Roche's Blockbuster Oncology Drugs Losing Steam As They Approach Patent Expiry

Roche Holdings’ oncology business accounts for over 50% of the company valuation, according to our estimates. The company’s blockbuster oncology drugs are Avastin, Herceptin and MabThera/Rituxan. These three drugs alone accounted for roughly 40% of the company’s overall revenues in 2016. However, the growth has slowed of late. Avastin sales saw a slight decline in the first half of 2017 while Herceptin and MabThera/Rituxan grew 3% each. This slowdown can primarily be attributed to competitive pressure. While Avastin is growing in international markets, especially China, which is expanding its drug coverage, the competition in the lung cancer market is increasing in the U.S. Nearly 15% of Avastin’s sales can be attributed to its use in lung cancer. Furthermore, Roche’s newer drug Tecentriq’s sales have started ramping up, and it is cannibalizing Avastin to a degree.

Herceptin and MabThera/Rituxan’s low single-digit growth can be attributed to expansion in China, longer treatment duration, and continued uptake in vasculitis and rheumatoid arthritis. All three drugs are nearing their patent expiry. For Avastin it is 2020, 2019 for Herceptin and mid 2018 for MabThera/Rituxan in the U.S. After the patent expiry, generic drugs will be able to enter the market, and all three drugs will likely see a significant drop in sales. Also, the company’s Aphinity trial results in the previous quarter were fairly disappointing. Roche’s Herceptin + Perjeta combination trial results indicated an improvement of less than 1% after 3 years for the treatment of breast cancer. The relatively small benefit is unlikely to justify a potential 100% increase in treatment cost, and also makes it difficult for Roche to convince oncologists to adopt the combo treatment, even if the FDA were to approve the combination. Accordingly, we estimate the sales of Avastin, Herceptin and MabThera/Rituxan will fall from around $20 billion in 2016 to $11 billion by the end of our forecast period in 2023. The chart below shows the historical and forecasted revenue trajectory of the these three drugs.

Our price estimate of $33 for Roche Holdings’ stock is around 5% above the current market price.

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Roche Holdings’ oncology business accounts for over 50% of the company valuation, according to our estimates. The company’s blockbuster oncology drugs are Avastin, Herceptin and MabThera/Rituxan. These three drugs alone accounted for roughly 40% of the company’s overall revenues in 2016. However, the growth has slowed of late. Avastin sales saw a slight decline in the first half of 2017 while Herceptin and MabThera/Rituxan grew 3% each. This slowdown can primarily be attributed to competitive pressure. While Avastin is growing in international markets, especially China, which is expanding its drug coverage, the competition in the lung cancer market is increasing in the U.S. Nearly 15% of Avastin’s sales can be attributed to its use in lung cancer. Furthermore, Roche’s newer drug Tecentriq’s sales have started ramping up, and it is cannibalizing Avastin to a degree.

Herceptin and MabThera/Rituxan’s low single-digit growth can be attributed to expansion in China, longer treatment duration, and continued uptake in vasculitis and rheumatoid arthritis. All three drugs are nearing their patent expiry. For Avastin it is 2020, 2019 for Herceptin and mid 2018 for MabThera/Rituxan in the U.S. After the patent expiry, generic drugs will be able to enter the market, and all three drugs will likely see a significant drop in sales. Also, the company’s Aphinity trial results in the previous quarter were fairly disappointing. Roche’s Herceptin + Perjeta combination trial results indicated an improvement of less than 1% after 3 years for the treatment of breast cancer. The relatively small benefit is unlikely to justify a potential 100% increase in treatment cost, and also makes it difficult for Roche to convince oncologists to adopt the combo treatment, even if the FDA were to approve the combination. Accordingly, we estimate the sales of Avastin, Herceptin and MabThera/Rituxan will fall from around $20 billion in 2016 to $11 billion by the end of our forecast period in 2023. The chart below shows the historical and forecasted revenue trajectory of the these three drugs.

Our price estimate of $33 for Roche Holdings’ stock is around 5% above the current market price.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

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