Roche First-Half Profit Climbs 10% on Cancer MedicinesNaomi Kresge
Roche Holding AG’s first-half profit climbed 10 percent as new breast-tumor drugs Kadcyla and Perjeta showed signs of being able to fuel growth as the Swiss drugmaker prepares for lower-priced copies of its main cancer medicines.
Earnings excluding some items, which the company calls core net income, climbed to 6.65 billion Swiss francs ($7.1 billion), Basel-based Roche said in a statement today. Earnings per share on that basis were 7.58 francs, beating the 7.45-franc average of 12 analysts’ estimates compiled by Bloomberg.
Roche, the world’s biggest maker of cancer drugs, is racing to add new products before cheaper biosimilar copies of its Rituxan leukemia medicine and the Herceptin breast-tumor treatment reach the market. Today’s announcement shows the magnitude of its success in breast cancer, with second-quarter sales for Kadcyla, which got U.S. approval in February, reaching 65 million francs, said Fabian Wenner, a Zurich-based analyst for Kepler Cheuvreux.
“It was a blowout result” for Kadcyla, Wenner said.
First-half revenue climbed 4 percent to 23.3 billion francs, matching the average estimate. Roche doesn’t report full quarterly earnings.
Roche’s success in cancer has been tempered by failures in other research areas. The company abandoned its most-advanced experimental diabetes drug over safety concerns this month. Roche is seriously considering halting its research and development program for heart and metabolic diseases, Daniel O’Day, head of the company’s pharmaceutical unit, said in an interview today.
“It’s still too premature to say what we will do,” O’Day said. “We are still deciding.”
Practically speaking, Roche has already left the field, because most development programs with patients have already been halted, Chief Executive Officer Severin Schwan said in an interview. The question now is whether there’s an opportunity to get back into the field with drugs in earlier testing stages, Schwan said.
Roche rose 0.6 percent to close at 234.80 francs in Zurich, giving the company a market value of 202.7 billion francs. The stock has returned 32 percent this year including reinvested dividends, compared with a 19 percent return for the Bloomberg Europe Pharmaceutical Index.
Roche wouldn’t be satisfied to be only a cancer company, he also said.
Both executives pointed toward programs in central nervous-system disorders such as Alzheimer’s and to an experimental asthma medication as potential sources of growth outside oncology. The asthma drug, lebrikizumab, has the potential for more than $1 billion in peak annual sales, Schwan said.
Meanwhile, Roche will consider takeovers, with a “focus on bolt-on acquisitions,” Schwan said on a conference call with reporters.
The company has sought financing for a potential takeover of Alexion Pharmaceuticals Inc., people with knowledge of the situation said earlier this month. Alexion makes orphan drugs, medicines for small groups of patients with few options for treatment. Buying the Cheshire, Connecticut-based company, which had a market value of about $20 billion before a Bloomberg News report of the financing talks, would give Roche control of its drug Soliris, a therapy to treat two rare blood diseases which can cost as much as $400,000 a year per patient.
Schwan declined to comment today on Alexion or on the field of orphan drugs, of which Roche is the second-largest producer, according to O’Day. That takes into account the small patient groups that take Roche’s blood cancer drug Rituxan, O’Day said.
Orphan drugs fit with Roche’s focus on innovative medicines designed to address the genetic basis of diseases, O’Day said, speaking broadly about the field and not specifically about Alexion.
“We’re not discouraged at all about smaller subsets of patients,” the pharmaceutical director said.
Sales of Rituxan, the company’s top-selling drug, were little changed at 1.7 billion francs at constant exchange rates in the second quarter, while Herceptin sales were little changed at 1.51 billion francs. Copies of the two products may begin to reach the market in 2015, according to Timothy Anderson, a New York-based analyst at Sanford C. Bernstein & Co.
Roche said today it believes Rituxan biosimilars won’t go on sale until 2016.
The company today confirmed the 2013 forecasts it gave in January, including an increase in sales at constant exchange rates in line with last year’s pace. Sales climbed 4 percent last year on that basis. Roche also aims for core earnings per share to grow faster than sales.
The drugmaker said yesterday that the experimental leukemia drug GA101 beat Rituxan in a clinical trial, positioning it as a successor to the older treatment. Roche has submitted GA101 for regulatory approval in the U.S., and expects a decision by the end of the year.