What Future for Roche After FDA Decision on Avastin?

Swiss pharmaceuticals giant Roche said it would appeal a decision by the US Food and Drug Administration to remove the approval for the drug’s indication for metastatic breast cancer, but analysts doubt the appeal would be successful.

On Thursday, the FDA ruled that the drug fails to show its efficiency in relation to costs. Analysts forecast this decision will result in a loss of $1 billion in annual sales for the cancer drug, which is still approved for the treatment of other cancer types, such as colon, brain, kidney and lung cancer.

“Roche has 30 days to submit additional Avastin data to the FDA to schedule another FDA hearing in January, but we don't subscribe much chance of success to this event," UBS said in a research note.

While doctors will still be able to prescribe the drug “off label”, analysts say the substantial costs for the treatment ($88,000 a year) will dent demand for the treatment significantly.

In a positive turn, the European Medicines Agency (EMA) has reaffirmed on the same day that Avastin is an effective treatment for advanced breast cancer in Europe, in combination with an agent called paclitaxel.

A Roche spokesperson told CNBC this indication is still to be confirmed by the European Commission.

JP Morgan maintained its overweight rating for Roche’s stock. Avastin can be sold for another six months in the US before it is completely withdrawn, JP Morgan’s analysts pointed out.

Roche stock "looks attractive relative to its peers on measures like generic cliff exposure, biologics, and the durability of revenue/EPS growth," analysts at Sanford C.Bernstein wrote.

Bernstein and Bank of America/Merrill Lynch highlight the positive verdict from the European Medicines Agency, which should offer some relief for investors. According to estimates from BofA/ML, Avastin’s use in the treatment of breast cancer in Europe could see peak sales of 600 Swiss francs, or 2 percent of EPS.

Roche’s blockbuster cancer drug Avastin has been on a rocky road this year: In July, an advisory panel to the FDA has recommended the drug’s indication for breast cancer be pulled from the US market.

In September, the FDA gave the company and investors some hope by delaying the final vote to December. And on Thursday, the FDA together with the EMA (European Medicines Agency) gave its final verdict – a day earlier than expected