FDA Approval Of Hemlibra, Gazyva A Big Positive For Roche

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Roche’s (NASDAQ:RHHBY) hemophilia A therapy – Hemlibra – was recently approved by the FDA. This is a big win for Roche, as the drug’s estimated peak sales are touted to be as high as $5 billion. Earlier in July 2017, the company stated that in its clinical trials, Hemlibra substantially reduced bleeding in adults and children with hemophilia A. It should be noted that hemophilia A occurs in 1 in 5,000 live male births. The number of people with hemophilia in the United States is estimated to be about 20,000, while the worldwide figure is estimated to be over 400,000 people. Most of these incidents have either have no access to treatment or they receive inadequate treatment. In fact, Roche’s Hemlibra will be the first new medicine in nearly 20 years to treat people with hemophilia A.

Last week, Roche also received FDA approval for Gazyva, used for previously untreated advanced follicular lymphoma. Gazaya showed solid results in phase 3 trials with patients, compared to the use of a Rituxan-based regimen as a first-line therapy. It should be noted that Rituxan is a blockbuster drug for Roche, with 2016 sales of around $6 billion. However, during Q3 2017, Rituxan’s performance raised eyebrows with a double-digit dip in sales in Europe. Q3 2017 marked only the second quarter during which the drug faced biosimilar competition in Europe, and this trend could lead to a meaningful erosion in the company’s top line going forward. Now with Gazyva’s approval, the drug will surely help to compensate some of the expected Rituxan losses in the coming years. In fact, the peak sales of Gazyva are touted to be around $3.5 billion.

Time and again Roche has been successful in launching new drugs, and the company has a strong position, especially in the growing cancer therapy market. The initial performance of recently launched Ocrevus, which is used to treat multiple sclerosis, is encouraging, with $500 million in year-to-date sales and expected peak sales of $6 billion. Hemlibra will likely be another blockbuster drug for Roche. These developments suggests that the company is looking to expand its lead beyond cancer in other therapeutic areas as well.

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Our price estimate of $33 for Roche implies over 10% premium to the market.

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