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Roche boosted by strong drug sales in U.S. and China

The logo of the Swiss drugmaker Roche is seen on a factory in Burgdorf near Bern, Switzerland in this November 17, 2010 file photo. REUTERS/
The logo of the Swiss drugmaker Roche is seen on a factory in Burgdorf near Bern, Switzerland in this November 17, 2010 file photo. REUTERS/

By Caroline Copley

ZURICH (Reuters) - Strong demand for Roche's specialty cancer medicines, many of which are bought privately in emerging markets, has helped it defy an expected slowdown in sales in China following a crackdown on sales practices there.

The Swiss group on Thursday posted an 8 percent rise in third-quarter sales in local currencies - or 2.7 percent in Swiss francs, after adverse foreign exchange moves - helped by strong uptake of two new breast cancer drugs.

The world's largest maker of cancer drugs chalked up growth of 12 percent in the United States in the first nine months of the year and said it had seen continued strong growth in China, where sales were up 23 percent.

This contrasts with the problems faced by other multinational drugmakers in China where an anti-bribery drive has hit promotional activities and sales. Many Chinese doctors have refused to see drug representatives for fear of being caught up in the widening scandal.

The impact is expected to be felt most severely at GlaxoSmithKline, the company at the centre of bribery allegations, which reports results on October 23.

But Roche's specialized cancer drugs, which are generally paid for privately in China, have escaped largely unscathed.

"We have seen that the market as a whole has been affected but again due to the nature of our portfolio we are in a different situation at Roche," Chief Executive Severin Schwan told reporters.

He also slapped down recent speculation that the company could merge with its cross-town rival Novartis and said the Hoffmann-Oeri families, which hold a majority stake in Roche, were committed to the firm's independence.

The Swiss group said quarterly sales rose to 11.57 billion Swiss francs ($12.6 billion), compared with the average analyst forecast of 11.54 billion francs in a Reuters poll.

Analysts at Citi said it was a strong set of numbers and noted the group's diabetes care unit - a weak point in recent quarters - showed signs of some stabilization.

Shares in Roche were 0.1 percent higher by 0850 GMT, in line with the European healthcare sector index.

BIOTECH BET

Roche's drugs business has so far been shielded from a wave of patent expiries that have hit rivals, as most of its top-selling medicines are biotech drugs consisting of proteins derived from living organisms that are hard to copy.

On Monday, Roche said it would invest $880 million to boost production of biologic therapies at four of its manufacturing sites, as it looks to shore up its position as market leader in this fast-growing field.

Sales of its older cancer medicines Rituxan and Herceptin continued to gain momentum in the quarter, rising 12 percent and 7 percent respectively, while Avastin benefited from increased use in ovarian and colorectal cancer.

This helped to offset weaker sales of hepatitis C treatment Pegasys, which tumbled 16 percent.

The Basel-based drugmaker is also developing follow-on medicines - improved versions of its top-sellers - which it hopes will help it fend off anticipated competition from so-called biosimilar copies when its older drugs go off patent.

In a sign this strategy is paying off, Roche said sales of Kadcyla, a treatment for an aggressive form of breast cancer which won U.S. approval in February, were 156 million francs in the first nine months of the year, up from 83 million in the first half.

Sales of another new drug Perjeta, which last month gained approval in the United States for use to help shrink tumors prior to surgery, had sales of 186 million francs.

Roche reiterated its expectation for full-year sales to grow in line with 2012, when they rose 4 percent in local currencies, and core earnings to rise ahead of revenues. It also expects to further increase its dividend in 2013.

Some analysts have questioned whether this guidance is conservative and sales were already up 6 percent in constant exchange rates in the first nine months.

Dan O'Day, the head of Roche's pharmaceutical division said he expected demand for the firm's major growth drivers to continue in the fourth quarter.

But he cautioned last year's sales of flu drug Tamiflu had been strong and said the loss of exclusivity on chemotherapy drug Xeloda could also weigh.

($1 = 0.9160 Swiss francs)

(Additional reporting by Ben Hirschler.; Editing by David Cowell and Mark Potter)

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