Roche’s Expansion In Africa Is a Good Long Term Move, Though The Immediate Opportunity is Small

+29.53%
Upside
32.64
Market
42.28
Trefis
RHHBY: Roche logo
RHHBY
Roche

Roche Holdings (NASDAQ:RHHBY) plans to expand its reach in Sub-Saharan Africa over the next five years. The company aims to get an additional patient pool of 56,000 by 2020 by leveraging its strength and expertise in oncology and other relevant disease areas. [1] More specifically, the focus will be on breast cancer, cervical cancer, ovarian cancer and hepatitis C. Considering Africa’s per capita income and the state of government and private healthcare systems, the immediate opportunity is low. We believe that the meaningful impact will be visible in the next 5-10 years. At this point, the move will not be significantly accretive to earnings. From a long-term perspective, expansion in Africa is a good strategy as the expected growth in economy and subsequently, healthcare expenditure, will boost pharmaceutical sales. The region has a high incidence of viral, bacterial and parasitical diseases, as well as a large number of cancer patients.

Our price estimate for Roche Holdings (NASDAQ:RHHBY) stands at $36.56, which is roughly in-line with the market.

See our complete analysis for Roche

Relevant Articles
  1. Is Roche Stock Undervalued At $33?
  2. What’s Driving Roche Stock?
  3. Company Of The Day: Roche Holdings
  4. What’s Happening With Roche (RHHBY) Stock?
  5. What’s Next For Roche Stock?
  6. Should You Buy, Sell, Or Hold Roche Stock At $42?

Roche stated in its press release that the diseases it plans to focus on are high priority. In 2012, about 150 million people had hepatitis C in sub-saharan Africa. [1] Additionally, 400,000 women were diagnosed with breast cancer in the same year with annual cervical cancer related deaths totaling 54,000. [1] Is that large enough to make a difference? Let’s compare it to the situation in the U.S. According to breastcancer.org, about 292,130 new breast cancer cases are expected to be diagnosed in 2015. So, the addressable market in sub-saharan Africa is considerably larger. However, extreme poverty, low per capita income, lack of health insurance and apt medical facilities result in a very small fraction of patients who are able to seek and get proper medication. This gap is likely to take decades to fill. Also, the pricing that Roche can command in this region is likely to be significantly lower than that in the U.S., so the dollar opportunity will not be proportional to the number of patients. However, the long-term potential is huge and we expect many big pharma firms to gradually establish their foothold in Africa. As these economies develop, the capacity to fund pharmaceutical treatment will grow considerably.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

Notes:
  1. Roche Launches a New Strategy in Africa, Roche Press Release, Jun 24 2015 [] [] []