Roche Continues Steady Growth
Roche’s (NASDAQ:RHHBY) recently released Q2 2017 earnings emphasize its research-centric robust business model, which has kept its results afloat despite competitive concerns. We believe that Roche’s mix of defensive and aggressive strategies positions it well as the pharma industry undergoes a shift – with new biosimilars getting approval and drug pricing concerns emerging in the U.S. Roche has successfully monetized combination therapies in the past that offer incremental benefits, in order to protect pricing and revenues of its existing drugs. It has consistently expanded in the adjuvant therapy area, and in general, has been successful in expanding use cases through research. This continues to reflect in its quarterly results, with Perjeta growing nearly 17% to more than CHF 1 billion.
Roche has also been successful at launching new drugs and has a strong position in the growing cancer therapy market. The initial performance of recently launched Ocrevus suggests that the company is looking to expand this lead in other therapeutic areas as well. The drug is aimed at treating multiple sclerosis, and raked in nearly $200 million in revenue in the first quarter of its launch. We estimate the drug’s peak sales to be north of $6 billion. In addition, new cancer drug Tecentriq continued its impressive ramp up.
However, Roche’s legacy behemoths – Avastin, Herceptin, and Rituxan – will soon face biosimilar competition. While Roche’s efforts to defend its existing franchises are commendable, we have previously stated that investors should focus on the company’s commitment to its pipeline and new launches. It appears that with the impressive Q2 results of new drugs, the company did emphatically signal that commitment.
Our price estimate of $33 for Roche implies a slight premium to the market.
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