Roche’s (RHHBY) third-quarter revenue slump due to lower COVID-19-related sales – October 18, 2022

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Swiss pharmaceutical giant Roche Holding AG (RHBY Free report) third-quarter revenue fell 6% to 14.7 billion francs due to lower sales related to COVID-19.

The company reports its results under two divisions – Pharmaceuticals and Diagnostics. All growth rates mentioned below are on an annual basis and at constant exchange rates.

Pharmaceuticals Division sales were down 6% in the third quarter, while Diagnostics Division sales were down 4%.

Sales for the first nine months of 2022 amounted to 47 billion francs, up 2% compared to last year. Sales in the Pharmaceuticals division remained stable at 33.2 billion francs in the first nine months. Strong demand for new drugs, namely Hemlibra (hemophilia), Ocrevus (multiple sclerosis), Evrysdi (spinal muscular atrophy) and Phesgo (breast cancer), drove the growth of this division. Adoption of new eye medicine Vabysmo (launched earlier this year) was also strong.

Biosimilar competition for established cancer drugs like Avastin, MabThera/Rituxan and Herceptin also hurt sales, as expected. Sales of Actemra/RoActemra and Ronapreve (COVID-19) also declined significantly year-over-year as the pandemic continued to weaken in many countries in 2022.

Diagnostics Division sales were CHF 13.8 billion, up 6%, with the core business showing continued strong growth in all regions. As expected, demand for COVID-19 tests plunged in the third quarter of 2022.

Nine-month results in detail

Sales of Ocrevus, used to treat two forms of multiple sclerosis, increased by 17% to CHF 4.4 billion, as demand in both indications (recurrent and primary progressive forms of multiple sclerosis) remained strong.

Perjeta sales increased 5% to CHF 3.1 billion due to continued strong demand in the international region.

Hemlibra sales jumped 28% to CHF 2.8 billion, fueled by strong adoption in the US, international region and Europe.

Immuno-oncology drug, Tecentriq (for advanced lung cancer, urothelial cancer and breast cancer), posted 10% year-on-year sales growth to CHF 2.7 billion, sales increased due to strong demand in the United States and Europe.

Arthritis drug Actemra/RoActemra recorded sales of CHF 2 billion, down 23%, due to lower sales related to COVID-19, mainly in the United States and the international region.

Sales of Herceptin were down 18% to CHF 1.7 billion due to the adoption of biosimilars in various countries.

Sales of Avastin, approved for multiple oncology indications, fell 29% to CHF 1.7 billion due to competition from biosimilars in the US and Europe.

The asthma drug Xolair recorded sales of 1.6 billion francs, up 10% thanks to sales growth in the indication of chronic spontaneous urticaria.

Sales of Rituxan/MabThera (blood cancer and rheumatoid arthritis) decreased by 20% to CHF 1.6 billion due to the erosion of biosimilars, mainly in the United States.

Kadcyla sales increased by 11% to CHF 1.6 billion, driven by the use of Kadcyla in the context of early breast cancer.

Sales of the lung cancer drug Alecensa increased 16% to CHF 1.1 billion on solid growth across all regions.

Sales of the eye drug Lucentis fell 25% to CHF 800 million, mainly due to competitive pressure. The first biosimilar version of Lucentis (with a restricted label) arrived on the market in the United States at the beginning of the third quarter of 2022.

The recently approved spinal muscular atrophy drug, Evrysdi, generated sales of CHF 793 million thanks to strong adoption across all regions.

Ronapreve, the antibody cocktail of casirivimab and imdevimab, for the treatment of newly diagnosed high-risk patients with mild to moderate COVID-19, generated sales of CHF 631 million, down 36%, the sales growth in Japan was partially offset by lower sales in Europe. Roche and partner Regenerate (REGN Free Report) collaborated in the development and manufacture of the cocktail.

Roche is responsible for distribution in Europe and other countries outside the United States. Regeneron is responsible for the United States.

Esbriet, indicated for idiopathic pulmonary fibrosis, decreased by 25% to CHF 590 million due to generic adoption, mainly in the United States. The first generic versions were launched in May 2022.

Phesgo sales were CHF 526 million, up 150%, as sales continued to show strong growth, particularly in Europe and the United States.

Diagnostics division sales increased by 4%. Point of Care activities recorded strong growth (+30%).

Orientation 2022 reiterated

Sales should remain stable or grow in the low figures (at constant exchange rates). Basic earnings per share are expected to grow in the low to mid-single digit range.

Our opinion

Roche’s performance in the third quarter was disappointing due to the significant drop in sales related to COVID-19 in both divisions.

Roche currently wears a Zacks rank #4 (sale). A few higher ranked stocks in the healthcare sector are Puma Biotechnology (PBYI free report) and Dynavax (DVAX free report). While Puma sports a Zacks Rank #1 (strong buy), Dynavax sports a Zacks Rank #2 (buy). You can see the full list of today’s Zacks #1 Rank stocks here.

Puma’s loss estimates narrowed to 6 cents from 16 cents over the past 60 days. Puma has exceeded estimates in three of the last four quarters and missed in the other, averaging 201.37%.

Dynavax earnings estimates rose to $1.73 from $1.14 for 2022 in the past 90 days. Dynavax’s earnings have exceeded estimates in two of the past four quarters.

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