Poor test results for Roche cloud growth prospects

Procter & Gamble Health

19/07/2017 11:51

* Roche hit by a run of sour news 
    * Biosimilar rivals massing on the horizon 
    * CEO has insisted Roche will continue growth 
 
    By John Miller 
    ZURICH, July 19 (Reuters) - A run of disappointing drug 
trials at Roche  ROG.S  has left analysts suggesting the view 
from its new 41-storey office building in Basel has become more 
clouded, with little chance of management now upgrading its 
growth forecast next week, when it reports first-half earnings. 
    Moreover, the first of a threatened flood of biosimilar 
copies of Roche's $22-billion-per-year trio of cancer drugs, 
Rituxan, Avastin and Herceptin, have now been approved in Europe 
and the United States. 
    Chief Executive Severin Schwan has long contended he can 
boost sales despite these new biosimilar drug launches, largely 
by developing new drugs to treat other diseases.  urn:newsml:reuters.com:*:nL8N19E45E 
    But Roche has just seen its new immunotherapy treatment 
Tecentriq fail a bladder cancer trial, even though a similar 
drug from rival Merck  MERK.NS  shone in a separate study. 
 urn:newsml:reuters.com:*:nL8N1IC120 urn:newsml:reuters.com:*:nL2N1IJ24U 
    That flop was closely followed by unimpressive data from 
Roche's Aphinity study that showed combining Roche's two breast 
cancer drugs Herceptin and Perjeta produced only a modest 
additional benefit. 
    As a result Kepler Cheuvreux analyst David Evans, last month 
cut his forecasts for peak Perjeta sales to $1.5 billion, from 
$3.5 billion previously.  urn:newsml:reuters.com:*:nL1N1IY1G5 
    "Apart from the underwhelming Aphinity data, Roche has had 
some other setbacks," Evans said in a note, citing the Tecentriq 
failure and the approvals of rival biosimilars - near copies of 
branded drugs derived from living organisms that cannot be 
exactly duplicated but show the same effectiveness. 
    "Their impact in the second half might limit Roche's chances 
of upgrading 2017 guidance," he said. 
    Roche now sees 2017 sales growth at a low- to 
mid-single-digit percentage, with core earnings per share 
growing in line with sales. 
    This year, the share price is up just 4.7 percent, half 
local rival Novartis's rise and among the laggards in the Stoxx 
600 Europe healthcare sector index  0#.SXDP , up 6.3 percent, 
despite some good news on Roche's development pipeline. 
    The U.S. Food and Drug Administration's approval of Ocrevus, 
the first regulator-backed drug against primary progressive 
multiple sclerosis, in March set the stage for Roche's next 
blockbuster.  urn:newsml:reuters.com:*:nL2N1H6024 
    Additionally, Roche's investigational haemophilia drug 
emicizumab is seen topping $1.5 billion in sales by 2022 as it 
wrests business from rival Shire  SHP.L , Thomson Reuters data 
shows.  urn:newsml:reuters.com:*:nL8N1K121F 
    Another of Roche's biosimilar-busting hopefuls, Alecensa, 
demonstrated better results than Pfizer's  PFE.N  Xalkori 
against lung cancer, paving the way for use in early treatment 
of the disease.  
    Roche also contends the Herceptin-Perjeta data is not as 
dire as some judge it and believes it still reinforces its case 
with regulators that the two medicines should be used together 
to keep breast cancer from returning. 
    "Our view is shared by many experts," a Roche spokesman 
said. 
     
    STRATEGY TEST 
    But meanwhile the threat of cheaper biosimilars displacing 
Roche's existing big-selling medicines is becoming a reality, 
with knock-offs from Novartis  NOVN.S , Celltrion  068270.KQ  
and Mylan  MYL.O  now coming on line  urn:newsml:reuters.com:*:nL4N1K548V. 
    Novartis's Rituxan copy was approved in Europe last month, 
and managers there said this week they expected biosimilars to 
steadily win over patients from the originals.  urn:newsml:reuters.com:*:nL8N1JG0OL 
    "It's only two weeks in," Novartis's Sandoz generics unit 
head Richard Francis said, of Rituxan's European launch. "But 
the reception we're seeing from physicians and payers and key 
stakeholders is very positive." 
    A Roche spokesman said the arrival of biosimilars is no 
surprise, but analysts remain concerned. 
    "Roche has $22 billion of revenues exposed to biosimilars," 
said Tim Race, a Deutsche Bank analyst, in a note. "The rapid 
pace of innovation, particularly in oncology, means we have a 
lower than historical level of visibility that Roche can 
maintain its market leadership." 
 ($1 = 0.9541 Swiss francs) 
 
 (Reporting by John Miller; Editing by Greg Mahlich) 
 ((J.Miller@thomsonreuters.com; +41 58 306 7734; Reuters 
Messaging: j.miller.thomsonreuters.com@reuters.net)) 
 
Keywords: ROCHE GROWTH/