Recently, pharmaceutical research group Decision Resources released a report which forecasts the breast cancer market in major markets to rise from $8.6 billion in 2011 to $10.9 billion in 2018 backed by new premium-priced drugs including drugs from Roche Holdings (PINK:RHHBY) and the addition of new patients.  Here is why we think Roche is well-placed to tap this expected growth.
Roche holds a strong position in the oncology drug market with some of the world’s best-selling oncology drugs such as Avastin, Herceptin, Mabthera/Rituxan, Xeloda and Tarceva. Roche has invested heavily in R&D for oncology drugs including breast cancer and has a range of pipeline drugs in addition to highly successful products already available in the market. Recently, the company’s experimental breast cancer drug Perjeta (pertuzumab) got the FDA approval for HER2 positive breast cancer. HER2 is more aggressive than other breast cancers and spreads quickly. The drug is to be used in combination with the company’s current breast cancer drug Herceptin (trastuzumab). The company also has a late-stage “armed antibody” for HER2 positive breast cancer, T-DM1, which is likely to get FDA approval soon following its encouraging results in clinical trials. 
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According to Decision Resources, HER2-positive currently constitutes nearly 55% of the breast cancer market even as the number of patients accounts for nearly 25-30% of breast cancer cases. This is due to the premium charged for drugs used to treat HER2-positive patients. HER2-positive market’s share in the overall breast cancer market is expected to increase further to 65%.  So, this market segment is expected to grow between $4.8 billion and $6.8 billion at a much faster rate than the overall breast cancer market, and Roche’s above-mentioned drugs target mainly this segment. Consequently, the company can benefit more from the expected growth than its competitors.
Our price estimate for Roche Holdings currently stands at $47, about 5% ahead of the current market price. The oncology segment accounts for more than 50% of the company’s value, according to our estimates. Most of its pipeline drugs are capable of being commercially successful, if approved, which would help the company maintain its market leadership in the segment. By tweaking the chart below, you can see how a change in the drug’s sales impacts our price estimate for the stock.Notes:
- Growth in the Breast Cancer Drug Market Through 2021 Will Be Driven by New Entrants from Roche/Genentech and Novartis in Select Market Segments and an Increase in Incident Cases, FierceBiotech, August 16 2012 [↩] [↩]
- Roche’s breast cancer drug gets FDA nod, Reuters, June 9 2012 [↩]