continue to decline. Generic competition for Xeloda also continues to hurt sales.

We note that competition from biosimilars loom large on Roche's key drugs like Herceptin, Avastin and Rituxan. The first biosimilars for MabThera are already in the market. The company expect biosimilars for Herceptin towards 2017 end-early 2018. We note that Novartis AG (NVS - Free Report) has already launched its bisomilar version of Rituxan/ MabThera in Europe. Moreover, Roche is facing stiff competition from the likes of Merck & Co., Inc.’s (MRK - Free Report) Keytruda and Bristol-Myers Squibb Company’s (BMY - Free Report) Opdivo in the immuno-oncology space.

Zacks Rank

Roche currently carries a Zacks Rank #3 (Hold). You can see  the complete list of today's Zacks #1 (Strong Buy) Rank stocks here .

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