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Roche Builds a Wide Moat With Dominant Oncology and Diagnostics Franchises

Firm has a promising strategy of combining expertise in both areas to generate a growing personalized medicine pipeline.

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Following new immuno-oncology data at the ASCO meeting, we are maintaining our $33 billion estimate for annual IO drug sales by 2022 versus consensus expectations of $20 billion. While we continue to view  Merck (MRK) as the most undervalued company in the IO group, we see Bristol as the best positioned in IO. Along with these companies, Roche and  AstraZeneca (AZN) are also well entrenched in the important IO class, which should strengthen all of these companies' moats as IO drug demand should be high in several cancer settings that have unmet medical need along with strong drug pricing power ($150,000 annually).

While we are maintaining our long-term outlook for IO drugs, the composition of our estimates is shifting as the new data slightly weakens the outlook for the lung cancer indication and strengthens the outlook in the renal cancer indication.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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