Expect Ocrevus To Drive Roche Holding’s Q3 Earnings Growth

by Trefis Team
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Roche Holdings
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Roche Holding (NASDAQ:RHHBY) is scheduled to announce its Q3 earnings on October 17. We expect mid-single digit growth in the company’s top line, primarily led by Ocrevus, which has seen strong growth in the recent past. However, Oncology drugs’ revenue growth could remain tepid, as growth in the sales of new drugs will mostly be offset by older drugs, including Rituxan, which will likely continue to see a double digit dip in Europe. We have created an interactive dashboard ~ What Is The Q3 Outlook For Roche Holding ~ on the company’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s adjusted earnings, and price estimate.

Expect Neuroscience Drugs Revenue To See Strong Growth

We forecast Roche’s Neuroscience, Metabolism & Other Drugs segment revenues to see strong growth in mid-twenties (percent) to north of $6.5 billion for the full year. This can primarily be attributed to its new drug Ocrevus, which garnered over $1 billion in sales in the first half of the year, marking Roche’s best drug launch ever. Ocrevus is used for the treatment of relapsing and primary progressive forms of multiple sclerosis. The company recently stated that data shows earlier Ocrevus treatment slows multiple sclerosis. The market size for multiple sclerosis is estimated to be over $17 billion, and it is expected to grow at a CAGR of 6% in the coming year. Roche’s Ocrevus will likely be a key player in this segment, and could garner as much as $5 billion in peak sales. Looking at the gross margins, they have remained stable at around 80% over the past few years, and we don’t expect any significant change in the near term.

Expect Oncology Drugs And In-Vitro Diagnostics To See Modest Revenue Gains

We forecast only a modest growth in the company’s largest segment – Oncology Drugs. The company has been facing a decline in its blockbuster drugs, such as Rituxan, which lost its patent exclusivity in Europe last year, and it will also lose the U.S. exclusivity this year. Note that Rituxan is an important drug for Roche, and it generated revenues of over $5.5 billion in 2017. However, the company has been focused on the launch of new drugs the past few quarters, in order to compensate the expected revenue loss from Rituxan, as well some other blockbuster drugs, which are expected to lose their patent exclusivity next year. Some of these new drugs includes, Tecentriq and Gazaya, which are expected to do well in the coming quarters. Also, Perjeta sales have seen steady growth in the recent past, and this trend will likely continue in the near term, and aid the overall segment revenue growth. Our forecast of only a modest growth in segment revenues can be attributed to the new drugs sales, which will mostly be offset by declines in some of the blockbuster drugs.

Looking at the company’s In-Vitro Diagnostics business, we expect growth to be in low single digits to around $12.4 billion in 2018. We expect the growth to be driven by its lab business, which saw mid-single digit growth in the previous quarter as well.  However, we don’t expect any significant revenue jump in this business for Roche, as there is stiff competition from the likes of Johnson & Johnson, and other players.

 

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