Roche CEO says upcoming patent losses putting pressure on profitability

Roche chief executive Severin Schwan acknowledged that some of the company's "highly profitable medicines [are] coming off patent," and while it has new medicines "to ramp up…that puts a lot of pressure on the profitability," the Financial Times reported Monday. Schwan also indicated the need to have "realistic" expectations about Roche's performance in 2018, after "one of the best years we ever had in terms of our pipeline progress." 

In December, the FDA cleared Mylan's Ogivri (trastuzumab-dkst) for HER2-positive breast and metastatic stomach cancers, making it the first US approval of a biosimilar version of Roche's Herceptin (trastuzumab). Ogivri remains under review by regulators in Europe. Biosimilar versions of Roche's MabThera (rituximab) for blood cancers and rheumatoid arthritis were also approved last year in Europe, including Novartis' Rixathon and Celltrion's Truxima

Meanwhile, biosimilar competition looms for Roche's Avastin (bevacizumab) as well, although the cancer drug will maintain patent protection in the US until 2020. Each of the three drugs have generated about $7 billion in sales per year. 

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However, despite some trial setbacks last year, notably in regards to the experimental therapy lampalizumab in age-related macular degeneration, Roche ended 2017 with positive results from the Phase III HAVEN 3 study of Hemlibra (emicizumab-kxwh) in haemophilia. The company also reported results from the late-stage IMpower150 trial, showing that the combination of Tecentriq (atezolizumab) and Avastin plus chemotherapy significantly cut the risk of disease worsening or death compared to Avastin plus chemotherapy in the first-line treatment of advanced non-squamous non-small-cell lung cancer. 

In addition, the FDA expanded the label for Roche's Perjeta (pertuzumab) in December to include use in combination with Herceptin and chemotherapy for the adjuvant treatment of patients with HER2-positive early breast cancer at high risk of recurrence, a broader group than some analysts had expected. 

Jefferies analyst Jeffrey Holford has indicated that while he expects "a very conservative guide from management" when the Swiss drugmaker reports full-year results on February 1, he is also "highly confident in the company's ability to beat and raise [revenues and core earnings per share] for a sustained period following this." 

Still, Schwan is urging caution, citing the hefty costs associated with producing new treatments, the Financial Times reported. "While we hope to compensate on a sales level, of course, the profitability at this stage is a very different one," the CEO said. He also conceded that growth in the US will likely decline as biosimilars become adopted more widely, but "hopefully" by then, in Europe, Roche will "have washed out the effect of the biosimilars and we'll have a new basis on which we can grow." 

Last month, Roche entered into an agreement to boost its oncology portfolio with the acquisition of Ignyta for $1.7 billion. The move is viewed as being in line with Schwan's strategy in recent years to avoid large-scale deals in favour of smaller bolt-on acquisitions that "complement existing product franchises or technologies," he said. For related analysis, see ViewPoints: For Ignyta, revenge is best served cold

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