Gimme Shelter

Roche's New Drugs May Protect its Old Ones

Combinations can ease the pain of biosimilar competition.

Roche Holding AG's blockbuster cancer drugs face a huge impending sales decline in the next few years. Its investors aren't worried.

The company's ADRs spiked as much 6.8 percent on Thursday, in response to positive trial data for a combination of Herceptin -- one of those big blockbusters -- and a newer drug called Perjeta.

Roche faces competition for its big cancer drugs -- which are expected to generate more than $20 billion in sales this year -- from a wave of generic-like substitutes called biosimilars.

But the company has a forward-looking strategy that has helped prepare it to weather such a storm. Several of its drug trials don't just expand the market for the drugs tested. They also protect older Roche medicines. 

Perjeta is already approved for a subset of pre-surgery breast-cancer patients and for those with metastatic disease. The trial data announced on Thursday showed the drug helped post-surgery patients with early breast cancer live cancer-free, in combination with Herceptin and chemotherapy, longer than Herceptin and chemo alone.

We won't know the exact magnitude of the effect until June. But we do know Herceptin works well enough on its own that Perjeta had to exceed a high bar to show additional benefit when added to the treatment cocktail. Some analysts expect Perjeta, which generated close to $2 billion in sales in 2016 in its existing indications, to peak at more than $5 billion in annual sales. 

That's no chump change.

But another sneaky benefit might be Perjeta's ability to extend the sales life of its breast-cancer-fighting partner. Roche expects a Herceptin biosimilar to hit the U.S. market this year. But due to regulatory issues, the fact that biosimilars are new to the U.S. market, and the expense of creating these more-complicated drug copies, Herceptin's sales drop-off is expected to be relatively slow compared to that of a drug facing a traditional generic.

An expansion of Perjeta's approval might slow that decline down even more. Roche will likely be able to offer a Herceptin-Perjeta bundle at a discount to a combination of Perjeta and a biosimilar competitor, unless the biosimilar maker decides to be very aggressive on price. This won't negate the impact of biosimilars, but it may soften the blow. 

This is not a one-off. Roche is also testing new-old combinations for its other two blockbusters facing biosimilar competition, Avastin and Rituxan. Roche is teaming Avastin up with its immune-boosting cancer drug Tecentriq in multiple trials. And it's pairing Rituxan with the newer blood-cancer drug Venclexta. If successful, these trials may help extend the lives of those blockbusters, too.

These upcoming tests are no sure bet to succeed, nor is a focus on wholly owned combinations in general.

But in the upcoming biosimilar fight, a few extra weapons certainly won't hurt. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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    Max Nisen in New York at

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