Despite Key Patent Losses Roche Could Add $5 Billion In Sales Over The Next 3 Years

by Trefis Team
Roche Holdings
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Roche Holding (NASDAQ:RHHBY) has added roughly $6 billion in sales between 2015-2018. However, the company’s key blockbuster drugs – Avastin, Herceptin, and Rituxan – will likely be competing with biosimilars given the patent losses. In fact, we calculate $3 billion in expected lost sales from patent losses of these drugs. Roche will likely be able to more than offset these declines and add $5 billion in sales over the next three years, primarily with its relatively newer drugs, Perjeta, Ocrevus, Kadcyla, Tecentriq, and Alecensa.

Roche is a Swiss healthcare company with a global presence. The firm operates in two main segments: Pharmaceuticals and Diagnostics. The pharmaceutical segment produces drugs in various therapeutic segments, primarily Oncology, Immunology, Neuroscience, Anti-Infectious, and Ophthalmology. Roche has the largest oncology drug market share in the world with a range of successful products, including Avastin, Herceptin, and Rituxan. In this note we look at Roche’s revenue sources, historical growth, future projections, and the company’s business model. You can look at our interactive dashboard analysis ~ RHHBY Revenues: How Does Roche Make Money? ~ for more details. In addition, look at our data for healthcare companies here.

Roche Generates Its Revenue From Sales of Pharmaceutical And Diagnostics Products. Its Largest Segment In Terms of Revenues Is Oncology, Which Accounted For Roughly Half of Total Revenues In 2018.


Roche’s Business Model

  • What Need Does It Serve?
    • Roche primarily serves the pharmaceuticals and diagnostics products markets. The company discovers, develops, and sells pharmaceutical products globally. Its drugs are used for the treatment of various types of diseases, including cancer, heart-related, and infectious, among others.
    • Roche has the largest oncology drug market share in the world with a range of successful products, such as Avastin, Herceptin, and Rituxan. The company also has a leading market position in in-vitro diagnostics.
  • Who Pays To Roche?
    • Chain stores (Walgreens, CVS, Rite-Aid, Walmart), clinics, long term care facilities, health maintenance organizations, federal facilities, non-federal institutions, mail order pharmacies, and retail stores.
  • What Buyers Care About?
    • Price
    • Subsidies available in the form of reimbursements
    • Availability
    • Any possible side effects
    • For Diagnostics, buyers care about Technological innovation, convenience of use, product performance, and service/product warranty.
  • What Are The Alternatives To Roche?
    • Within pharmaceuticals, other alternatives are Bristol-Myers Squibb, Johnson & Johnson, Pfizer, Merck, Abbvie, GlaxoSmithKline, and Teva, among others.
    • Outside of pharmaceuticals, other alternatives are acupuncture, aromatherapy, ayurvedic medicine, chiropractic care, homeopathy, and nutritional counseling, among others.
    • In Diagnostics, Roche competes with Abbott Labs, Siemens, GE Healthcare, Johnson & Johnson, Novartis, and Hitachi Medical Corp, among others.

Roche’s Total Revenue Grew 11% Between 2014 And 2018, And It Could Grow Another 8% By 2021, Led By The Company’s New Drugs.

  • Roche’s total revenue grew from $54.8 billion in 2014 to $60.7 billion in 2018.
  • This growth was largely led by its immunology and neuroscience portfolios, which benefited from Xolair and Actmera sales growth, and the company’s 2017 launch of Ocrevus, which marked the best drug launch for Roche and garnered over $2 billion in sales in 2018. This also explains the jump seen in revenue growth in 2018.
  • However, as we look forward, the revenue growth rate could slow to low single-digits, with revenues expected to be north of $65.5 billion by 2021, for the factors discussed in the following section.

Revenue Will Likely Grow In Low Single-Digits Over The Next Few Years, Given The Recent Losses of Market Exclusivity For Some of The Drugs, Which Will Likely Be More Than Offset By The Company’s Relatively New Drugs.

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