Roche Zooms Past Forecasts with New Drug Launches

Q2 FY16 sales of breast cancer treatment Perjeta jumped 35% to CHF467 million

Source: Company's Website
Source: Company’s Website

Roche Holding AG (OTC: RHHBY), the world’s biggest maker of cancer drugs, announced its Q2 FY16 and H1 FY16 financial results on July21st, 2016. The Basel, Switzerland-based Company operates in the pharmaceuticals and diagnostics businesses worldwide. The Company offers pharmaceutical products for anemia, anticoagulation therapy, bone, cancer, cardiovascular, central nervous system, chlamydia, coagulation, diabetes, and drug metabolism disorder, and other diseases. It also provides diagnostic solutions for blood gas analysis; blood screening; cancer screening; cardiac markers; cardiovascular testing; cholesterol monitoring; coagulation monitoring, routing, and specialty testing; diabetes monitoring and therapy; and PCR clinical diagnostics. In addition, the Company offers amplification, gene expression and knockdown, genome sequencing, nucleic acid purification, protein analysis, and real-time PCR systems and products.

Roche operates under two main divisions: Pharmaceutical Division and Diagnostics Division. Read more about Roche’sfinancial results below.

Q2FY16 financial highlights

Source: Company's Presentation
Source: Company’s Presentation

Roche’sQ2 FY16 sales grew 6% to CHF12.60 billion, reflecting positive sales growth for the fifth consecutive year as compared to CHF11.75 billion in the year-ago quarter. The Pharmaceutical Division’s sales grew 5% to CHF9.66 billion during the quarter, while the Diagnostics Division reported an 8% growth to CHF2.94 billion on a constant exchange rate basis.

During the reporting quarter, Rituxan, Herceptin, and Avastin reported sales of over CHF1 billion on a constant exchange rate basis, while the newly launched breast cancer treatment Perjeta jumped 35% to CHF467 million.

H1 FY16 financial highlights

For H1 FY16, Roche’s group sales grew 5% on a constant exchange rate basis to CHF25.02 billion ($25.4 billion),beating forecasts of CHF24.79 billion,compared to CHF23.58 billion in H1 FY15.

Segmental highlights

Source: Company's Presentation
Source: Company’s Presentation

Pharmaceutical Division: Roche’s pharmaceuticals division posted a 4% rise in sales to CHF19.5 billion, driven by oncology and immunology medicines, in H1 FY16 at constant exchange rates. U.S. sales grew 4%, led by immunology treatments Xolair and Esbriet, as well as Herceptin and Perjeta against HER2-positive breast cancer. There was robust demand for Alecensa, which was recently launched in the U.S. for a specific type of lung cancer. Sales of Lucentis and Tarceva declined due to competition. In Europe, the 5% sales growth was driven by Perjeta, MabThera/Rituxan and Actemra/RoActemra especially in Germany and France. In the International region, the sales growth of 4% was driven by HER2 medicines, Avastin, and MabThera/Rituxan, partly offset by lower Pegasys sales due to competition from a new generation of hepatitis C treatments. In Japan, sales rose 2% driven by HER2 medicines, Alecensa, and Actemra/RoActemra.

Diagnostics Division: Roche’s Diagnostics division posted a 6% rise in sales to CHF5.6 billion at constant exchange rates during H1 FY16. All regions contributed to this growth, particularly Asia-Pacific, which reported 17% growth. Professional and Tissue Diagnostics reported robust demand. Diabetes Care sales were impacted by challenging market conditions, especially in North America.

R 2x2Roche’s H1 FY16 IFRS net income grew 3% at constant exchange rates and 4% in Swiss francs. The positive currency effect was driven by the weakening of the Swiss franc against the US dollar, the yen and the euro, partly offset by strengthening of Latin American currencies.

Roche’s core EPS rose 5% to CHF7.74, ahead of forecasts of CHF7.52. Core EPS grew 5.2% at constant exchange rates, slightly faster than sales. Core EPS growth reflects the strong underlying business performance, investments in the launch of new products and the product pipeline, the one-off accounting impact of changes to the Group’s Swiss pension plans, as well as an early bond redemption.Roche made a one-off accounting adjustment to its pension plan that boosted earnings by CHF426 million during H1 FY16.

Drug approvals

During Q2 FY16, Roche has been trying to bring a number of new drugs onto the market. In April 2016, the FDA granted accelerated approval to Venclexta, a drug to treat people with chronic lymphocytic leukemia. In May 2016, the FDA granted accelerated approval for Roche’s cancer immunotherapy drug Tecentriq for a specific type of bladder cancer. Also in May 2016, the subcutaneous formulation of MabThera/Rituxan received approval in the E.U. for chronic lymphocytic leukaemia. In June 2016, the European Commission approved Gazyva/Gazyvaro plus bendamustine for the second-line treatment of follicular lymphoma.

Source: Company's Presentation
Source: Company’s Presentation

Roche’s recent strategy of combining older cancer drugs with new molecules is also working well. The Company won regulatory approval in June 2016 to sell its blockbuster Avastin in Europe in combination with another of its older cancer treatments, Tarceva, for patients with a specific type of advanced lung cancer. Its blockbuster drug Herceptin is also being used as a component of Kadcyla, a recent treatment for breast tumors.

Drug pipeline

Roche has nine new medicines in clinical development; four are cancer drugs, and one is for multiple sclerosis. The Company now has over 50 ongoing study programs for cancer drugs that combine tumor medicines for optimal potency.

Roche has also made significant progress in late-stage development. In June 2016, the European Medicines Agency (EMA) and the FDA confirmed that the data submission for OCREVUS (ocrelizumab) is complete, and that it is reviewing the marketing applications for both relapsing and progressive multiple sclerosis. In addition, the FDA granted priority review for the US application with an action date of December 28th, 2016.

In June 2016, Roche’s largest clinical trial ever conducted in giant cell arteritis (GCA), a serious inflammatory disease of blood vessels, showed positive results in people with newly diagnosed and relapsing GCA.

Other highlights

In May 2016, Roche’s Diagnostic Division launched the CoaguChekINRange, the first Bluetooth-enabled home device that allows patients and their healthcare providers to check their coagulation status. In June 2016, Roche launched the cobas e801 module in countries accepting the CE Mark. This module is part of the cobas 8000 analyzer, and provides better immunochemistry testing capacity and an extensive test menu to laboratories with high testing volumes. Also in June 2016, the cobas liquid biopsy test for the detection of specific mutations of the epidermal growth factor receptor (EGFR) gene became the first FDA approved liquid biopsy test.

Guidance for FY16

Going forward, Roche confirmed its target for currency-adjusted sales growth in the low to mid-single digit percentage range for FY16. It also expects core EPS to be ahead of sales growth during the year.

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