New Roche (RHHBY.US) drug boosts stock price to 28 monthly best! Investors return to value stocks to help the healthcare sector have a “group carnival”

The Zhitong Finance App learned that optimism about an experimental breast cancer drug under Roche (RHHBY.US) and encouraging test results drove the company's stock price to its best monthly performance since 1997. Meanwhile, analysts expect the share price to still have room to rise.

According to reports, on November 18, Roche announced the positive results of the LiDERA study on stage III breast cancer. The study evaluated the efficacy and safety of the currently developed drug Giredestrant compared with standard endocrine monotherapy for adjuvant treatment in medium- and high-risk stage I-III ER-positive and HER2-negative breast cancer patients. The study reached the primary end point in a predetermined midterm analysis, and Giredestrant was superior to standard endocrine therapy in improving non-invasive disease survival (IDFs). At the time of the mid-term analysis, overall survival (OS) data were not mature, but clear positive trends were observed. Giredestrant was well tolerated, adverse events were consistent with its known safety, and no new safety signals were found.

Boosted by this news, Roche's stock price soared 19% in November, drawing market attention. Bank Vontobel AG analyst Stefan Schneider (Stefan Schneider) pointed out that the rise in Roche's stock price — which pushed the company's market value to a level equivalent to $311 billion — was “supported by data and should not fall back.” “Continued positive clinical trials should help the stock rise further,” he added.

Giredestrant is a next-generation oral selective estrogen receptor degrading agent (SERD) and complete antagonist independently developed by Roche. It aims to prevent estrogen from binding to estrogen receptors (ER) and induce their degradation, thereby stopping or slowing the growth of cancer cells. In September of this year, Roche announced positive results from the phase III Evera study on Giredestrant to treat breast cancer. The results showed that the study reached the main end point. The ITT population and the ESR1 mutant subgroup all achieved statistically significant and clinically significant prolongation of progression-free survival (PFS) after treatment with giredestrant combined with everolimus. Overall survival (OS) data is not mature, but it shows a clear positive trend.

Doctors have long sought more effective and better tolerated hormone therapies for early-stage breast cancer, and Giredestrant is seen as a potentially major treatment. According to analysts at J.P. Morgan Chase, the Giredestrant test results announced last month may have brought it a sales peak of about 5 billion US dollars. Intron Health estimates that global ancillary sales of the drug will reach $10 billion or more by 2032.

Intron Health analyst Naresh Chouhan (Naresh Chouhan) said in a report: “The results of this trial are enough to change the rules of the game for Roche.” He pointed to the “very large” size of the potential market and the drug's status as the first novel of its kind. He also said that upcoming clinical trial results for drugs in fields such as obesity and hereditary muscle diseases are expected to transform Roche into the most attractive European pharmaceutical stock by mid-2026.

Success, however, is not a guarantee. Other drug makers are also developing drugs for early-stage, estrogen-driven breast cancer — the most common type of disease. AstraZeneca (AZN.US) is expected to report the findings of a competitive drug next year.

Some oncologists are still wary about the future of Roche's breast cancer drug. Jefferies analyst Michael Leuchten (Michael Leuchten) wrote in the report, citing a breast cancer expert: “Expectations should be moderated for the mid-term results of Roche Giredestrant in late-stage trials.” “Although the data may open up possibilities for new treatment models, he believes these results are not enough to immediately change clinical practice.”

Investors are pouring into the healthcare sector

It is worth mentioning that from a broader perspective, investors have been shifting from artificial intelligence (AI) related stocks to healthcare stocks as concerns about drug pricing and tariff risks ease, and valuations become attractive. This is also an important reason for the rise in Roche's stock price.

This reallocation of assets is happening on both sides of the Atlantic. In November, the S&P 500 Healthcare Index achieved its best monthly performance since October 2022, while the Stoxx 600 Healthcare Index recorded its biggest monthly increase since the beginning of this year.

Henning Postada (Henning Postada), head of global multi-asset investments at DWS, said: “Healthcare companies are clearly undervalued.” He added that investors' concerns “are already reflected to some extent in the stock prices of these companies.”

In November, as pessimism about the “AI bubble” swept through global financial markets, investors re-examined bullish bets on technology stocks that are closely linked to artificial intelligence and have vague AI monetization paths, and switched to high-quality value stocks with steady cash flow, long-term stable profit data, and historically low valuations. In the US stock market, the current price-earnings ratio of healthcare stocks based on expected earnings for the next 12 months is only about 18.7 times, while the S&P 500 index as a whole is 22.1 times.

As a result, the healthcare sector is popular with hedge fund institutions that claim to be “smart money” — it was the best-performing sector in the S&P 500 index in November. According to Goldman Sachs Group's brokerage business statistics, as of last week, the US healthcare sector has been the value stock segment with the largest net purchases for four consecutive weeks.

The strong upward momentum in the healthcare sector is largely in line with the performance tracked by hedge fund research firm PivotAlpath. The health care index compiled by the company rose 13% in the three months ending September. The company attributed this rise not only to global capital flocking to value stocks due to the fear of the AI bubble, but also to strong clinical trial results, unexpected acceleration in AI-enabled R&D pipelines, and an overall recovery in mergers and acquisitions between biotech and big pharma.

Performance growth is also the core logic driving the influx of hedge funds into the healthcare sector. In the third quarter, America's largest public healthcare companies outperformed other industries. Increased use of new drugs and specialty drugs, continued growth in demand for diet pills, and strong growth in hospital visits all boosted profits.

Looking at individual stocks, apart from Roche, other healthcare stocks performed well. Merck (MRK.US) shares rose nearly 22% in November after Wall Street was increasingly optimistic about the company's future application prospects outside of its major cancer drug Keytruda, thanks to recent mergers and acquisitions and successful clinical trials. Regenerative (REGN.US) shares rose nearly 20% in November after a high-dose version of its ophthalmic drug received regulatory approval. Investors expect this will put the treatment in a better position to compete with Roche's flagship drug. Amgen (AMGN.US) shares rose more than 16% in November, and its previously announced quarterly results far exceeded market expectations.

David Mazza, CEO of Roundhill Financial, said, “The healthcare sector lags behind the market for so long that people can grow if they forget it. Now, in addition to being afraid of the AI bubble, when you see a real inflection point in both revenue and profit, the sector is finally receiving a large inflow of capital as a result.” “What makes this trend even more appealing is that valuations are still quite attractive for investment compared to historical data, so investors are receiving fundamental improvements without paying peak valuations.”