Revenge Of The Clones: Roche Takes A Hit From Biosimilars, But Worthwhile Value Remains

Complacency can be a dangerous thing, and with Roche (OTCQX:RHHBY) doing quite well before the COVID-19 pandemic, it looks like analysts may have gotten a little complacent about the ongoing impact of biosimilar competition. Roche’s third quarter miss certainly wasn’t a welcome development, but it changes little about the long-term outlook, particularly given healthy results from the new drug portfolio and a healthy pipeline. In the shorter term, demand for COVID-19 testing should keep a healthy tailwind at the back of the diagnostics business.

I continue to believe that Roche shares are undervalued below the high $40s. With a healthy pipeline and strong internal R&D effort, as well as the capacity to acquire high-potential assets, I’m not concerned about Roche’s ability to generate mid-single-digit cash flow growth on a long-term basis, and I expect further improvements to the dividend. Given the return potential, I think Roche is very much worth considering at these levels for investors who want quality growth.

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Revenge Of The Clones: Roche Takes A Hit From Biosimilars, But Worthwhile Value Remains