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

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

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.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

NASA's flying saucer among 'Best of What's New'
Washington, Nov 22 (IANS) NASA's Low-Density Supersonic Decelerator (LDSD), a spacecraft that aims to facilitate the safe landing of future Mars missions, has earned a place in the the Popular Science magazine's "Best Of What's New" list.
Indian helping to light up Gambia (Diaspora Feature)
Banjul (Gambia), Nov 22 (IANS) Like many Indians who are proving to be philanthropists around Africa, Ram Mohan has set up a social business called Comafrique Intelizon Initiative and has embarked on the replacement of candles in villages in the Gambia with solar lights from India.
Leopards in human areas not conflict animals: Study
New Delhi, Nov 22 (IANS) Leopards in human areas are not always "stray" or "conflict" animals but residents with strategies to thrive in human dominated areas, says the first GPS-based study of leopards in India.
Golf courses are hotspots for ticks
Washington, Nov 22 (IANS) Golf courses are prime habitats for ticks, the tiny bloodsucking creatures, says a new study.

Latest from the Network

Gosling gets restraining order against stalker
Los Angeles, Nov 22 (IANS) Actor Ryan Gosling and his sister Mandi have obtained a restraining order against a woman stalker. The woman, Grace Marie Del Villar was allegedly stalking the actor for the past three...
Read more on Celebrity Balla
Julie Walters wants to be Bond villain
Julie Walters' dream role is to play James Bond villain. The 64-year-old actress would love to play an over-the-top baddie in the famous spy series, after being inspired by the actress Lotte Lenya, who played the main...
Read more on Movie Balla
Shuttler Srikanth loses in Hong Kong Open semis
Hong Kong, Nov 22 (IANS) Leading Indian shuttler Kidambi Srikanth's good run in the $350,000 Hong Kong Open Super Series came to an end as he lost to top seed Chen Long of China in the men's singles semifinal here...
Read more on Sport Balla
NASA's flying saucer among 'Best of What's New'
Washington, Nov 22 (IANS) NASA's Low-Density Supersonic Decelerator (LDSD), a spacecraft that aims to facilitate the safe landing of future Mars missions, has earned a place in the the Popular Science magazine's "Best...
Read more on Business Balla
Five killed in Afghanistan attack
Kabul, Nov 22 (IANS) At least five people were killed and seven injured in an attack in Afghanistan, the authorities said Saturday. A bomb targeted a car in Nangarhar province's Jalalabad city, 120 km from Kabul,...
Read more on Politics Balla
JLo uses diamonds to exfoliate?
Los Angeles, Nov 22 (IANS) Singer-actress Jennifer Lopez reportedly uses a $250 body scrub made with diamond powder to exfoliate. According to a report in US OK! magazine, the 45-year-old star swears by the Australian...
Read more on Celebrity Balla
Gorilla Glass 4 to toughen smartphone screens
New York, Nov 22 (IANS) Glassmaker Corning Incorporated has unveiled the super tough Gorilla Glass 4, the latest version of its hardened glass covers that save smartphone and tablet screens from damage. The new...
Read more on Celebrity Balla
Pakistan and New Zealand cricketers advance in rankings
Dubai, Nov 22 (IANS) Pakistan and New Zealand progressed in the Test rankings following their drawn second Test, according to the latest International Cricket Council (ICC) release Saturday. Sarfraz Ahmed jumped to a...
Read more on Sport Balla
One Direction put girlfriends first
One Direction put their girlfriends before their mothers. The 'Steal My Girl' hitmakers - comprising Zayn Malik, Niall Horan, Louis Tomlinson, Harry Styles and Liam Payne - admit they will rush to see their partners...
Read more on Celebrity Balla
Jennifer Lawrence has universal appeal
Jennifer Lawrence's ''many-sided qualities'' give her universal appeal. The 23-year-old actress portrays the lead character Katniss Everdeen in 'The Hunger Games' franchise and movie bosses believe a big key to the...
Read more on Celebrity Balla