Although Roche (OTCQX:RHHBY) hasn't been a terrible stock over the last three years, it's hard not to look at the performance of companies like Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and Amgen (NASDAQ:AMGN) with some envy. In the case of the first two peers, Roche has been slower to get into the immuno-oncology game, as both Bristol-Myers and Merck have seen good initial successes with their PD-1 antibodies (and, in the case of Bristol-Myers, its CTLA-4 antibody as well). Roche has also had to withstand more than a little concern and skepticism regarding the company's ability to defend its lucrative oncology franchise from impending biosimilar competition and growing worries about pricing.
I do continue to believe, though, that Roche has an attractive
future. While the company was somewhat late to the game in
immuno-oncology, the company is bringing a lot to bear in terms of
numerous combo therapy candidates. The company is also seeing some
traction in its non-oncology franchise, with encouraging results in
multiple sclerosis and hemophilia. Biosimilar competition and price
resistance remain real risk factors, but I believe Roche's pipeline can
support long-term free cash flow growth in the high single digits and a
fair value in the mid-$30s.
Roche Still Waiting For The Big Push