The Story behind Roche Holding's Valuation—and What's Driving It
Perjeta and Kadcyla
In 2012, the US FDA (Food and Drug Administration) the drug Perjeta, and the EU (European Union) approved the drug soon after. Both Perjeta and Kadcyla have been approved for the indication of human epidermal growth factor receptor 2-positive (or HER2+) metastatic breast cancer.
During 2015, Perjeta and Kadcyla earned 1.4 billion swiss francs, or $1.41 billion, and 0.8 billion swiss francs, or $0.81 billion, respectively. Perjeta’s strong growth was driven by higher sales in the US and Europe, whereas Kadcyla’s sales rose following higher demand in Europe.
Perjeta holds 80% of the market share in the US and ~10% in Europe. Roche Holding (RHHBY) has just entered the European market, where there is huge potential. With rising reimbursement approvals, Perjecta’s uptake in the European market will likely increase. In 2016, Roche plans to increase drug penetration and neoadjuvant uptake.
These two products are expected to offset the falling sales of Herceptin following biosimilar competition. Pfizer’s (PFE) PF-05280014 is currently under development as a biosimilar of Herceptin.
Breast cancer, briefly
Globally, about 1.4 million new cases of breast cancer are diagnosed each year. It’s estimated that the disease will cause death for over 450,000 women annually.
Major drugs used to treat breast cancer include Arimidex by AstraZeneca (AZN), Ellence from Pfizer (PFE), and Ixempra. Ixempra was acquired by R-Pharm US from Bristol-Myers Squibb (BMY) in 2015.
Industry-specific factors such as pricing pressure and volume uptake are among the major contributors to Roche’s performance. But stock prices are susceptible to such events. To get exposure to Roche while controlling excessive company-specific risks, you can always choose to invest in an ETF like the Vanguard FTSE All-World Ex-US Index Fund (VEU). Roche accounts for 1.03% of VEU’s total holdings.
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