Roche Holdings Q1 Preview: Rituxan Will Likely Continue To Decline While Tecentriq & Ocrevus May Lead Growth

by Trefis Team
Roche Holdings
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Roche Holdings (NASDAQ:RHHBY) is scheduled to announce its Q1 earnings on April 26. We don’t expect any significant growth in the company’s top line, as its key drug Rituxan may continue to face headwinds in Europe. The drug witnessed double digit declines in the previous two quarters, amid patent expiry in the EU, and increased competition from biosimilars. Rituxan is an important drug for Roche, with sales over $5.7 billion in 2017, and it is nearing patent expiry in the U.S. as well. Other key drugs – Avastin and Herceptin – which generated $13.5 billion in sales in 2017, are also nearing patent expiry in the U.S. This will have a significant impact the company’s Oncology segment in the coming years, in our view. We’ll also be looking for commentary on the hemophilia drug which was granted breakthrough therapy designation by the FDA earlier this month. We have created an interactive dashboard on Roche’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance.

Our price estimate of $36 for Roche implies a premium of over 25% to the market.

Expect Tecentriq And Ocrevus To See Solid Growth

We expect Roche’s Pharmaceuticals revenue to grow in low single digits in 2018, as it faces biosimilar competition for Rituxan in Europe. However, we expect Tecentriq and Ocrevus to do well in the near term. Both drugs have seen solid growth of late, and we expect this to continue in 2018. We expect Tecentriq sales to double to roughly $1 billion, while Ocrevus and Madopar sales could grow in double digits to north of $2 billion in 2018. Among other drugs, we estimate Perjeta to continue to do well and expect sales of over $2.5 billion in 2018. Apart from Oncology and Neuroscience, Roche’s other Pharmaceuticals segments will likely continue to face decline in the coming years, due to patent loss and expected competition from biosimilars and generics.

Diagnostics Will Likely See A Modest Growth Led By Emerging Markets

Looking at the company’s In-Vitro Diagnostics business, we expect growth to be in low single digit to a little under $13 billion in 2018. We expect the growth to be driven by emerging markets, including Latin America, Middle East and Asia Pacific. Emerging markets have been experiencing rapid economic growth, and Roche is increasingly focusing on these markets. In addition, Roche has increased its focus on diagnostics R&D, which should help in building its pipeline and launching new products in these markets. It should be noted that Roche has a formidable presence in in vitro diagnostics. Some of its best sellers are immune assays, blood glucose monitoring system, advanced tissue staining and tests for HIV and Hepatitis B & C. Having said that, we believe the growth will only be modest in the coming years, primarily due to stiff competition from the likes of Johnson & Johnson, and other players.

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