Some Hope For Alzheimer’s Patients From Biogen’s Data, But Upside For Roche Is Limited

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Roche

Our price estimate for Roche Holdings (NASDAQ:RHHBY) stands at $36.56, which is roughly in-line with the market. We are not boosting our estimate despite the recent news that Roche may re-open the trials for its experimental drug gantenerumab (contingent on further evaluation), which was being tested to treat Alzheimer’s disease, the most common form of dementia with a  growing patient base and no cure. The reasons are simple. First, the decision is based on recent study results announced by Biogen. The company was testing a similar drug targeting the beta amyloid protein. Although the data are promising, the study  is based on a small sample size. Second, almost 70% of Roche’s value comes from oncology drugs and diagnostics business, which means that the company’s competitive advantage lies elsewhere and not neurology. In fact, we estimate that neuroscience drugs constitute less than 5% to its value. A successful Alzheimer’s drug launch, which is still far off, will move the needle on Roche’s stock materially only if it can generate sales in the vicinity of $5 billion. Adjusting for the risk of not getting approval, which is quite high for Alzheimer’s, the upside is likely to be limited.

Nevertheless, this is good news for patients. An aging population will significantly expand Alzheimer’s patient count over the next decade as old age is one of the key risk factors. Currently, there is no cure for the disease and the drugs available in the market only relieve symptoms temporarily.

See our complete analysis for Roche

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According to World Health Organization, there are around 47.5 million people living with dementia with 7.7 million new cases added every year. [1] This figure is expected to reach 75.6 million by 2030. Alzheimer’s diseases constitutes around 60% to 70% of dementia cases so the current addressable patient pool is around 28 million to 33 million. There is definitely some money to be made here, but the fact that there has been little success in this area during the past decade casts doubts over near term commercial viability. It must be noted that Roche is evaluating gantenerumab in another trial for mild dementia caused by Alzheimer’s.

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Notes:
  1. WHO Dementia Facts []