Roche: Currency Headwinds Are Masking Strong Growth Trends

seekingalpha10-28

Roche's strong year-to-date results are masked by the strength of the Swiss franc and are also impacted by declining COVID-19 sales, but underlying growth trends are strong.Key products like Vabysmo, ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2478614812?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2070915153/image_2070915153.jpg","is_english":true,"pubTime":"2024-10-28 09:35","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2478614812","market":"us","top_or_hot":-1,"title":"Roche: Currency Headwinds Are Masking Strong Growth Trends","media":"seekingalpha","content":"<div>\n<p>Roche's strong year-to-date results are masked by the strength of the Swiss franc and are also impacted by declining COVID-19 sales, but underlying growth trends are strong.Key products like Vabysmo, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4730004-roche-currency-headwinds-are-masking-strong-growth-trends\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Roche: Currency Headwinds Are Masking Strong Growth Trends</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nRoche: Currency Headwinds Are Masking Strong Growth Trends\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-28 09:35 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4730004-roche-currency-headwinds-are-masking-strong-growth-trends><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Roche's strong year-to-date results are masked by the strength of the Swiss franc and are also impacted by declining COVID-19 sales, but underlying growth trends are strong.Key products like Vabysmo, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4730004-roche-currency-headwinds-are-masking-strong-growth-trends\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"RHHVF","symbol_name":"Roche Holding Ltd","start_time":0,"source_url":"https://seekingalpha.com/article/4730004-roche-currency-headwinds-are-masking-strong-growth-trends","article_id":"2478614812","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2070915153/image_2070915153.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2478614812","pubTimestamp":1730079342,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Roche's strong year-to-date results are masked by the strength of the Swiss franc and are also impacted by declining COVID-19 sales, but underlying growth trends are strong.Key products like Vabysmo, ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"RHHVF":"Roche Holding Ltd","RHHBF":"Roche Holding Ltd","03165":"华夏欧优股对冲","RHHBY":"罗氏控股","BK4007":"制药"},"translate_title":"罗氏：货币逆风掩盖了强劲的增长趋势","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"RHHBF":0.9,"RHHBY":0.9,"RHHVF":0.9,"03165":0.6},"content_text":"Roche's strong year-to-date results are masked by the strength of the Swiss franc and are also impacted by declining COVID-19 sales, but underlying growth trends are strong.Key products like Vabysmo, Ocrevus, and Phesgo are performing well.The pipeline remains healthy with upcoming readouts from mid- and late-stage trials of (among others) tiragolumab, GYM329, and fenebrutinib.Roche looks well-positioned to deliver shareholder value with and without contribution from the obesity pipeline.   Ruslan Lytvyn/iStock via Getty Images Roche (OTCQX:RHHBY) (OTCQX:RHHBF) (OTCPK:RHHVF) reported strong Q3 results, but the year-over-year growth trends in the last few quarters have been consistently masked by the strength of the Swiss franc (the reporting currency). The loss of COVID-19-related sales have also resulted in tougher Y/Y comps, and both the currency headwinds and COVID-19 comps will be in the rearview mirror going forward, and I expect the strong underlying performance of the business to become increasingly visible. My previous articles on Roche largely focused on its obesity pipeline, and in today’s article, I will focus on the existing commercial business and upcoming pipeline updates outside of obesity. Currency headwinds and declining COVID-19-related revenues mask the strong growth trends of the base business The numbers provided by Roche paint the best picture on the impact of the two headwinds on reported numbers. Roche reported 2% Y/Y revenue growth in the first nine months of 2024, but the growth in constant currency is 6% and the growth excluding the COVID-19 business is a very respectable 8%.   Roche investor presentation The healthy growth rates in both the pharma and diagnostics divisions excluding COVID-19 sales can be seen in the presentation slide below.   Roche investor presentation There is not much to complain about as far as the commercial business is concerned. Vabysmo remains in high growth mode. Global quarterly net sales exceeded CHF1 billion for the first time in Q3, and it continues to gain market share versus Regeneron’s (REGN) Eylea. Assuming a modest sequential increase in net sales of Eylea, Vabysmo’s U.S. market share in Q3 would improve by nearly three percentage points to over 37%. On the Q3 earnings call, management said that Vabysmo’s new to brand market share reached 50% in treatment-naive patients, up from around 40% in previous quarters, and this is a strong early indicator of demand.   Roche earnings reports, Regeneron earnings reports Analysts asked on the earnings call whether the introduction of a biosimilar Eylea (the low dose version) would impact the growth of Vabysmo in the United States (assuming Amgen (AMGN) launches the low dose biosimilar version soon after the recent court wins), and management said they do not expect that to happen. And neither do I. If cheaper options are needed, biosimilar Avastin and Lucentis are already available, and a third one will likely not make a significant difference to Vabysmo's growth trajectory. Ocrevus is still delivering decent growth despite being more than seven years on the market for the treatment of multiple sclerosis, and despite increasing competition in the CD20 class. And Roche was not sitting on its hands – it has worked over the last few years to bring a more convenient, subcutaneously administered version of Ocrevus to market, and it received approvals in Europe and the United States in June and September, respectively, under the brand name Ocrevus Zunovo. Granted, Ocrevus Zunovo is a very large volume subcutaneous version of the drug that requires 10 minutes to administer, and the whole process takes about 55 minutes after the first dose, but it is a significant improvement over an IV infusion that can take up to 3.5 hours to administer. It is not really a game changer for multiple sclerosis patients as the efficacy is the same, and I still consider Kesimpta the more convenient subcutaneous injection even if it is administered every month versus every six