PREVIEW-Roche Q3 to shed light on price pressure impact

* Roche kicks of Big Pharma earnings season

* Q3 sales seen falling 4.5 pct to 11.8 bln Sfr

* Top line to be hit by currency effects,lower Tamiflu sales

* Roche may shed light on pricing pressure impact on sector

By Katie Reid

ZURICH, Oct 11 (BestGrowthStock) – The impact of drug price pressure
is likely to come under the microscope when Switzerland’s Roche
(ROG.VX: ) kicks off the Big Pharma earnings season with a
forecast dip in third-quarter sales figures on Thursday.

Austerity measures in Europe and healthcare reforms in the
United States are expected to weigh on pharmaceutical groups,
and companies such as Roche and Sanofi-Aventis (SASY.PA: ) have
already started to explore cost cuts to offset lower prices.

“Roche’s results will be the first indication as to the
impact of price pressures on the industry and could shed some
light as to whether certain treatments or countries are more
affected than others,” Vontobel analyst Andrew Weiss said.

To offset the hit in western markets, drugmakers are
increasingly focusing on emerging countries, where demand for
modern treatments is growing strongly, and investors will be
watching closely for evidence of strong performance in key
countries such as China.

Healthcare consultancy IMS Health expects the Chinese drug
market to grow by 25-27 percent to more than $50 billion in
2011, making it the world’s third-largest pharmaceutical market
behind the United States and Japan. [ID:nN06291996]

Analysts at Deutsche Bank said underlying generic pressures
on certain companies, such as AstraZeneca (AZN.L: ), Novartis
(NOVN.VX: ) and GlaxoSmithKline (GSK.L: ), would also come to the
fore during this quarter’s earnings season.

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For graphic on pharma sector: http://r.reuters.com/xaw97p

For Special Report on Roche: http://r.reuters.com/sed24p

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TARNISHED

Roche, the world’s largest maker of cancer drugs, is
expected to post a 4.5 percent drop in third-quarter sales to
11.8 billion Swiss francs ($12.26 billion), according to the
average estimate in a Reuters poll. [ID:nLDE69A1VO]

The 114-year-old company has had a number of setbacks in its
drug development pipeline this year, tarnishing its reputation
as the darling of the pharmaceuticals sector and shaving around
a fifth of the value of its stock so far this year.

It reported some promising clinical trial news at the
European Society for Medical Oncology congress over the weekend
but not enough to spark a rally in the stock. [ID:nLDE69809D]

Analysts do not expect the quarterly sales figures — Roche
does not give quarterly updates on profits — to do much to
ignite the shares either, with investors awaiting the results of
a cost cutting review that will not be ready until the end of
the year.

“Investor sentiment is at an all time low,” Credit Suisse
analysts said, adding Roche’s low valuation was compelling.

Roche is currently trading at around 9.5 times 2011
earnings, at a discount to cross-town rival Novartis, which will
post results a week after Roche.

“We look for a raft of phase II pipeline data during the
fourth quarter plus an update on cost savings before year end to
help drive a share price recovery as investors take comfort that
management has understood the gravity of its pipeline
disappointments and is adapting to its new environment,” the
Credit Suisse analysts said.

In the third quarter, Roche, which is expected to confirm
its full-year outlook, will have been hit by an unfavourable
currency impact as well as lower sales of Tamiflu after last
year’s swine flu pandemic boosted demand for the flu drug.

Analysts are also likely to focus on demand for blockbuster
Avastin and prod management for any details on the drug’s
prospects in breast cancer after an advisory committee urged
U.S. authorities to revoke its label for the disease.

European authorities also started to review it in this
setting, casting more doubt over the drug, which raked in sales
of over 6 billion francs last year.

Avastin sales are, however, seen rising over 8 percent to
1.7 billion francs in the third quarter, at a slightly lower
growth rate compared to the second quarter, but still indicating
doctors are still prescribing it to fight bowel, breast, lung
and other cancers.
(Additional reporting by Ben Hirschler in Milan)
($1=.9628 Swiss Franc)

PREVIEW-Roche Q3 to shed light on price pressure impact