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Roche (RHHBY) Q1 Revenues Decline on Lower COVID-19 Test Sales

Swiss pharma giant Roche Holding AG’s RHHBY first-quarter revenues declined 7% to CHF 15.3 billion due to lower COVID-19-related sales.

Roche’s stock has gained 1.8% in the year so far compared with the industry’s growth of 3.6%.

 

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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 in the Pharmaceuticals Division were up 9% in the first quarter to CHF 11.7 billion, driven by strong global demand for newer drugs.

The Diagnostics division’s sales were down 28% as COVID-19 test sales dropped to CHF 0.3 billion in the first quarter of 2023 from CHF 1.9 billion in the same period last year, when demand was exceptionally high.

First Quarter in Detail

Sales of Ocrevus, used to treat two types of multiple sclerosis, increased 14% to CHF 1.6 billion as demand in both indications (relapsing and primary progressive forms of multiple sclerosis) remained strong.

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Perjeta’s sales grew 11% to CHF 1 billion due to continued high demand.

Sales of Hemlibra surged 24% to CHF 1 billion.

Immuno-oncology drug Tecentriq (for advanced lung cancer, urothelial cancer and breast cancer) recorded 15% year-over-year sales growth to CHF 920 million.

Actemra/RoActemra sales were down 12%.

Ronapreve, the antibody cocktail of casirivimab and imdevimab, for the treatment of recently diagnosed high-risk patients with mild to moderate COVID-19, generated sales of CHF 567 million, up 9%. Roche and partner Regeneron REGN collaborated for developing and manufacturing the cocktail.

Roche is responsible for distribution in Europe and other countries outside the United States and Regeneron is responsible for the United States.

Kadcyla sales were up 5% to CHF 509 million.

Asthma drug Xolair raked in sales of CHF 479 million, up 5%.

Herceptin sales were down 17% to CHF 477 million due to biosimilar uptake in various countries.

Sales of Rituxan/MabThera (for blood cancer and rheumatoid arthritis) declined 17% to CHF 459 million due to biosimilar erosion.

Ophthalmology drug Vabysmo (approved in 2022) sales came in at CHF 432 million, as sales of this new eye medicine showed an excellent uptake.

Sales of Avastin, which is approved for multiple oncology indications, were down 24% to CHF 416 million due to biosimilar competition in the United States and Europe.

Sales of the lung cancer drug Alecensa were up 9% to CHF 372 million.

The recently approved spinal muscular atrophy drug, Evrysdi, generated sales of CHF 363 million, up 62%.

Phesgo, a fixed-dose combination of Perjeta and Herceptin for subcutaneous injection, saw sales of CHF 241 million, up 72%.

Gazyva/Gazyvaro sales came in at CHF 197 million, up 24%.

Sales of the ophthalmology drug Lucentis declined 35% to CHF 167 million, primarily due to competitive pressure. Lucentis started facing biosimilars as soon as the first version (with a restricted label) came to market in the United States at the beginning of the third quarter of 2022.

Polivy generated sales of CHF 150 million.

Revenues in the Diagnostics division declined 28%. The decline in sales across all regions is primarily due to the lower demand for COVID-19 tests. Immunodiagnostic products, particularly cardiac tests, were the main growth drivers (+9%).

2023 Guidance

Roche expects a decrease in total sales in the low single-digit range (at constant exchange rates) due to the sharp decline in sales of COVID-19 products of roughly CHF 5 billion. Excluding this impact, sales growth is anticipated to be solid in both divisions’ base businesses. Core earnings per share are targeted to develop broadly in line with sales declines.

Our Take

Roche’s performance in the first quarter was ordinary as significantly lower COVID-19 product sales impacted the top line even though new drugs, namely Ocrevus, Hemlibra, Evrysdi and Tecentriq recorded growth and the uptake of the new eye drug Vabysmo (launched at the beginning of 2022), was outstanding.

Sales are likely to be impacted further due to the expected sharp decline in sales of COVID-19 products of roughly CHF 5 billion.  Competition from biosimilars for established cancer medicines like Avastin, MabThera/Rituxan and Herceptin also harmed sales.

Roche currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the healthcare sector are Novo Nordisk NVO and Sanofi SNY. Novo Nordisk currently sports a Zacks Rank #1 (Strong Buy) and Sanofi carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past 60 days, earnings estimates for NVO for 2023 have gained 6 cents to $4.52. NVO topped earnings estimates in three of the last four quarters and missed in the remaining one, the four-quarter earnings surprise being 3%, on average.

Over the past 60 days, earnings estimates for Sanofi have increased to $4.40 from $4.46 for 2023. SNY also surpassed estimates in three of the trailing four quarters and missing in the other, the average surprise being 7.68%.

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Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report

Sanofi (SNY) : Free Stock Analysis Report

Roche Holding AG (RHHBY) : Free Stock Analysis Report

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