months for Ocrevus Zunovo. This is because Kesimpta can be self-administered at home with an autoinjector and the process takes less than a minute. Even so, the availability of Ocrevus Zunovo should open up opportunities in places where there is no infrastructure for IV administration, and Roche believes this is an incremental opportunity of approximately CHF2 billion, or approximately $2.3 billion based on most recent exchange rates. The impact of the approval is not yet visible in the quarterly numbers, but management said that approximately 80% of new patient starts on Ocrevus Zunovo are new-to-brand and not switches from Ocrevus IV. This is a good initial signal, but the statement does not tell us a lot about the overall demand for Ocrevus – are new patient starts accelerating for Ocrevus, including the IV and subcutaneous versions? I believe the company’s estimate of increased total Ocrevus sales of more than $2 billion is reasonable but would like to see this estimate translate to growth acceleration in the following quarters. The HER2 franchise performed well in Q3, driven by the strong growth and conversion of patients to Phesgo. And similar to Ocrevus Zunovo in multiple sclerosis, Roche recently received FDA approval for Tecentriq Hybreza, the subcutaneous version of the PD-L1 antibody. The growth of Tecentriq has stalled in recent quarters and in this case, management does not seem optimistic about improved uptake due to the availability of a subcutaneous version. Management also said that Tecentriq appears to have peaked in some indications, but that they still expect growth from the product going forward, driven by potential label expansion, including with novel combinations such as with the internally developed TIGIT antibody tiragolumab, and through external collaborations – for example, Jazz Pharmaceuticals (JAZZ) recently announced positive results from a phase 3 trial of Zepzelca in combination with Tecentriq in patients with extensive stage small cell lung cancer. Tecentriq sales should benefit through no additional effort from Roche in these external combination opportunities. As noted at the start of this section, the base diagnostics business continues to perform well (excluding COVID-19 sales), and it should benefit in the following quarters and years from multiple launches across core lab, molecular lab, and near patient care segments. The strong year-to-date performance has resulted in an improved full-year core EPS outlook. Management reiterated the mid-single-digit revenue growth guidance, but they raised the full-year core EPS growth guidance from in-line with revenue growth to high-single-digit growth, and the dividend outlook remains positive with further increases expected going forward. Healthy pipeline to keep Roche in growth mode in the second half of the decade, even excluding obesity There are multiple readouts outside of obesity that could make a strong impact on Roche’s growth outlook. The first upcoming readout is from the SKYSCRAPER-01 phase 3 trial of TIGIT antibody tiragolumab in combination with Tecentriq in patients with first-line PD-L1 positive non-small cell lung cancer. Tiragolumab has been an initial source of excitement in the TIGIT landscape after the promising early-stage results, but it has been more of a disappointment in the last few years, with failures in some trials. The most recent disappointment was the failure in the SKYSCRAPER-06 trial, where the combination of tiragolumab, Tecentriq and chemotherapy missed co-primary endpoints in first-line non-squamous non-small cell lung cancer patients. The final overall survival data from SKYSCRAPER-01 are expected in late 2024, and the reason to be optimistic about the outcome is based on last year's inadvertent unblinding of the trial after the second interim analysis that revealed an overall survival estimate of 22.9 months for tiragolumab plus Tecentriq versus 16.7 months in the Tecentriq monotherapy arm, yielding a hazard ratio of 0.81. Moving on from tiragolumab, the recent positive phase 3 data from competitor Scholar Rock (SRRK) in spinal muscular atrophy (‘SMA’) patients offer positive read-through for Roche’s GYM329, as the two candidates have a similar mechanism of action. Roche is testing GYM329 in combination with Evrysdi in SMA patients, with phase 2 data expected in 2025. And separately, GYM329 also has potential on the obesity side of the pipeline where it could improve the body composition of obese patients. Roche’s brain-penetrant BTK inhibitor has recently generated impressive phase 2 data in multiple sclerosis patients, with annualized relapse rates as low as 0.04 after 48 weeks of treatment. These data are in stark contrast to Sanofi’s (SNY) tolebrutinib which failed to differentiate against teriflunomide and delivered an ARR of 0.13 versus 0.12 for teriflunomide. Roche seems more confident in fenebrutinib and is testing it against teriflunomide, and against Ocrevus in separate phase 3 trials. Fenebrutinib could become a multibillion blockbuster on its own if it delivers data that are superior to teriflunomide and at least similar or even slightly worse than Ocrevus. Results from these trials are expected in 2025. Management does not seem to expect much disruption of Ocrevus itself or of the CD20 class of drugs – they expect fenebrutinib to primarily take market share from other oral multiple sclerosis drugs. We would expect fenebrutinib to take share from the 30%, 40% of the oral market share versus the share that OCREVUS is in today. How much we might see from new orals kind of cutting into the anti-CD20 share? It's -- we're honestly not anticipating that that would be a huge number to be honest. I think the anti-CD20 high efficacy market has been fairly stable over time. The entry of new options has really only expanded the market which is exactly what we had hoped would happen. So I think we're not particularly worried about this maybe is another way to answer the question. Overall, Roche’s pipeline looks very healthy even without very valuable shots on goal in obesity and adjacent markets, and I expect additional product portfolio and pipeline expansion through internal efforts and also through business development in the following quarters and years. Conclusion The reported growth rates are masking the strong underlying growth trends, and the negative comparisons from the COVID-19 side of the business are now in the rearview mirror. Roche’s commercial business and pipeline are in good shape and the company looks well positioned to deliver long-term shareholder value, and potentially enhanced shareholder value if the obesity pipeline bears fruit by late 2020s and in the early 2030s.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2478614812"}