Roche's Noise May Be A Buyer's Best Friend

It feels like it has been a long time since Roche (Nasdaq:RHHBY) had good news for the Street. Clinical setbacks have led to lower growth assumptions, competition from biosimilars has become a "when, not if" scenario, and the company seems to be falling further behind the likes of Illumina (Nasdaq:ILMN) and Life Technologies (Nasdaq:LIFE) in the high-multiple world of life sciences. Even a relatively broad cost-cutting initiative produced only a tepid ho-hum response from the Street. 

So, with the company now facing the possible loss of breast cancer labeling for its drug Avastin, is it crazy to think that this might be a good time to consider Roche as a value stock buy?

The Latest Bad News: Avastin in Breast Cancer
When Roche announced this summer that a clinical trial of Avastin in breast cancer failed to show much benefit, the clock began ticking on when the company would see a response from regulators in Europe and the U.S.. As expected, particularly given the FDA's recent obsession with safety, regulators are now moving to pull (or at least severely restrict) the use of Avastin in breast cancer.

While European regulators have recommended that Avastin remain available for use in breast cancer, that recommendation extends only to its use in combination with paclitaxel. Other combinations, with Sanofi aventis's (NYSE:SNY) Taxotere and Roche's other drug Xeloda, were struck down. The FDA was more stringent. It issued complete response letters (rejections) for use with other chemotherapy agents and as a second-line treatment, and moved to pull the labeling for breast cancer altogether. This is a relatively uncommon occurrence, as Pfizer (NYSE: PFE) was the first to go through the process of having a drug approved under accelerated approval subsequently pulled when Mylotarg was pulled this summer. 



Please follow this link for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Roche-Noise-May-Be-A-Buyers-Best-Friend-RHHBY-ILMN-LIFE-ABT-BEC-PFE-TEVA1222.aspx

Roche Gets Another Setback With Avastin

Bit by bit, it seems that Roche's (RHHBY) oncology drug Avastin is losing its luster. Last year, the company reported data that adding Avastin to early-stage colon cancer did not improve outcomes. Now there is word that it is not particularly useful in breast cancer either.

Simply put, follow-up studies have not replicated initial studies that indicated Avastin could shrink tumors and prolong life. In a decision that was controversial at the time, the FDA allowed Genentech (which Roche later fully acquired) to market Avastin for breast cancer on the basis of this initial data, with the proviso that future data would have to back up that decision.

Well, it hasn't ... so now the FDA has to decide whether to pull the labeling claim for this indication. A panel will be meeting on this issue on Tuesday, and as I have often said - the FDA does not have to do what its panels recommend, but it generally does.

You would think it would be a no-brainer - the drug just does not seem to help all that much. What's more, it is a very expensive drug and it does produce side-effects, so it is not as though supporters can argue "go ahead, it won't hurt to try". All of that being said, the FDA has never pulled a drug before under these circumstances, so maybe it is not as much of a slam-dunk as it might seem.

Avastin is clearly a major drug for Roche - it should do over $6 billion in sales this year, with breast cancer probably accounting for about one-fifth of that. So while the loss of Avastin in breast cancer will not cripple the company, it will hurt. Of course, it also bears mentioning that removing the label is not the same as removing the drug - once a drug is approved, doctors can more or less do what they like with it. So although the FDA has recently cracked down on "off-label marketing" by major drug companies, it still happens and Avastin may still be used in breast cancer; probably just not as often.

Even with this news, I'm a fan of Roche. Still, the company has had a few setbacks lately, so it is probably time to run another valuation analysis on this name.