Roche's Resurgence: A Turnaround of Dramatic Proportions

Roche chairman Franz Humer appears to be basking in the glow of a remarkable turnaround. After facing a potential implosion just three years ago, the Swiss healthcare group has seen its fortunes dramatically shift. According to recent market trends, Roche's share price has rallied, placing it at a premium of over 40% compared to the rest of the European drugs sector. The company's pipeline of new drugs, particularly cancer treatments Tarceva and Avastin, has been a key driver of this recovery.

Key Takeaways:

• Roche's pipeline of new drugs has been at the heart of the company's recent recovery, with positive news on cancer drug Tarceva and the potential of Avastin driving expectations.
• The company's decentralized research structure, which allows its US and Japanese affiliates to operate independently, has contributed to its success.
• Roche's expertise in diagnostics will become increasingly important as drugmakers target therapies to specific patient sub-groups based on genetic profiles.
• Analysts note that Roche's R&D pipeline is still under scrutiny, and the company's later-stage pipeline is only above average, while the early-stage pipeline is average.
• The clean-up of Roche's operations, including the offloading of its vitamins unit and its over-the-counter business, has boosted investor confidence.
• Novartis' oversight of Roche has likely been a positive influence on the company, although analysts also note that Roche's US distribution capabilities are a potential weakness.

Statistics:

• Roche's share price has risen to a premium of over 40% compared to the rest of the European drugs sector.
• The company's pipeline of new drugs has generated significant expectations, with Tarceva and Avastin driving much of the enthusiasm.
• Roche controls 33% of Novartis' voting shares.

Sources:

• "The Financial Times", 06 May 2008, "Roche's revival is a welcome surprise for investors"