UPDATE 3-Roche Q3 sales dip as top drug Avastin falters

* Q3 sales fall 3 pct to 11.5 bln Sfr in local currency

* Misses average forecast of 11.8 bln francs in Reuters poll

* Avastin Q3 sales rise 7 pct, down from a 10 pct rise in Q2

* Reaffirms 2010 target

* Stock falls 1 percent, underperforms sector index

(Adds details from conference call, analyst comment, stock)

By Katie Reid

ZURICH, Oct 14 (BestGrowthStock) – Roche (ROG.VX: ) reported a 3
percent drop in third-quarter sales, as top-selling cancer drug
Avastin faced one of its toughest periods, failing to give the
Swiss company the boost it needed after a series of setbacks.

Roche, which has seen its market position slip this year, is
battling with uncertainty for Avastin after a U.S. advisory
panel urged authorities in July to revoke its label in advanced
breast cancer.

Avastin sales in the United States, Roche’s biggest market,
fell 3 percent in the third quarter, but demand for the drug
remained relatively robust in the Emerging Markets and Japan.

“The question is really the U.S. environment for breast
cancer,” Pascal Soriot, head of the group’s pharmaceuticals
division told reporters in a conference call.

“A number of physicians are wondering about the future of
this indication and whether payers, insurance companies, will
over time reimburse for this treatment, but as soon as we can
clear this concern that some may have about the use in breast
cancer, we believe we should start growing again,” Soriot said.

Nomura analyst Amit Roy said Avastin growth in the United
States was probably also being hit by competition in lung cancer
from Eli Lilly’s (LLY.N: ) Alimta.

Avastin, which has been on the market for five years and
raked in sales of over $6 billion last year, is currently also
under review in breast cancer in Europe, but Soriot said he did
not believe this would affect future demand for the product.

At 0900 GMT, Roche stock, which has already lost more than a
fifth of its value so far this year, was trading 1.4 percent
lower, underperforming a near flat European healthcare index
(.SXDP: ).

PRICE PRESSURES

Sales at the group in the three months slipped to 11.5
billion Swiss francs ($12.01 billion), also hit by a sharp fall
in demand for flu drug Tamiflu since last year’s swine flu
pandemic abated.

Roche, which announced a cost-cutting round earlier this
year to offset pipeline disappointments and a squeeze on product
prices, said European austerity measures and U.S. healthcare
reforms had had a 1.5 percent impact on sales so far this year.

The group still expects this impact to rise to 2 percent for
the whole of 2010 and to 2.5 percent in 2011 as cash-strapped
governments wrestle with record budget deficits by slashing
medicine costs.

The 114-year-old group remained tight-lipped on its
cost-cutting programme, saying only that its group-wide review
of structures and processes was well under way and that measures
would be announced before the end of the year.

“Roche could surprise the market if it decides to make a
bold move and significantly cut cost, mainly R&D. Beyond 2
billion francs would be a positive surprise,” Vontobel analyst
Andrew Weiss said.

The group, which does not post quarterly profit figures,
reaffirmed its full-year outlook, saying it still expects to
meet its 2010 goal of double-digit core earnings per share
growth in local currencies.

Stock in the world’s largest maker of cancer drugs has been
trading at around nine times forecast 2011 earnings, at a
discount those of crosstown rival Novartis (NOVN.VX: ), which is
expected to report a solid set of quarterly results next
Thursday.
($1=.9574 Swiss francs)
(Editing by Greg Mahlich and Hans Peters)

UPDATE 3-Roche Q3 sales dip as top drug Avastin falters