360° Coverage : Roche's Competitive Advantage

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Roche's Competitive Advantage

Apr 11 2014, 8:18am CDT | by

Roche Holdings has managed to grow its revenues and earnings at an impressive rate, whereas other big pharmaceutical firms have suffered due to several major drugs losing patent protection. Roche...

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16 weeks ago

Roche's Competitive Advantage

Apr 11 2014, 8:18am CDT | by

Roche Holdings has managed to grow its revenues and earnings at an impressive rate, whereas other big pharmaceutical firms have suffered due to several major drugs losing patent protection. Roche has distinguished itself due to its focus on biotechnology research and development (R&D) and leadership in oncology (cancer therapeutics). Given that the R&D productivity has declined over the years as far as small molecules are concerned, and the fact that there is a visible shift towards targeted therapies, Roche stands to gain. In this analysis we’ll look at Roche’s competitive advantage and how it fits in the shifting pharmaceutical landscape.

Our price estimate for Roche stands at $36.80, which is roughly inline with the market price.

See our complete analysis for Roche

Dominance In The Growing Cancer Market
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Roche has one of the strongest and most profitable drug portfolios in cancer therapeutics market. Three of its major drugs Rituxan/MabThera, Avastin and Herceptin are used for treating a variety of cancer forms including blood cancer, breast cancer and colorectal cancer. The combined sales from these drugs stood at over CHF 19.28 billion in 2013, or roughly $21.8 billion at the current exchange rate. This accounted for around 53% of Roche’s total pharmaceutical revenues during the year. Additionally, its total oncology (cancer therapeutics) sales constituted roughly 62% of its pharmaceuticals business which clearly showcases Roche’s success in this area. Despite the fact that individual sales of Rituxan/MabThera, Avastin and Herceptin stood between $6.8 and $7.8 billion, their growth was still healthy. Avastin saw its revenues jump by 13% in 2013 due to its demand for the treatment of ovarian cancer in Europe and increased use for colorectal cancer in both, Europe and the U.S.

The opportunity in oncology comes from the fact that global incidence of cancer is expected to increase from about 12.7 million in 2008 to 21.3 million in 2030. In addition, the number of deaths is likely to show a similar growth trajectory as depicted in the chart below. Treating Cancer can be tricky as it is a not a single disease, and has more than 200 types and thousands of subtypes affecting more than 60 organs. This means that the medicines have to be very specific and targeted. Being the biggest biotech firm in the world with a strong technical know-how, Roche has developed several biologics to treat cancer. Unlike small molecule drugs, biologics tend to be more targeted and attach themselves to specific cell receptors associated with the disease process.

Biologics Are The Way To Go As Small Molecule Drug R&D Productivity Declines
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Roche has maintained strong focus on biotech research and development (R&D), especially since its acquisition of Genentech. In both absolute terms and as a percentage of revenues, it spends more amount on R&D activities as compared to its competitors such as Pfizer, Merck and Johnson & Johnson. The company currently has 14 biopharmaceutical drugs in the market and another 39 investigational biopharmaceuticals in its drug pipeline. Additionally, seven of its 10 highest selling drugs are biopharmaceuticals. Given that R&D productivity has declined for small molecule drugs over the last few years, biologics may be the way to go. The shift is clear as 71% of the revenue generated by top 10 drugs in 2012 came from biotech products.

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Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by rob ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat toda ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern sta ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

8 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

8 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Moha ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 2 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kin ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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