Roche hit by 'high-end' biosimilar attack as Ocrevus, Tecentriq bounce back from COVID-19 slowdown

Roche
Roche's pharma division saw sales drop 4% at constant currencies in the third quarter, dragged down by heavy biosimilar impact. (Roche)

Biosimilars historically haven't enjoyed the same success in the U.S. as in Europe. So industry watchers weren’t exactly sure how copycats to Roche’s big three cancer drugs—Avastin, Rituxan and Herceptin—would fare when they landed in the U.S.

Turns out, they've hit it big.

In the third quarter, U.S. biosimilars together bit CHF 2.68 billion ($2.93 billion) off Roche’s sales compared with the same period last year. Together with the COVID pandemic, they dragged Roche’s flagship oncology business to an 8% year-over-year decline during the first nine months.

All three drugs’ Q3 performance came in way below industry watchers’ previous estimates, according to Wolfe Research data. Rituxan’s CHF 1.0 billion revenue marked a 38% drop, and Avastin sales were down 34% to CHF 1.19 billion.

Herceptin was hit the hardest, as its CHF 879 million haul marked a 43% decrease and came in 18% below analyst estimates. The longtime big-seller actually yielded its third-place position in Roche’s portfolio to multiple sclerosis therapy Ocrevus.

Still, Roche pharma chief Bill Anderson said the decline was just “a bit more impact than what we thought we would see at the beginning of the year” and it fell in what management projected at the half-year point, only “at the high-end,” he said during an investor call on Thursday.

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Roche has routinely pointed to its newer drugs as growth drivers that can keep its pharma business chugging along, revenue-wise. But that was not the case in Q3. Its pharma revenue dropped 4% at constant currencies to CHF 11.12 billion ($12.17 billion), or 5% below consensus.

The good news is, some key new drugs are showing signs of recovery after a brutal Q2 caused by COVID-19. After a sequential quarterly decline in Q2, Ocrevus delivered a 29% year-over-year increase and reeled in CHF 1.20 billion in Q3.

Ocrevus’ share of new MS prescriptions had suffered in the early days of the pandemic as patients were avoiding physician visits. Before COVID, Ocrevus had a 40% to 45% share patients switching MS meds in the U.S., which dropped to 30% in April. Now, it has returned to high 40%-range, Anderson said.

Hemophilia A med Hemlibra had a similar trajectory. Its sales dropped sequentially in Q2 because it didn't attract new patients. It was back on the growth wagon in Q3, with sales of CHF 572 million that topped both Q1 numbers and the Street’s expectations.

RELATED: Roche's Ocrevus touts 2-year switching data in jam-packed—and growing—multiple sclerosis market

Meanwhile, sales of the PD-L1 inhbitor Tecentriq were flat in Q2 over Q1 but surged in Q3, checking in at CHF 718 million. Anderson attributed the growth in part to a first-in-class FDA approval in previously untreated liver cancer, where Bayer’s Nexavar is the standard of care. In just four months, Tecentriq has stolen 17% U.S. patient share in that setting, according to a Roche presentation.

Roche recently introduced Evrysdi to the spinal muscular atrophy field at a discount to Biogen’s market-leading Spinraza. Right now, about a third of Evrysdi patients were newly diagnosed, and two-thirds are switching from Spinraza or Novartis’ gene therapy Zolgensma, Anderson said, without giving specific sales figures.

One major area that’s been slowing Roche down this year is China, where many other multinational companies are seeing fast growth. While China’s been growing quarter over quarter this year, it was well below last year’s level.

“The main reason there was really capacity constraint in the hospitals,” Roche CEO Severin Schwan explained early on during Thursday’s call. What used to be crowded bed arrangements—very often even in the corridor—were basically gone during COVID-19, he said.

What’s more, in anticipation of upcoming biosimilar competition, Roche cut the prices on Avastin, Rituxan and Herceptin in China by about 25% to requalify for the National Reimbursement Drug List. To break even, Roche would need to increase volume by 31%, Anderson explained. But the volume growth was only enough for Herceptin—and that might not last, given new, homegrown competition from 3SBio.

Despite an underperforming Q3, Roche still maintained its full-year guidance. The forecast rests on the belief that, even if there’s a resurgence in COVID-19 cases, hospitals won’t go back into full lockdown mode as they did in the early days, because physicians have learned more about the virus and how to manage it, Schwan said.