Roche's (RHHBY) Q1 Sales Grow on COVID-19 Tests, New Drugs

Swiss pharma giant Roche Holding AG’s RHHBY performance in the first quarter of 2022 was good on strong demand for its diagnostics base business, a broad portfolio of COVID-19 tests and new medicines.

Roche’s stock has lost 7.3% in the year so far against the industry’s growth of 2.8%.

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The company reported total sales of CHF 16.4 billion in the first quarter, up 10% from the year-ago period.

The company reports results under two divisions — Pharmaceuticals and Diagnostics. All growth rates mentioned below are on a year-over-year basis and at constant exchange rates.

Sales at the Pharmaceuticals division were CHF 11.1 billion in the quarter, up 6%. Strong demand for newly launched medicines, namely Hemlibra (hemophilia), Ocrevus (multiple sclerosis), Ronapreve (COVID-19; mainly in Japan), Evrysdi (spinal muscular atrophy) and Phesgo (cancer) drove growth for this division.

The impact of competition from biosimilars for established cancer medicines like Avastin, MabThera/Rituxan and Herceptin has slowed down as expected.

The Diagnostics division’s revenues came in at CHF 5.3 billion, up 24% on strong momentum in base business, especially in immunodiagnostics, with cardiac tests as a key contributor. The company has a leading portfolio of COVID-19 tests.

Results in Detail

Sales of Ocrevus, used to treat two forms of multiple sclerosis, increased 18% to CHF 1.4 billion as demand in both indications (relapsing and primary progressive forms of multiple sclerosis) remained strong, mainly in the United States, while the pandemic still had a certain negative impact.

Perjeta’s sales grew 1% to CHF 993 million due to high demand in China in both early and metastatic breast cancer settings. Kadcyla sales soared 9% to CHF 511 million.

Sales of Hemlibra surged 30% to CHF 853 million, fueled by strong uptake in the United States and Europe.

Immuno-oncology drug, Tecentriq (for advanced lung cancer, urothelial cancer and breast cancer), recorded 8% year-over-year sales growth to CHF 825 million as sales increased due to high demand in the United States and Europe.

Arthritis drug Actemra/RoActemra recorded sales of CHF 792 million, as several countries included this medicine in their treatment guidelines for severe COVID-19-associated pneumonia.

Herceptin sales came in at CHF 607 million, down 19% due to biosimilar uptake in various countries.

Sales of Avastin, approved for multiple oncology indications, were down 32% to CHF 581 million due to biosimilar competition in the United States and Europe.

Sales of Rituxan/MabThera (blood cancer and rheumatoid arthritis) declined 21% to CHF 564 million due to biosimilar erosion, primarily in the United States.
Sales of lung cancer drug, Alecensa, rose 23% to CHF 361 million on solid growth across all regions.

Ronapreve, the antibody cocktail of casirivimab and imdevimab, for the treatment of recently diagnosed high-risk patients with mild to moderate COVID-19, generated sales of CHF 587 million. Roche and partner Regeneron REGN have collaborated for 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.

Asthma drug Xolair raked in sales of CHF 456 million, up 9%. Gazyva sales came in at CHF 165 million, up 7%.

Esbriet, indicated for idiopathic pulmonary fibrosis, declined 6% to CHF 241 million. The recently approved spinal muscular atrophy drug, Evrysdi, generated sales of CHF 226 million.

Revenues in the Diagnostics division increased 24%, mainly due to Roche’s comprehensive and growing portfolio of COVID-19 tests. The Point of Care and Molecular Lab businesses recorded strong growth (84% and 21%, respectively) with COVID-19 testing.

2022 Guidance Reiterated

Sales are projected to remain stable or grow in the low-single digits (at constant exchange rates). Core earnings per share are estimated to grow in the low- to mid-single-digit range. For 2022, Roche expects sales of COVID-19 medicines and diagnostics to decrease approximately CHF 2 billion to around CHF 5 billion. It expects a decline in sales due to biosimilars to be roughly CHF 2.5 billion.

Pipeline Progress

In January 2022, the FDA approved Vabysmo for the treatment of neovascular or ‘wet’ age-related macular degeneration (nAMD) and diabetic macular oedema (DME).

In March, the European Medicines Agency’s Committee for Medicinal Products for Human Use recommended the approval of Polivy combination therapy for the treatment of previously untreated diffuse large B-cell lymphoma (DLBCL).

The phase III SKYSCRAPER-02 study, evaluating the investigational anti-TIGIT immunotherapy tiragolumab plus Tecentriq and chemotherapy as an initial treatment for people with extensive-stage small-cell lung cancer (ES-SCLC), did not meet its co-primary endpoint of progression-free survival.

In April, the FDA granted priority review to Actemra/RoActemra for the treatment of COVID-19 in hospitalized adults.

Our Take

Roche’s performance in the first quarter was good on the back of the diagnostics division, which maintained its stellar performance on demand for COVID-19 tests. The pharmaceuticals business also remained stable and newer drugs continue to offset the decline in sales of legacy drugs.

However, the outlook indicated that sales will decline in 2022 year over year due to reduced demand for its COVID-19 medicines and diagnostics.

Roche currently carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks are Vertex Pharmaceuticals Incorporated VRTX and Voyager Therapeutics, Inc. VYGR, both carrying Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The consensus estimate for Vertex’s 2022 earnings has increased 25 cents over the past 60 days to $14.58. Shares of VRTX have gained 22.2% in the year so far.

Loss estimates for VYGR have narrowed to $1.35 from $2.20 for 2022 in the past 60 days. Earnings of Voyager surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 41%.

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