By John Miller
ZURICH (Reuters) - A run of disappointing drug trials at Roche (S:ROG) has left analysts suggesting the view from its new 41-storey office building in Basel has become more clouded, with little chance of management now upgrading its growth forecast next week, when it reports first-half earnings.
Moreover, the first of a threatened flood of biosimilar copies of Roche's $22-billion-per-year trio of cancer drugs, Rituxan, Avastin and Herceptin, have now been approved in Europe and the United States.
Chief Executive Severin Schwan has long contended he can boost sales despite these new biosimilar drug launches, largely by developing new drugs to treat other diseases.
But Roche has just seen its new immunotherapy treatment Tecentriq fail a bladder cancer trial, even though a similar drug from rival Merck (NS:MERK) shone in a separate study.
That flop was closely followed by unimpressive data from Roche's Aphinity study that showed combining Roche's two breast cancer drugs Herceptin and Perjeta produced only a modest additional benefit.
As a result Kepler Cheuvreux analyst David Evans, last month cut his forecasts for peak Perjeta sales to $1.5 billion, from $3.5 billion previously.
"Apart from the underwhelming Aphinity data, Roche has had some other setbacks," Evans said in a note, citing the Tecentriq failure and the approvals of rival biosimilars - near copies of branded drugs derived from living organisms that cannot be exactly duplicated but show the same effectiveness.
"Their impact in the second half might limit Roche's chances of upgrading 2017 guidance," he said.
Roche now sees 2017 sales growth at a low- to mid-single-digit percentage, with core earnings per share growing in line with sales.
This year, the share price is up just 4.7 percent, half local rival Novartis's rise and among the laggards in the Stoxx 600 Europe healthcare sector index <0#.SXDP>, up 6.3 percent, despite some good news on Roche's development pipeline.
The U.S. Food and Drug Administration's approval of Ocrevus, the first regulator-backed drug against primary progressive multiple sclerosis, in March set the stage for Roche's next blockbuster.
Additionally, Roche's investigational haemophilia drug emicizumab is seen topping $1.5 billion in sales by 2022 as it wrests business from rival Shire (L:SHP), Thomson Reuters data shows.
Another of Roche's biosimilar-busting hopefuls, Alecensa, demonstrated better results than Pfizer's (N:PFE) Xalkori against lung cancer, paving the way for use in early treatment of the disease.
Roche also contends the Herceptin-Perjeta data is not as dire as some judge it and believes it still reinforces its case with regulators that the two medicines should be used together to keep breast cancer from returning.
"Our view is shared by many experts," a Roche spokesman said.
STRATEGY TEST
But meanwhile the threat of cheaper biosimilars displacing Roche's existing big-selling medicines is becoming a reality, with knock-offs from Novartis (S:NOVN), Celltrion (KQ:068270) and Mylan (O:MYL) now coming on line.
Novartis's Rituxan copy was approved in Europe last month, and managers there said this week they expected biosimilars to steadily win over patients from the originals.
"It's only two weeks in," Novartis's Sandoz generics unit head Richard Francis said, of Rituxan's European launch. "But the reception we're seeing from physicians and payers and key stakeholders is very positive."
A Roche spokesman said the arrival of biosimilars is no surprise, but analysts remain concerned.
"Roche has $22 billion of revenues exposed to biosimilars," said Tim Race, a Deutsche Bank (DE:DBKGn) analyst, in a note. "The rapid pace of innovation, particularly in oncology, means we have a lower than historical level of visibility that Roche can maintain its market leadership."