Roche Holdings’ (PINK:RHHBY) second largest selling drug Avastin got the European nod for treatment of recurrent ovarian cancer (when ovarian cancer returns after 6 months of completion of platinum-based chemotherapy).^[1] The European Commission’s approval will add an additional revenue stream for the drug even as the drug is already approved as first-line treatment for women with advanced ovarian cancer. The event lends support to our expectations of continued growth in sales for Avastin as well as the company’s oncology division in the near future.

See Full Analysis for Roche Holdings Here

Roche has a formidable presence in the global oncology (cancer treatment) drug market with a range of successful products such as Avastin, Herceptin, Mabthera, and Rituxan.

Rituxan/MabThera and Avastin are some of the world’s largest-selling cancer drugs with each clocking over $6 billion in sales. Owing to the success of its drugs, Roche’s overall oncology drug sales increased from $19 billion in 2008 to more than $22 billion in 2011.

We expect Roche’s oncology drug sales to increase further at a good pace and reach $32 billion by the end of Trefis forecast period due to a number of factors. Several of Roche’s drugs have found additional indications over the ones they were manufactured for. For example, Zelboraf, a medicine for treatment of melanoma, is being tested for additional indications like metastatic melanoma and papillary thyroid cancer. There are 6 additional indications in the oncology segment for which Roche will file for approval in 2012 relating to Avastin, Herceptin, Tarceva and MabThera/Rituxan. Further, Roche has a formidable pipeline in the oncology drug segment and more than 10 other pipeline drugs are expected to be ready for filing in the next 2-3 years. In addition, most of its cancer drugs do not face near-term patents expiry.

Our price estimate for Roche Holdings currently stands at $47, in-line with the current market price. However, on the continuance of such approvals, its oncology drugs could clock more sales than we currently estimate. Further, oncology drugs have enjoyed high pricing due to absence of products that safely treat cancer, and prices are perceived to have not reached their ceiling yet. While we expect the growing competition and healthcare reforms to keep drug prices in check, the company may be able to capitalize its market leadership position to increase drug prices.

As the oncology segment is the largest revenue contributor and constitutes more than 50% to our price estimate, even a small out-performance with respect to our expectations will have a huge impact on the company’s valuation and could trigger an upside to our current price estimate for Roche.

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