Tecentriq And Ocrevus Will Drive Roche’s Near Term Growth

by Trefis Team
Roche Holdings
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Roche Holdings (NASDAQ:RHHBY) has seen modest revenue growth over the last few years, as it faces competition for many of its drugs. We believe the company’s revenues will grow in low single digits in the coming years, despite its loss of patent exclusivity for some of its blockbuster drugs. This can be attributed to its new drugs, such as Tecentriq, and Ocrevus, among others, and a bubbling phase 3 pipeline, which will offset revenue declines in its existing portfolio, in our view. Looking at 2018, we estimate mid-single digit top line growth for the company, primarily led by Ocrevus and Tecentriq sales. 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.

Expect Tecentriq And Ocrevus To See Solid Growth

We expect Roche’s Pharmaceuticals revenue to grow in mid-single digits in 2018, despite it facing biosimilar competition for its blockbuster drug Rituxan in Europe. This can be attributed to an expected ramp up in sales of its oncology drug Tecentriq and neuroscience drug Ocrevus. Both drugs have seen solid growth of late, and we expect this trend to continue in 2018. Tecentriq received FDA approval in 2016. The drug is aimed at treating the most common type of bladder cancer called urothelial carcinoma. Urothelial carcinoma accounts for more than 90% of all cases of bladder cancer. The drug could cost roughly $12,500 per month which is on similar lines with PD-1 inhibitors Bristol-Myers Squibb’s Opdivo and Merck’s Keytruda. We expect Tecentriq sales to double to roughly $1 billion, while Ocrevus sales could grow to $1.5 billion in 2018. Apart from Oncology and Neuroscience, Roche’s other Pharmaceuticals segments will likely continue to face decline in 2018, and beyond, due to patent loss and expected competition from biosimilars.

Beyond 2018, Roche will benefit from its strong phase 3 pipeline, which includes Idasanutlin and Taselisib, among others. These compounds are being tested for refractory chronic lymphocytic leukemia, acute myeloid leukemia and HER2- breast cancer, and the two drugs combined could garner as much as $6 billion in peak sales. The latter is also being tested for squamous non-small cell lung cancer in phase 2. This disease has a relatively large patient pool.

Our $34 price estimate for Roche is based on $2.10 expected EPS in 2018 and a price to earnings multiple of a little over 16. Our revenue forecast of $57.4 billion represents year-on-year growth of around 5%. Of the total expected revenues in 2018, we estimate $45.0 billion in the Pharmaceuticals segment, and In-Vitro Diagnostics making up for the rest. Our price estimate of $34 for Roche Holdings is a 20% premium to the current market price.


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