Roche (RHHBY) 2019 Sales Solid on Robust Show by New Drugs

Swiss pharma giant Roche Holding AG RHHBY reported solid sales growth in the fourth quarter and 2019, propelled by strong performance of new drugs.

The company also provided an encouraging annual guidance for 2020.

Roche’s stock has gained 24.6% in the past year compared with the industry’s growth of 12.1%.

 

The company reported sales of CHF 15.4 billion in the fourth quarter of 2019, up 6% from the year-ago quarter. Sales for 2019 came in at CHF 61.5 billion, up 8% from the year-ago period. Earnings per share came in at CHF 20.16 in 2019, up from CHF 18.14 in 2018.

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 11%, driven by strong growth in multiple sclerosis drug Ocrevus, the new hemophilia drug Hemlibra and oncology drugs Tecentriq and Perjeta. This more than offset the impact of the biosimilar competition for MabThera/Rituxan and Herceptin in Europe and Japan and that for MabThera/Rituxan, Herceptin and Avastin in the United States.

Diagnostics division sales climbed 3%, primarily on the back of strong immunodiagnostic business.

Results in Detail   

Herceptin sales fell 12% due to biosimilar competition in Europe and Japan. Sales in the United States declined due to the switch to Kadcyla in the adjuvant setting along with the entry of biosimilars in July 2019.

Perjeta sales grew 29%, owing to increased demand for adjuvant early breast cancer therapy.  Kadcyla sales soared 45% due to strong demand in the United States.

Sales of Avastin, approved for multiple oncology indications, were up 4%. However, sales in the United States in the second half were affected by the first biosimilar launch in July 2019.

Sales of Rituxan/MabThera declined 4% due to the entry of biosimilars in Europe and Japan.

Sales of Ocrevus, the drug used to treat two forms of multiple sclerosis, surged 57% on continued global growth.

Immuno-oncology drug, Tecentriq (for advanced bladder cancer and advanced lung cancer), recorded 143% year-over-year growth in sales, driven by the inclusion of new indications — extensive-stage small cell lung cancer and triple-negative breast cancer.

Sales of lung cancer drug, Alecensa, surged 38% on solid growth across all regions.

Performance of the immunology franchise was driven by 8% growth in Actemra/RoActemra sales and 1% in Xolair sales. Gazyva/Gazyvaro sales jumped 43%. Sales of hemophilia A drug, Hemlibra, surged more than 500%, fueled by strong uptake in the United States, Japan and Europe.

Sales of ophthalmology drug, Lucentis, grew 8%. Roche has a collaboration agreement with Novartis NVS for this drug.

Revenues at the Diagnostics division rose 3%, owing to 6% growth in Molecular Diagnostics. Centralized and Point of Care Solutions grew on the back of the immunodiagnostics business.

2020 Outlook

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 fourth quarter. The FDA approved immuno-oncology drug Tecentriq in combination with chemotherapy for the initial (first-line) treatment of adults with metastatic non-squamous non-small cell lung cancer (NSCLC) with no EGFR or ALK genomic tumor aberrations.

The FDA also approved a supplemental New Drug Application (sNDA) for Xofluza (baloxavir marboxil) for the treatment of acute, uncomplicated influenza, or flu, in patients 12 years of age or older.

The European Commission approved Kadcyla as an adjuvant (after surgery) treatment of HER2-positive early breast cancer.

The FDA also accepted risdiplam for Priority Review for the treatment of spinal muscular atrophy (SMA).

In December, Roche acquired Spark Therapeutics, Inc. The company also signed a licensing agreement with Sarepta Therapeutics, Inc., SRPT, which provided the former with exclusive commercial rights to SRP-9001, the latter’s investigational gene therapy for Duchenne muscular dystrophy (DMD), outside the United States. SRP-9001 is currently in clinical development for the same.

Our Take

Roche’s performance in 2019 was impressive as strong growth in Ocrevus, Perjeta, Tecentriq and Hemlibra countered biosimilar competition for Herceptin and MabThera from the likes of Amgen AMGN.

Meanwhile, the company continues to progress with its pipeline, as it looks to restructure the portfolio beyond oncology into MS and hemophilia, among others. The approvals of Polivy and Rozlytrek should further drive sales.

Roche currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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