Despite multiple patent expirations of some of its key drugs, including Avastin, Herceptin, and Rituxan, Roche (OTCMKTS:RHHBY), one of the largest pharmaceutical companies with a market capitalization of close to $300 billion, saw its sales increase from $53.2 billion in 2016 to $64.4 billion in 2019. What drove this growth was Roche’s relatively new drugs, which have seen market share gains over the recent years. Sales from these new drugs, such as Tecentriq, Perjeta, and Kadcyla among others, have seen a 2.5x growth from $3.2 billion in 2016 to $8.3 billion in 2019, and we estimate the sales to further grow by 2x to $16.6 billion in 2023. In our interactive dashboard, ‘Roche Revenues: How Does Roche Make Money?‘, we discuss Roche’s business model, followed by sections that review past performance and 2020 expectations for the company’s revenue drivers, and competitive comparisons with Pfizer and Merck.
A Look At Roche’s New Drugs
Roche’s new drugs include Perjeta, Kadcyla, Gazyva, Esbriet, Alecensa, Tecentriq, Ocrevus, and Hemlibra among others. In the table below we highlight these drugs along with their primary indication, year of approval, first year sales, 2019 sales, and estimated peak sales.
|Drug||Indication||First Approved||First Year Sales ($ Bil)||2019 Sales ($ Bil)||Estimated Peak Sales ($ Bil)|
|Esbriet||Idiopathic Pulmonary Fibrosis||2014||0.59||1.14||3.00|
|Hemlibra||Reduce Bleeding – Hemophilia A Patients||2017||0.23||1.39||4.00|
To summarize, the 3 major old drugs – Herceptin, Rituxan, and Avastin – that have lost patents over the recent past, together garnered over $20 billion in peak sales for Roche, and the newer drugs that are listed above have a potential to garner $30 billion in peak sales over the coming years. These drugs have been gaining market share of late, and they are expected to drive the future growth for Roche. A decline in sales of older drugs will be more than offset by the growth in sales of newer drugs, implying a steady top line growth over the coming years, in our view. Furthermore, some of these drugs are being studied in phase 3 for newer indications, along with some new drugs, which if approved, could further bolster Roche’s top line.
Covid-19 Impact On Roche’s Business
- With restrictions on movement, amid the wide spread of coronavirus, there were fewer visits to hospitals for non-emergency and non-Covid cases over the recent months. Many elective surgeries were also postponed directly impacting Roche’s sales.
- Roche’s two devices ~ cobas 6800 and cobas 8800 received FDA approval on March 13 for testing the coronavirus. These devices have a very limited installed base of around 800 devices globally, with a capacity of 5,568 tests per device in a 24 hour window. The company is also aiming to supply 400,000 test kits per week.
- Despite a challenging environment, Roche reported a 1% growth in sales on a constant currency basis. Similarly, Roche’s Core EPS also grew 2% on a constant currency basis.
- The company has reaffirmed its outlook for low to mid-single-digit growth in the top and bottom line for 2020.
- Roche’s ADR at $43 has seen close to 8% growth year-to-date, while it is up 23% from the Mar 23 lows of $35.