Roche cancer drug outflanks cheaper rivals in key US market

London

ROCHE has won a reprieve from an expected deluge of cheaper versions of its biotech cancer drugs as US regulators knocked back a biosimilar form of rituximab from Swiss rival Novartis.

Novartis's Sandoz unit said its copy of Roche blockbuster Rituxan - used to treat blood cancers and certain immunological diseases - had received a so-called complete response letter from the US Food and Drug Administration (FDA).

The FDA issues such letters when it is not ready to approve a product.

The news follows a similar setback for another biosimilar copy of Rituxan from Celltrion and its partner Teva.

Together, the two delays win Roche extra breathing space in the crucial US market.

Roche shares rose 1 per cent in early trading, while Novartis stock was little changed.

Deutsche Bank analyst Tim Race said Rituxan could now remain free from biosimilar competitors in the United States this year, with erosion threatening only from 2019.

Rituxan generates about US$4 billion of US sales for Roche. Mr Race said he had been expecting a sales loss to biosimilars of about US$150 million in 2018 and Roche earnings would be around 0.5 per cent higher if this was removed.

For 2019, Mr Race assumes a US$1 billion fall in US Rituxan sales versus 2017, so if biosimilars enter from mid-2019, there could be an earnings uplift of about 2 per cent.

Sandoz said it was evaluating the FDA letter and it stood behind the "robust" evidence included in the regulatory submission for its biosimilar.

"While disappointed, Sandoz remains committed to further discussions with the FDA to bring this important medicine to US patients as soon as possible," it said.

The problems facing Rituxan biosimilars in the United States are in sharp contrast to the situation in Europe, where copies of the drug from both Celltrion and Novartis are already available and uptake of the cut-price medicine is hurting Roche.

Rituxan sales plunged by 44 per cent in Europe in the first quarter of 2018.

The tussles in the biosimilars market are a growing focus for investors, with soaring valuations for some pioneers in the field, such as South Korea's Celltrion, and worries about the long-term sales threat to makers of original drugs, such as Roche and AbbVie.

Overall, US regulators have lagged behind Europe in approving biosimilars, while a complex system of rebates offered to insurers by original-brand drugmakers has also created barriers to use.

Biological drugs such as Rituxan are complex molecules made inside living cells, which means that rivals seeking to make copies when patents expire can only ever produce medicines that are similar to the original rather than identical. REUTERS