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Roche (RHHBY) Q1 Sales Grow on Solid Performance of New Drugs

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Swiss pharma giant Roche Holding AG (RHHBY - Free Report) reported robust sales in the first quarter of 2020, propelled by the strong performance of new drugs. Notably, the company confirmed its outlook for the year amid the global coronavirus outbreak.

Roche’s stock has gained 6.6% in the year so far against the industry’s decline of 3%.

 

The company reported sales of CHF 15.1 billion in the first quarter of 2020, up 2% 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 7% to CHF 12.3 billion, driven by strong growth in multiple sclerosis drug, Ocrevus; hemophilia drug, Hemlibra; immuno-oncology drug, Tecentriq; and breast cancer drug, Perjeta. This more than offset the impact of the biosimilar competition for older drugs.

Diagnostics division sales climbed 5% to CHF 2.9 billion, primarily on the back of a strong molecular testing business.

Results in Detail   

Herceptin sales fell 24% 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 22%, owing to increased demand for adjuvant, early breast cancer therapy.  Kadcyla sales soared 55% due to strong demand in the United States, Europe and other international markets.

Sales of Avastin, approved for multiple oncology indications, were down 13% due to biosimilar competition in the United States and Japan.

Sales of Rituxan/MabThera (blood cancer and rheumatoid arthritis) declined 15% due to the entry of biosimilars in the United States, Europe and Japan.

Sales of Ocrevus, the drug used to treat two forms of multiple sclerosis, surged 38% on continued global growth.

Immuno-oncology drug, Tecentriq (for advanced lung cancer, urothelial cancer and breast cancer), recorded 99% year-over-year sales growth, driven by the inclusion of new indications — extensive-stage small cell lung cancer (ES-SCLC) and triple-negative breast cancer.

Sales of lung cancer drug, Alecensa, surged 43% on solid growth across all regions.

Performance of the immunology franchise was driven by 30% growth in arthritis drug Actemra/RoActemra sales and 3% in Xolair sales. Gazyva/Gazyvaro sales jumped 49%. Sales of hemophilia A drug, Hemlibra, surged more than 146%, fueled by strong uptake in the United States, Japan and Europe.

Sales of ophthalmology drug, Lucentis, were down 13% 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.

Revenues at the Diagnostics division rose owing to 29% growth in Molecular Diagnostics, driven by molecular testing. While emergency and COVID-19 testing strongly increased, routine testing decreased as a result of declining regular health checks.

2020 View Reiterated

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  

Roche made encouraging pipeline progress in the year so far. Tecentriq was approved in China in combination with chemotherapy (carboplatin and etoposide) for the first-line treatment of patients with ES-SCLC.

Polivy was approved in Europe in combination with bendamustine and MabThera/Rituxan for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma, who are not candidates for a hematopoietic stem cell transplant. The European Commission also approved Venclexta/Venclyxto in combination with Gazyva/Gazyvaro for the treatment of adult patients with previously-untreated chronic lymphocytic leukemia.

The cobas SARS-CoV-2 test, for the detection of coronavirus, was launched following an Emergency Use Authorization from the FDA and is also available in markets accepting the CE mark.

Meanwhile, Roche initiated a randomized, double-blind, placebo-controlled phase III study in collaboration with the Biomedical Advanced Research and Development Authority (BARDA) to evaluate the safety and efficacy of Actemra/RoActemra plus standard of care in hospitalized adult patients with severe COVID-19 pneumonia compared to placebo plus standard of care.

Our Take

Roche’s performance in the first quarter was impressive as strong growth in Ocrevus, Perjeta, Tecentriq and Hemlibra countered biosimilar competition for Herceptin and MabThera from the likes of Amgen (AMGN - Free Report) and Allergan . The approvals of Polivy and Rozlytrek also boosted performance.

While the company ensured that the global supply chain for medicines and tests remain intact, the COVID-19 outbreak will affect performance, going forward. Moreover, chronic disease studies will be negatively impacted due to the uncertainty regarding the duration and severity of the pandemic.

Nevertheless, a positive outcome from the Actemra study for COVID-19 will be significant boost for the company. Moreover, demand for Roche’s diagnostic tests should maintain momentum.

Roche currently 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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