Roche Reports 1Q Sales

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Roche Holdings Ltd. (RHHBY) recently reported results for the first quarter of 2013.  Revenues grew 6% year over year to CHF 11.6 billion driven by solid demand for its cancer drugs and increased sales of diagnostic tests to clinical laboratories.

In particular, strong sales of Tamiflu (+84%) due to a severe flu season in North America boosted sales in the first quarter.

Sales were also positively impacted by the strengthening of the Swiss franc against the Japanese yen.

On a geographical basis, sales were particularly strong in the US and international markets.

All growth rates mentioned below are on a year-on-year basis and at constant exchange rates.

Roche reports business in two divisions: Pharmaceuticals Division and Diagnostics Division.

Sales for the Pharmaceuticals Division climbed 7% to CHF 9.2 billion, driven by strong sales of from oncology drugs which were up 10%.

Cancer drugs such as Herceptin (up 11%), Avastin (up 11%) and MabThera/Rituxan (up 6%) performed very well during the first quarter of 2013.

The strong growth in Avastin sales was due to its increased demand in the ovarian and colorectal cancer indications.

Sales of rheumatoid arthritis (:RA) drug Actemra/RoActemra were up 32% during the first quarter of 2013.

Roche’s Actemra primarily faces competition from UCB’s (UCBJF) Cimzia and AbbVie Inc.’s (ABBV) Humira in the RA space.

Strong sales of newly launched drugs such as Zelboraf, Erivedge, Kadcyla and Perjeta also benefited first quarter 2013 segmental sales.

We note that Roche launched Kadcyla (indicated for HER2-positive metastatic breast cancer) in the US in Feb 2013 while Perjeta (indicated for first line HER2-positive metastatic breast cancer) obtained approval in the European Union in Mar 2013. Perjeta was launched in the US in Jun 2012.

However, sales of drugs such as Pegasys (indicated for hepatitis B and hepatitis C) declined 15% year over year due to the launch of triple-combination therapy.

Revenues from the Diagnostics Division went up 1% to CHF 2.4 billion, on the back of strong demand for tests and platforms used in clinical laboratories.

The professional diagnostics (+5%) and tissue diagnostics (+7%) sub-segments performed impressively during the quarter.

The growth was partially offset by declines in diabetes care and applied sciences solutions.

Reimbursement cuts and intensified pricing pressure adversely impacted the diabetes care business thereby reducing sales by 5%.

Applied science declined 10% as a result of discontinued products and lower research funding.

2013 Outlook Backed

Roche continues to expect sales in 2013 to increase in line with 2012 levels.

Sales are expected to be strong in emerging markets in 2013.

Roche expects core earnings per share to grow at a higher rate than sales in 2013. Roche expects to further increase its dividend in 2013.

Roche currently has a Zacks Rank #4 (Sell). As of now, Allergan Inc (AGN) looks well placed with a Zacks Rank #2 (Buy).

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