Roche’s Pipeline Prospects Promise Steady Sailing To More Growth
Executive Summary
Analysts increasingly see Roche’s pipeline and newly launched drugs winning over investors and neutralizing worries over biosimilars and potential US pricing reforms. Its 16 September pipeline update in London may reinforce that.
Optimism amongst analysts is growing over Roche’s growth prospects and its ability to overcome looming threats from biosimilars and possible US pricing reforms, a trend that should be reinforced when the Swiss pharma presents a pipeline update in London on 16 September.
Roche’s management used its half-yearly update on 25 July, which showed strong earnings growth, to underline prospects for its widening portfolio of new drugs and growing pipeline while playing down looming threats to US sales revenue from biosimilar pressure for its top three oncology therapies Herceptin (trastuzumab), Rituxan (rituximab), and Avastin (bevacizumab).
Analysts' Optimism Grows
The overall reaction among analysts was that Roche is riding a wave that will overcome those challenges and carry it into a protracted period of earnings growth.
“We would expect market attention to gradually move from biosimilars to rejuvenation of the portfolio,” analysts at Bryan Garnier said in a note to investors issued 26 July.
“Roche shares continue to look undervalued as investors weigh near-term weakness such as biosimilar and potential US pricing reform headwinds, more than long-term strength offered by newer products and pipeline,” Morningstar analysts said in a note published 25 July.
Optimism among observers was reinforced by two recent cancer drug approvals, Polivy (polatuzumab vedotin-piiq) and Rozlytrek (entrectinib), prospects for two upcoming filings later in 2019 with neurology drugs risdiplam and satralizumab, and the pending acquisition of Spark Therapeutics Inc., which is still expected to close in the second half of 2019 despite being delayed by US and UK regulators. Roche this week said its tender offer for the gene therapy group had been extended again, this time from 31 July to 3 Sept, and left the prospect open that it could then be extended further.
Launches, New Indications And Pipeline
Roche's management says its pipeline is solid, advancing and helping support the group’s large base.
CEO Severin Schwan told analysts that since sales from new drugs are expected to outweigh losses from older ones, there is no reason to anticipate declining profits in 2020, and even less so beyond this date since the peak from biosimilars is very much expected next year.
Pharma division head Bill Anderson underscored that trend, noting during the results analysts call that during every quarter, drugs launched over the past seven years had increased their weight in total Roche pharma sales.
In this year’s second quarter, their weight moved further, up to 29% from 27% growth in the first quarter. They continue to grow fast, driven by Ocrevus (ocrelizumab), Perjeta (pertuzumab), Hemlibra (emicizumab) and increasingly by Tecentriq (atezolizumab), he added.
"That gives us that confidence that we will continue to grow through the period of biosimilars and so, I think we're very well-prepared and excited to take on that future,” Anderson said.
The therapeutic and commercial promise for Polivy was also emphasized. The therapy was granted accelerated approval in the US in June for the treatment of adults with relapsed or refractory diffuse large B-cell lymphoma (DLBCL). (Also see "Roche's Polivy ADC Is Approved As Another New Option For R/R DLBCL " - Scrip, 11 Jun, 2019.)
“This molecule targets the CD79b protein on the surface of malignant B cells but it brings a very potent toxic payload along … We have been saying molecules like this can go where CAR-T doesn't because of patient eligibility, because of immediacy … You could look for much more from Polivy in the years ahead as we pursue first-line indications and go into other settings,” Anderson said.
Meanwhile, Gazyva (obinutuzumab) was now being seriously evaluated in lupus nephritis, new territory for the therapy. (Also see "Gazyva Succeeds In NOBILITY Lupus Nephritis Study But What Next?" - Scrip, 11 Jun, 2019.)
“We decided to do a Phase II study of Gazyva in lupus nephritis and those of you who have been around the biotech industry for many years know lupus nephritis has really been a graveyard for molecules,” said Anderson.
Roche had previously run large Phase III programs with Rituxan and then with Ocrevus in treating lupus nephritis, but those showed no benefit.
“Gazyva has the same target as Ocrevus and the same target as Rituxan, but has a different type of cell-killing ability. And based on this, we decided to take Gazyva into a Phase II study in lupus. We announced recently that we had positive results. We'll be sharing those at a major medical meeting later this year, but we are encouraged that we may have the world's first lupus nephritis drug, and so more to come on that,” Anderson said.
Strong growth was also flagged for Tecentriq.
“The growth from Tecentriq is really widespread both geographically as well as by indication," Anderson said.
"We have seen sources of growth in things like first-line, non-small cell lung cancer. The big use here [for Tecentriq] is in patients with liver metastases… we're now getting about 25% of the total business from small cell lung cancer, 50% from non-small cell lung cancer and then 20% from bladder cancer and 5% from triple-negative breast cancer, which is the newest indication."
"So we'll be basically going around the world with both the testing and the therapy [Tecentriq]. And we're very pleased at the progress,” he said.
And sales from MS drug Ocrevus, “is continuing to impress patients, and their families and to impress physicians" with over 100,000 patients treated globally todate.
“We'll see continued growth from Ocrevus for many quarters to come,” helped by the therapy’s US label having recently been updated to include active SPMS (secondary progressive multiple sclerosis) and clinically-isolated syndromes, Anderson said.
Editor's Note: This article was updated on 2 Aug. to note that Gazyva was tested in a Phase II lupus study, not Ocrevus.