Roche posts rise in first-half profit, boosted by cancer drug sales

Roche announced Thursday that first-half net income jumped 40 percent year-over-year to 6 billion Swiss francs ($6.4 billion), as sales were boosted by the performance of Avastin and the company's new breast cancer therapies Perjeta and Kadcyla. Overall revenue in the six-month period rose 4 percent to 23.3 billion francs ($24.9 billion), meeting analyst expectations, with sales of prescription drugs increasing by the same percentage to 18.2 billion francs ($19.4 billion).

CEO Severin Schwan remarked that the company "delivered strong operating results...driven by our existing portfolio [and] recently launched cancer medicines." Roche noted that in the second quarter, sales of prescription drugs rose 4 percent on a constant exchange rate basis to 9 billion francs ($9.6 billion), lifted mainly by Avastin, with sales from the drug jumping 13 percent versus the prior-year period to 1.6 billion francs ($1.7 billion). The company explained that the product benefited from increased use in ovarian cancer in Europe and colorectal cancer in both Europe and the US.

For other medicines, second-quarter sales of Rituxan, which is also sold as MabThera, and Herceptin were flat at 1.7 billion francs ($1.8 billion) and 1.5 billion francs ($1.6 billion), respectively. Meanwhile, revenue from Lucentis in the three-month period surged 18 percent year-over-year to 427 million francs ($457 million), mainly as a result of "solid uptake" in the diabetic macular oedema setting following FDA approval in this indication last August. In addition, sales of Xeloda climbed 3 percent to 388 million francs ($415 million), although revenue from Pegasys slipped 24 percent to 349 million francs ($373 million). Roche noted that the decline in sales of the hepatitis drug in the US and some European markets was a result of doctors anticipating the expected launch of second-generation triple-combination and interferon-free therapies at the end of 2013 and the beginning of 2014.

For newer products, quarterly revenue from Actemra jumped 33 percent to 258 million francs ($276 million), benefiting from growth of 38 percent in the US, 30 percent in Europe and 45 percent in Latin America. In addition, Roche reported first-half sales for Perjeta and Kadcyla of 108 million francs ($116 million) and 83 million francs ($89 million), respectively. Kepler Cheuvreux analyst Fabian Wenner described quarterly sales for Kadcyla, which was approved in the US in February, of 65 million francs ($69 million) as "a blowout result" for the product.

Roche added that second-quarter sales of prescription drugs in the US rose 7 percent on a constant exchange rate basis to 3.6 billion ($3.9 billion), with revenue in Europe up 2 percent at 2.3 billion francs ($2.5 billion). The company added the quarterly sales from its diagnostics unit increased 4 percent to 2.7 billion francs ($2.9 billion), as overall sales in the three-month period climbed by the same percentage to 11.7 billion francs ($12.5 billion).

The drugmaker said that based on its first-half performance, it reaffirmed its full-year outlook, with total sales expected to increase in line with last year’s growth on a constant exchange rate basis of 7 percent, with earnings predicted to grow ahead of revenue. Roche also indicated that it expects to further raise its dividend this year. Schwan explained that the company had always focused on dividends rather than buybacks as a way of returning cash to shareholders.

The executive also indicated that Roche would continue to look for bolt-on acquisitions of interesting technologies and products, although he declined to comment on reports of a potential bid for Alexion Pharmaceuticals (for related analysis, see ViewPoints: M&A rumour mill gathers pace, but analysts pour cold water on Roche/Alexion deal). "As far as our overall innovation strategy is concerned there is no change... It has always been our strategy to have internal and external innovation," Schwan remarked. However, the drugmaker is considering its position in cardiovascular and metabolic diseases following the recent failure of diabetes therapy aleglitazar (for further analysis, see ViewPoints: Why the aleglitazar setback will increase scrutiny on Roche’s R&D abilities outside of oncology). Daniel O’Day, head of the company’s pharmaceutical unit, said "it’s still too premature to say what we will do. We are still deciding."

Schwan noted that Roche wouldn’t be satisfied to be only a cancer company, pointing to experimental drugs in central nervous system disorders such as Alzheimer’s disease and lebrikizumab in asthma. The CEO suggested that lebrikizumab has the potential to generate more than $1 billion in peak annual sales. The company is looking for new drugs to offset expected revenue lost from Rituxan and Herceptin, which Sanford C. Bernstein & Co. analyst Timothy Anderson said could face generic competition from 2015. However, Roche said Thursday it believes biosimilar versions of Rituxan won’t reach the market until 2016 (for related analysis, read Spotlight On: Defence strategies against the impending flood of biosimilars).

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