Roche sales set hard challenge for drug industry rivals

ZURICH (Reuters) - Roche ROG.S sales in the first three months of the year beat analyst forecasts, setting a pace that Swiss local rival Novartis NOVN.S and others in the drug industry could struggle to match.

Swiss drugmaker Roche's logo is seen at their headquarters in Basel, Switzerland January 28, 2016. REUTERS/Arnd Wiegmann

Sales at the world’s biggest maker of cancer drugs rose 4 percent to 12.4 billion Swiss francs ($12.87 billion), leaving it confident it will hit full-year targets as it enhances its product pipeline to counter drugs going off-patent.

Analysts had expected sales to rise 3.6 percent.

By contrast, Novartis is seen reporting declining quarterly profit and revenue on Thursday, hit by patent expiries, problems at its eye care business and sluggish sales of its new Entresto heart failure medicine.

Roche benefited as sales of its “big three” cancer medicines -- Herceptin, Avastin and Rituxan that together account for more than a third of revenue -- continued to climb.

“Each one is different in terms of the growth projections, but I would say all three, when we look at the global basis for these medicines, will continue to grow in 2016,” said Roche pharmaceuticals division chief Dan O’Day on a conference call.

Analysts also cited flu drug Tamiflu as a big reason why Roche beat forecasts, as sales hit 367 million francs, more than 100 million francs better than most forecasts.

“Despite a suggestion that Tamiflu sales might be significantly lower in Q1, the reported figure... was better than expected,” wrote Berenberg analysts in a note to investors.

Roche confirmed its target for 2016 sales growing in the low- to mid-single-figure percentages at constant exchange rates, with faster growth of core earnings per share as well as an increased dividend.

Roche shares rose 1.5 percent by 0930 GMT, trimming their drop to less than 8 percent since Jan. 1. By contrast, Novartis’s stock has slipped nearly 15 percent this year.

Roche aims to launch eight new medicines in the next three years as it seeks to mitigate a wave of patent expirations that will leave it vulnerable to biosimilars starting in 2017.

Roche has won accelerated U.S. regulatory review for several medicines, including venetoclax for hard-to-treat leukemia andatezolizumab that blocks mechanisms that help tumors evade detection by the immune system.

It expects U.S. Food and Drug Administration approval for atezolizumab this year for bladder and lung cancer.

Roche is also touting ocrelizumab for primary progressive and relapsing forms of multiple sclerosis and expects FDA approval next year.

Roche’s results indicate it is finally getting a break from currency exchange rates after the strong Swiss franc last year dented sales and earnings. A strengthening U.S. dollar and Japanese yen are now giving sales a lift.

“The picture has changed a little bit,” said Chief Financial Officer Alan Hippe. “It could be pretty neutral year related to currency impact in 2016.”

Reporting by John Miller; Editing by Biju Dwarakanath and Keith Weir