Roche is the second European pharmaceutical company in a week to have the US Food and Drug Administration question its medicines. But unlike GlaxoSmithKline’s success last week, Roche came off second best. The FDA’s advisory committee voted 12 to 1 this week against allowing the continued use of Avastin, Roche’s top-selling drug for breast cancer treatment. The decision could cost the company about $1bn in sales of the drug that had sales of about $6bn last year – 13 per cent of turnover. A final decision will be made on the drug in September, but it is unlikely the recommendation will be overturned.

Other drug companies should take note. The FDA committee’s “risk versus reward” decision framework reviews many different factors. However in its review of the trial data for Roche’s drug, it did not clarify specific “quality of life” targets the drug had to meet for approval. These developments may prompt companies with drugs undergoing clinical trials to redesign their studies and delay bringing the products to market.

A further risk for Roche is that the FDA’s counterpart in Europe decides to review its approval for Avastin. For now the European Medicines Agency has not decided whether it will follow the lead of its US counterpart, but it will no doubt consider whether a review is needed.

The timing could not be worse. Severin Schwan, Roche’s chief executive, will announce his company’s first-half results on Thursday. Roche is one of the worst-performing healthcare stocks this year, having lagged the S&P European 350 healthcare index by more than 15 per cent. Although its stock trades at just under 10 times 2011 earnings, about a 5-10 per cent premium to the market, investors who marked Roche’s stock down 2 per cent on Wednesday are right to be wary.

E-mail the Lex team confidentially

Get alerts on Pharmaceuticals sector when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article