Market Underestimating Roche, Shares a Bargain
The wide-moat drugmaker's pipeline will allow it to grow in the face of biosimilar competition.
Roche (RHHBY) hosted a late-stage pipeline event on Sept. 13 that reinforced our conviction surrounding the potential of Roche's upcoming drug launches and the firm's ability to grow through biosimilar pressure. This wide moat drug firm remains significantly undervalued at recent prices, and we're maintaining our CHF 337 per share/$42 per ADR fair value estimate. While Herceptin and Rituxan biosimilar competition will only intensify going forward, particularly as both should face biosimilars in the U.S. in 2019, we think the firm's remaining portfolio and pipeline will allow 4% average top-line growth through 2022, ahead of consensus. We expect additional Tecentriq lung cancer data by Sept. 25 from the World Conference on Lung Cancer, with details from Impower 133 (PFS and OS benefit over chemo alone in small cell lung cancer) and Impower 132 (PFS benefit over chemo alone in non-squamous non-small cell lung cancer). In addition, we believe Tecentriq's differentiating data in combination with Avastin will be key to uptake in lung, renal, and liver cancers, and other immuno-oncology firms are well behind in studying EGFR-mutant lung cancer patients; Merck's Keytruda just entered phase 3 in this population in June with a chemo combination regimen.
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Karen Andersen does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.