Big pharma aims to show the drugs still sell

ZURICH (Reuters) - Roche Holding AG <ROG.VX> will aim to reassure that big-selling drugs can keep driving profit when it kicks off the European earnings season, as big pharma's blockbusters face growing threats.

Weakness in sales of top products will be a theme for European drugmakers, reflecting ageing portfolios, safety issues with certain products and tough conditions for promoting new drugs.

Roche's local rival Novartis AG <NOVN.VX> -- digesting a $39-billion move for eye care company Alcon <ACL.N> to broaden its business as it faces loss of exclusivity on top-seller Diovan for blood pressure -- will likely highlight some of those problems when it reports next week.

"The drug industry is under attack on multiple fronts, but the single biggest overhang affecting the longer-term prospects of the group is the patent 'cliff' that begins in earnest in 2011," Sanford C. Bernstein analyst Tim Anderson said in a recent report.

Basel, Switzerland-based Roche -- now led by new Chief Executive Severin Schwan -- has benefited from a partnership with Genentech Inc <DNA.N> and the U.S. biotech company's promising products like cancer drugs Avastin and Herceptin.

But Genentech shares were hurt by disappointing sales of Avastin last week, demonstrating the companies' reliance on the potential 10-billion-Swiss-franc ($9.97 billion) seller.

Roche's first-quarter sales are expected to be hit by the weak dollar and a previously flagged loss of sales of flu drug Tamiflu for government stockpiling, but are still seen rising 1 percent to 11.45 billion Swiss francs ($11.42 billion).

"The oncology franchise is still driving the vast majority of pharma growth," Deutsche Bank analysts said in a note. "Due to its premium growth, little exposure to political risk and significant pipeline upside, we continue to rate Roche 'buy'."

LOOMING THREATS

Europe's other large-cap drugmakers face bigger challenges than their Swiss rivals.

AstraZeneca Plc's <AZN.L> Nexium treatment for excess stomach acid -- the biggest single medicine from the European stable -- is suffering falling revenues due to pricing pressure from cheaper rivals, although it has seen off the imminent threat of generics to the product by settling with India's Ranbaxy Laboratories Ltd <RANB.BO>.

Times are also tough at GlaxoSmithKline Plc <GSK.L>, which is planning a new direct-to-consumer advertising campaign to try and regain market share for its troubled Avandia diabetes pill. Growth of Glaxo's top seller Advair, for asthma, is also slowing.

Roche trades at 13.1 times forecast 2009 earnings, according to Reuters data, a premium to the sector thanks to its promising new drugs and limited exposure to copy-cat generic competition. Novartis -- also based in Basel trails with a multiple of 11.3.

But that is still ahead of Glaxo, Europe's biggest drugmaker with a 2009 multiple of 10.4, as well as Astra at 8.7 and Sanofi-Aventis SA <SASY.PA> -- facing potential new competition for blood-thinner Plavix and anti-thrombotic Lovenox -- at 8.2.

Novartis, plagued by setbacks to several key products like diabetes drug Galvus, is seen posting a 15 percent drop in first-quarter profit to $1.83 billion next week.

But Novartis reports in U.S. dollar and so is better hedged against currency headwinds, which will hit Sanofi and Roche hardest in the European sector.

(Additional reporting by Ben Hirschler in London; Editing by David Cowell)