Roche beat forecasts with a 10 percent rise in third-quarter sales, helped by demand for Tamiflu due to the H1N1 swine flu pandemic, and the Swiss group now sees higher drug revenues for the full year.

Tamiflu outstripped expectations in the third quarter and Roche, the world's largest maker of cancer drugs which has sealed a $47 billion buyout of U.S. partner Genentech, on Thursday raised its 2009 forecast for both overall drug sales and the flu medicine.

Overall, a very good set of sales numbers, said Jefferies International analyst Jeffrey Holford. We continue to rate Roche as our favorite large-cap name in the European Pharma sector.

Hefty drug price increases and windfall sales from H1N1 swine flu have helped Big Pharma to a more successful year than feared, though the sector still has long-term problems such as greater competition for its big-selling drugs and trades at a discount to the wider market.

Two diversified healthcare groups have already demonstrated the sector's mixed prospects this week -- Abbott Laboratories' profit beat forecasts thanks to its Humira arthritis drug, while sales at rival Johnson & Johnson disappointed.

Investors are now looking to a string of more specialized pharmaceuticals makers reporting next week -- including Merck & Co , Bristol-Myers Squibb and Novartis -- for more details on the sector's prospects.

Roche's third-quarter sales rose to 12.4 billion Swiss francs ($12.2 billion), versus expectations of 12.2 billion. The group nudged up its full-year drug sales forecast, now seeing at least high single-digit sales growth compared with a previous target of high single digits, and confirmed its earnings target.

The Swiss group has been trading at a premium to European rivals GlaxoSmithKline , Sanofi-Aventis , Novartis and AstraZeneca thanks to its strong position in cancer and biotech drugs and lack of exposure to generic competition.


Much of Roche's impressive performance was due to windfall sales of Tamiflu, however, and some analysts were underwhelmed by its world-leading cancer portfolio and said much of the good news was already priced in.

The stock -- which has gained nearly a fifth since July -- dropped 1.2 percent to 167.50 francs by 0740 GMT, versus a slightly stronger DJ Stoxx European healthcare sector <.SXDP>.

Raising the sales guidance is definitely a positive but this is mainly due to the strong Tamiflu performance, said Kepler Capital Markets analyst Daniel Daetwyler.

One needs to flag the relatively weak local product sales growth in the U.S. with the key oncology drugs.

Sales of Tamiflu, which Roche manufactures under license from Gilead Sciences , more than quadrupled to 2 billion francs in the first nine months. Blockbuster cancer drug Avastin also underpinned growth, with nine-month sales up 26 percent.

Roche sees Tamiflu revenue of 2.7 billion francs, versus previous guidance of 2 billion.

The group repaid 7 billion francs of debt from its Genentech buyout in the third quarter and is committed to more than another 5 billion by mid-2010, and is still screening the market for small and mid-sized buys, Chief Executive Severin Schwan said.

($1=1.017 Swiss francs)

(Editing by Greg Mahlich and Jon Loades-Carter)