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Roche (RHHBY) Up 6.3% YTD on Strong Demand for New Drugs

Zacks Equity Research

Shares of Swiss pharma giant, Roche Holdings RHHBY have gained 6.3% in the year so far against the industry's 1.9% decline.

 

Roche is a leading healthcare company, focused on developing and commercializing innovative diagnostic and therapeutic products and services, which enable early detection and prevention of diseases as well as their treatment and monitoring.

The company’s performance has been strong in the year so far, as growth in demand for new drugs has offset the adverse impact of competition for legacy drugs. The company dominates the breast cancer space with strong demand for its HER2 franchise drugs. The HER2 franchise includes Herceptin, Perjeta and Kadcyla. Label expansion of these drugs, since approval, have kept the momentum in sales alive.

Apart from its strong breast cancer franchise, Roche has a strong oncology portfolio for various indications. New drug approvals like Alecensa for lung cancer, and Venclexta in combination with Rituxan/MabThera for the treatment of patients suffering from chronic lymphocytic leukaemia (CLL) or small lymphocytic lymphoma and acute myeloid leukemia, among others, have boosted the portfolio. Label expansion of these drugs will further enable the company to drive its top line.

In particular, the FDA approval of Ocrevus for the treatment of two forms of multiple sclerosis (MS) — relapsing MS (RMS) and primary progressive MS (PPMS) — has been a significant boost for Roche, as the drug has been performing impressively since launch amid stiff competition from the likes of Biogen BIIB, among others. Hemlibra (emicizumab-kxwh) for routine prophylaxis to prevent or reduce the frequency of bleeding episodes in adults and children with haemophilia A with factor VIII inhibitors has also taken off well.

Immuno-oncology is a key focus area for Roche, and Tecentriq is its leading immuno-oncology drug for multiple indications. The performance of the drug has been strong, even though it faces stiff competition from Merck’s MRK Keytruda and Bristol-Myers Squibb Company’s BMY Opdivo.

Meanwhile, Roche has been making prudent acquisitions to broaden its portfolio. The company acquired Flatiron Health and Ignyta, Inc in 2018. While Flatiron Health will accelerate development and delivery of breakthrough medicines for oncology patients, Ignyta’s lead molecule, entrectinib, targets tumors with one of two genetically defined gene rearrangements — ROS1 fusions in NSCLC, and NTRK fusions across a broad range of solid tumors. In July 2018, Roche acquired Foundation Medicine Inc. to broaden its healthcare portfolio. The company’s subsidiary, Genentech, also obtained full rights to Jecure Therapeutics’ entire preclinical portfolio of NLRP3 inhibitors. Jecure is focused on the discovery of novel therapeutics for the treatment of non-alcoholic steatohepatitis (NASH) and liver fibrosis. The acquisition will enable Roche to foray into the promising NASH space.

Earlier this year, the company announced that it has entered a definitive agreement to acquire Philadelphia-based gene-therapy company, Spark Therapeutics, for $4.8 billion.

Apart from offering therapeutic products and services for diverse medical needs, Roche also focuses on innovative diagnostic solutions for the early detection and treatment of diseases. The company continues to launch innovative diagnostic tests in this segment.

We expect the momentum to continue in the rest of the year as well.

Zacks Rank

Roche currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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