Roche Holdings Q3 Sales Updates: What We Are Watching

by Trefis Team
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Roche Holdings
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Roche Holdings (PINK:RHHBY) is going to announce its Q3 sales updates on October 16. It will be the first major healthcare company in our coverage to announce its Q3 updates followed by Johnson & Johnson (NYSE:JNJ) on the same day. (See our note: Johnson & Johnson’s Q3 Earnings: What We Are Watching) We expect continued strong performance by key pharmaceutical drugs Avastin, Rituxan, Mabthera,  Herceptin and Pegasys supported by the diagnostics franchise.

Our price estimate for Roche Holdings stands at $47, in-line with the current market price.

See Full Analysis for Roche Holdings Here

Oncology to Drive Growth

The company has a formidable presence in the global oncology (cancer treatment) drug market with a range of successful products such as Avastin, Herceptin, Mabthera, Rituxan. Rituxan and Avastin have shown double digit growth in last couple of quarters. We have big expectations from these drugs in Q3 2012 as well. Other drugs Hypetitis C drug Pegasys and cancer drug Xeloda are also expected to post strong sales. Sales of eye drug Lucentis may continue to be hit by increased competition.

Roche’s In Vitro Diagnostics segment, which accounts for 15% of our price estimate, has displayed rapid growth over the past few years on growing demand from emerging markets such as India, China and Latin. We expect the division to continue to show mid-single digit growth.

After its failed bid to acquire Illumina early 2012, it will be interesting to see if the company has another target in its mind.

Strong Long Term Outlook

Roche has invested heavily in R&D for oncology drugs including breast cancer. (Read Roche Defends $47 Value With Strong R&D Pipeline) Roche’s two drugs T-DM1 and Perjeta target mainly HER2-positive breast cancer. We particularly are optimistic on T-DM1′s prospects, which could turn into a blockbuster drug for Roche in time as its current blockbuster breast cancer drug Herceptin could see a decline in revenues, according to PHARE study. The drug can garner more than $1 billion each year for original indication. The recent approval of experimental breast cancer drug Perjeta (pertuzumab) for HER2 positive breast cancer will also lend support.

While the company recently received a setback for its promising under-trial cardiovascular drug Dalcetrapib as it failed to boost good HDL cholesterol significantly, we believe it still has some other promising drugs in its pipeline. Another cardiovascular drug, RG7652, is moving toward advanced trials after significantly reducing levels of bad LDL cholesterol. Further, the company’s pipeline for Alzihmer’s also looks promising.

In addition, Roche is adapting a strategy to combine pharmaceutical pipeline projects with the development of companion diagnostics in order to make treatments more effective. The suitability of some of the unique drugs developed by Roche for patients are ascertained by tests conducted by Roche’s Diagnostics division. This helps both of its divisions grow together.

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