Roche Holding AG (RHHBY - Free Report) posted strong sales for the first quarter of 2019, propelled by demand for new drugs amid biosimilar competition for legacy drugs. Consequently, the company raised its guidance for the year.
Roche’s stock has gained 8% in the past six months against the industry’s decline of 1.1%.
The company reported sales of CHF 14.8 billion in the first quarter of 2019, up 9% from the year-ago quarter.
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 12%, driven by strong growth of Ocrevus, Perjeta, Tecentriq and Hemlibra. The strong uptake of newly introduced medicines was partially offset by lower sales of Herceptin and MabThera/Rituxan. The Diagnostics division sales climbed 1%.
Results in Detail
Herceptin sales fell 6% owing to biosimilar competition since mid-2018, which more than offset the growth in the United States and China. Perjeta sales grew 41%, following increased demand for adjuvant early breast cancer therapy. In total, the HER2-franchise (Herceptin, Perjeta and Kadcyla) sales were up 7% year over year.
Strong Ocrevus sales (+67%) further boosted the top line. The drug, used to treat two forms of multiple sclerosis (MS), continued to gain traction worldwide with sales of CHF 836 million.
Immuno-oncology drug, Tecentriq (for advanced bladder cancer and advanced lung cancer), recorded 135% year-over-year growth in sales. This growth was driven by inclusion of the new indications — extensive-stage small cell lung cancer and triple-negative breast cancer.
Sales of lung cancer drug, Alecensa, surged 61% and witnessed solid growth across all regions. Oncology drug, Avastin, recorded 9% growth.
Performance of the immunology franchise was driven by increased sales of Actemra/RoActemra (+6%) and Xolair (+1%). Gazyva/Gazyvaro sales jumped 35% due to growth in the United States and Europe.
Sales of ophthalmology drug, Lucentis, grew 11%. Roche has a collaboration agreement with Novartis (NVS - Free Report) for this drug. The growth was driven by increased sales in all approved indications. However, sales of Rituxan/MabThera declined 3% due to entry of biosimilars in Europe. Sales of Xeloda were up +5%.
Revenues at the Diagnostics division were up only 1% on the back of Molecular Diagnostics (+7%), led by the growth of its cervical cancer business. However, sales were impacted by one-time, supply-chain effects in Centralised and Point of Care Solutions in Asia-Pacific and coagulation monitoring systems in North America.
2019 Outlook Raised
Sales in 2019 are expected to grow in mid-single digits. The company expects core earnings to grow in line with sales. Roche anticipates to increase its dividend further.
Roche made encouraging pipeline progress in the first quarter. In particular, label expansions of immuno-oncology drug, Tecentriq, obtained approvals for various indications. The FDA approved Tecentriq in combination with carboplatin and etoposide (chemotherapy) for the initial (first-line) treatment of adults with extensive-stage small cell lung cancer.
The FDA granted accelerated approval to Tecentriq plus chemotherapy (paclitaxel protein-bound particles for injectable suspension) for the treatment of adults with unresectable locally advanced or metastatic triple-negative breast cancer in patients, whose tumours express PD-L1 as determined by an FDA-approved test.
The European Commission approved Tecentriq in combination with Avastin, paclitaxel and carboplatin for the first-line treatment of adults with metastatic non-squamous non-small cell lung cancer (NSCLC). The European Commission also approved Hemlibra for routine prophylaxis of bleeding episodes in people with severe haemophilia A without factor VIII inhibitors.
The European Commission also approved MabThera for the treatment of adults with moderate-to-severe pemphigus vulgaris.
Roche submitted a supplemental Biologics License Application to the FDA for Kadcyla for adjuvant treatment of people with HER2-positive early breast cancer (eBC), with residual disease after neoadjuvant treatment.
Roche posted strong sales in the first quarter, as it combated biosimilar competition in Europe. In particular, MS drug Ocrevus witnessed strong growth on increased demand amid stiff competition from Biogen (BIIB - Free Report) drugs.
The company continues to progress with its pipeline, as it looks to restructure the portfolio beyond oncology into MS and haemophilia, among others. Label expansion of Tecentriq for various indications should further boost sales. Meanwhile, Roche had earlier announced that it will acquire gene-therapy company, Spark Therapeutics (ONCE - Free Report) . Earlier this month, the company withdrew its Premerger Notification and Report Form in connection with the pending acquisition of Spark Therapeutics.
Roche carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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