Oct. 16 (Bloomberg) -- Roche Holding AG, the world's biggest maker of cancer medicines, reported third-quarter sales that missed analyst estimates as demand for the Tamiflu influenza pill waned and growth of Herceptin for breast cancer drug slowed.

Revenue climbed 5.7 percent to 11.1 billion Swiss francs ($9.4 billion) from 10.5 billion francs a year earlier, the Basel, Switzerland-based company said today. Analysts surveyed by Bloomberg had a median sales estimate of 11.4 billion francs. Roche doesn't report quarterly earnings.

The shares had their biggest decline in more than a year after the company said Tamiflu sales had peaked, and revenue from Herceptin increased 18 percent, the slowest rate in at least five quarters. While the Avastin colon cancer treatment and Herceptin have helped Roche grow faster than competitors, the stock is more expensive than GlaxoSmithKline Plc and Sanofi-Aventis SA.

``It's not quite as exciting as we'd been hoping for,'' said Denise Anderson, an analyst at Landsbanki Kepler. ``Although growth is still above the market, that's already been included in the share price and we need additional news now'' in the form of fresh clinical data to drive the stock price higher.

Roche shares fell 6.1 francs, or 2.8 percent, to 210.6 francs at 11:40 a.m. in Zurich. The stock has lost about 3.6 percent this year. Investors are willing to pay 18.5 times Roche's earnings per share, compared with 12.8 times EPS for London-based Glaxo and 11.6 times for Paris-based Sanofi.

Outlook

The Swiss drugmaker maintained its current profit growth estimate for the year. Roche expects core earnings per share to grow faster than sales in 2007, while revenue from pharmaceuticals and for the Roche Group is forecast to grow more than 10 percent.

The Swiss drugmaker is seeking to expand the use of the products by testing them in more tumor types and earlier in the disease. In July, Roche named Severin Schwan its youngest-ever chief executive officer. Schwan, the current head of the company's diagnostics division, will take over in March from outgoing CEO Franz Humer.

Sales of Avastin, the first treatment to choke off blood to tumors, jumped 45 percent to 1.06 billion francs, above analyst expectations of 1.02 billion francs. The medicine is approved for colon and lung cancer in the U.S. as well as breast cancer in Europe. It faces competition, though, from ImClone Systems Inc.'s Erbitux drug, which is also approved as a colon cancer treatment.

Avastin Dosing

In June, researchers reported the drug could slow the spread of lung tumors at both high and low formulations, prompting speculation doctors may switch to a lower dose, which costs about half the amount of a high dose.

In the U.S., ``about 60 percent plus of the prescriptions are for the high dose,'' said William Burns, head of Roche's pharmaceuticals division. ``Now, that was maybe 75 percent earlier in the year, so there is a little shift, but it's not dramatic.''

Sales of breast-cancer drug Herceptin rose 18 percent to 1.21 billion francs, below analyst estimates of 1.24 billion francs. The treatment works by neutralizing the HER-2 protein, which fuels tumor growth and makes the disease harder to treat.

Roche plans to study Herceptin in other tumor types. The Swiss drugmaker is working on a late-stage trial of Herceptin in the treatment of gastric cancer. The company also intends to test the drug against bladder tumors.

Genentech Results

Both Avastin and Herceptin were developed by Genentech Inc., the world's second-biggest biotechnology company. Roche holds a majority stake in South San Francisco, California-based Genentech, which yesterday said net income rose 21 percent in the third quarter to $685 million.

Roche's best-selling drug, Rituxan, generated revenue of 1.38 billion francs in the third quarter, up 17 percent from a year previously and in line with estimates. Marketed as MabThera in Europe, the medicine is used to treat non-Hodgkin's lymphoma. U.S. regulators last year also approved it as a treatment for rheumatoid arthritis.

Sales of Tamiflu, one of only two medicines that may help prevent an avian flu pandemic, fell 60 percent to 257 million francs as demand from governments waned. Roche expects full-year sales of Tamiflu to come in at about 1.6 billion francs.

The Swiss drugmaker said in April it aimed to boost sales of the drug for companies' pandemic stockpiles as orders from governments tapered off. It also said public demand had fallen. The company may cut production capacity unless demand rises.

Unit Sales

Overall pharmaceutical sales at Roche rose 6 percent during the third quarter to 8.86 billion francs. Revenue from its smaller diagnostics division rose 4 percent to 2.26 billion francs. The company ranks as the world's biggest maker of diagnostic tests.

Roche has bought three diagnostics companies this year to increase the ties between that division and its pharmaceutical business. It has also made a hostile takeover bid for Ventana Medical Systems Inc., a U.S. company that makes a test to identify which patients might respond to Herceptin.

Tucson, Arizona-based Ventana has rejected Roche's $75 a share bid as too low, while the Swiss drugmaker has refused to raise the price. Roche has extended its tender offer for the outstanding shares of Ventana three times, most recently in September.

``I don't think Roche will be able to get around raising its offer'' for Ventana, said Dieter Buchholz, who helps manage around $107 billion of equity, including Roche shares, at AIG Private Bank in Zurich.

To contact the reporter on this story: Dermot Doherty in Geneva at Ddoherty9@bloomberg.net

Last Updated: October 16, 2007 05:44 EDT