Back in late 2011, we began to highlight to investors the opportunity with Eli Lilly because at that point, there was NOTHING in LLY share price for its phase 3 Alzheimer’s disease drug, solanezumab, despite the fact that results were about a year away. The stock had a very nice run as investors contemplated the “what if it works” scenario, appropriately recognizing along the way that the risk of failure was still high. Even though solanezumab eventually failed, the dream that the drug industry will eventually find a drug that works in this setting lives on.
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ASCO abstracts have been released. For ROG, of critical importance is tiragolumab (an anti-TIGIT antibody) where results from an important ph2 trial (ClinicalTrials.gov listing here) that compared the combination of (a) tiragolumab+Tecentriq to (b) Tecentriq monotherapy, in the all-important setting of first-line (1L) lung cancer are being shown for the first time. These are only partial results, with full results scheduled for release on May 29th at ASCO. Recall that ROG has recently advanced tiragolumab into two phase 3 trials already, one in non-small cell lung cancer (NSCLC; CT.gov listing here) and one in small cell lung cancer (SCLC; CT.gov listing here). Roche has a lead of probably ~1yr on its next closest competitor, Merck’s MK-7684.
We are upgrading ROG from Market-Perform to Outperform. The reason for the upgrade is that despite the ongoing pressure from biosimilars to major brands - such as Avastin, Herceptin, Rituxan - there is too much pipeline optionality to ignore that could lead to upward model revisions (both ours and consensus) and further P/E multiple expansion.
On Wednesday (04/22/20) before the open, Roche (ROG):
Reported 1Q20 sales that beat consensus. It was a sales-only quarter (with full financial results only being reported on the half-year).
Confirmed FY20 guidance, a reflection of COVID19 push-pulls.
Saw its share price rise modestly more than peers on the day.
ROG reported Q1 results on Wednesday before the market open, ahead of us/consensus, and confirmed 2020 guidance despite COVID19 pushes and pulls. COVID dominated the question and answer session, with questions ranging across fields of policy, finance, product headwind and sources of upside. In the latter, diagnostics at the forefront because of the upside represented by the PCR (launched; current capacity 15M tests/month) and antibody (serology) tests (aspirational capacity of high double-digit million test/month). We struggle to remember a call like this one in which Dx was the star (normally when Dx is the focus, it plays the villain (performance shortfall). ROG is unique in our coverage as a combined Rx/Dx company. No stronger case could be made for the advantages that provides that now during COVID19; normally the benefit is on the benefits it brings to drug development (mainly, oncology).
The Q1 2020 earnings season for our 14 covered names (US pharma, EU pharma, large cap biotech) is about to begin. It starts Wednesday, April 22nd with Biogen and Roche and ends Thursday, May 7th with Bristol-Myers Squibb. This report contains our updated forecasts and perspectives.
We are initiating coverage of 4 large cap biotech stocks. This will supplement our existing coverage of 10 US/EU large cap global pharmaceutical companies.
• If you have not seen these before, we have been publishing them for the last 7y now.
• We provide some high-level sector perspective with various comparative analyses (see Exhibit 4 below, as one example) and also discuss the bull/bear case, current controversies, the near-/long-term view, updated pipeline perspectives, and more for each of the 10 US/EU global pharmaceutical names we cover.
• It is very up-to-date on what matters with each name, recounting recent events and looking forward at what's ahead.
In almost every presentation showing latest COVID-19 data we’ve seen – in the media, in analyst notes, and elsewhere – what is shown are absolute numbers.
We track Emerging Markets growth rates for our covered companies. It has accelerated consistently since mid-2016…except for Q4 which likely feels the pinch from China’s volume-based procurement (VBP) program. One has to wonder what Q1-2020 will look like, between VBP and COVID-19 (coronavirus).
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