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TheStreet Open House

Roche Pacing the Field in the Biotech Race

NEW YORK (TheStreet) -- In the race for biotech supremacy you'd think my focus for this article would be on a big American company like Amgen (AMGN) or Gilead Sciences (GILD) or perchance the French pharmaceutical giant Sanofi (SNY). I'm focusing today on Swiss drug maker Roche Holding AG (RHHBY).

Roche was founded in 1896 operates in the pharmaceuticals and diagnostics businesses in Switzerland, the rest of the EU, the U.S. and other international markets.

A growing number of Roche's new products, including breast cancer medications Kadcyla and Perjeta, are in fact "biologic." The term "biologic therapies" means these complex drugs are derived from living, biological organisms.

On Oct. 14th, Roche announced its plans to invest 800 million Swiss francs (roughly $880 million) in four facilities in Germany, the U.S. and Switzerland that will increase its global production of biologic therapies, which often have higher profit margins than conventional medicines and are harder for competitors to reproduce once the biologic medication loses its patent protection. Roche is currently the undisputed leader in this field.

Biologic therapies accounted for about 85% of the nearly 27 billion Swiss francs that Roche's 10 top-selling drugs generated in revenue during 2012. Rising worldwide demand for biologic pharmaceuticals will justify the $880 million investment for biologic products already on the market and help it to develop nearly 40 new biologic therapies that Roche has in its pipeline of new drugs, according to the company.

Check out this list for an impressive product pipeline straight from the company's own website. Roche is traded OTC in the U.S., but you can also own shares indirectly through the iShares MSCI Switzerland Capped Index ETF (EWL), where Roche represents over 14% of the holdings in the ETF. Another Swiss pharmaceutical powerhouse in EWL is Novartis (NVSEF), which accounts for slightly more than 13% of the fund's holdings.

Whether you favor Roche or another big biotech company like Celgene (CELG), which discovers, develops, and commercializes therapies for cancer and immune-inflammatory diseases in the United States and Europe, the biotech race for new cures and the most advanced therapies is hotter than molten lava.

Sales of biotech and biologic products will comprise 25% of the global pharmaceutical market by 2018, according to EvaluatePharma, a research company that covers the worldwide healthcare industry. Roche is predicted to be the biggest player in the biotech and biologic therapies market, with sales are expected to rise to $35.3 billion in 2018, compared to less than $27 billion in 2012.

Roche is spending nearly $1 billion to increase production facilities, including one in its hometown of Basel. It will expand or upgrade a number of other productions plants like the one in Penzberg, Germany. The company already has two facilities in California in the biologic therapies manufacturing business.

There are a number of biotechnology companies and ETFs for investors to choose from, but it's challenging to think of any company in the world that's more focused on winning "the biotech race" than Roche. Remember, it was Roche that bought Genentech back in March 2009 for almost $47 billion. No wonder the company is the Usain Bolt of the biotech world, lapping the competition like greased lightning.

At the time of publication the author had no position in any of the stocks mentioned.



This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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