Roche’s Avastin Gets Approval For Ovarian Cancer, But Incremental Revenues Will Be Small

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Swiss pharmaceutical giant Roche Holdings (NASDAQ:RHHBY) has recently received the FDA approval for its blockbuster drug Avastin for the treatment of platinum-resistant recurrent ovarian cancer. This marks the second approval in the last three months for the drug, which continues to expand its usage to different cancer types. Avastin is already very successful, raking in more than $6.7 billion last year and growing by 6% in the first nine months of 2014. This makes it the company’s biggest selling product, slightly ahead of Herceptin and Rituxan. The recent approvals will add to the Avastin’s sales in the coming quarters, and re-establish Roche’ supremacy in the oncology market. With this recent development, Avastin is now approved for six different cancerous tumor types in the U.S.

A Phase 3 study showed that Avastin, when used in combination with chemotherapy, reduced the risk of worsening of platinum resistant ovarian cancer in women by 62% as compared to just chemotherapy. [1] The company mentioned that this is the first instance last 15 years when a new treatment option has emerged for this condition. So what is the incremental sales potential?

Our current price estimate for Roche stands at $38.54, implying a slight premium to the market price.

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Roche gives some statistics around ovarian cancer, which can help us gauge the drug’s incremental sales potential. An estimated 22,000 women will be diagnosed with ovarian cancer in 2014 in the U.S. alone, and around 14,000 are expected to die from the disease. [1] Platinum-resistant ovarian cancer is so named because it worsens within six months of completing platinum-based chemotherapy. Roche mentions that approximately 25% of relapse cases are platinum-resistant. In other words, approximately 4,300 women will be diagnosed with this condition this year in the U.S. [1] This means that the annual number of platinum-resistant ovarian cancer diagnosed cases will stand at roughly 20% of the overall number of ovarian cancer diagnosed cases. Considering typical monthly price for Avastin for treating a cancer patient weighing 70 Kgs (around $2900), and assuming treatment duration of tow to three months, Roche can add roughly $30 million annually from the newly diagnosed cases in the U.S. The overall revenue addition could be more if we consider the existing cases as well.

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Notes:
  1. FDA approves Roche’s Avastin plus chemotherapy to treat women with platinum-resistant recurrent ovarian cancer, Roche Press Release, Nov 17 2014 [] [] []