Flu season is just kicking off in the Northern Hemisphere. But fears of H1N1 swine flu are already paying off for European drug maker Roche (RHHBY), which makes the antiflu medicine Tamiflu. Strong sales of the drug helped Roche beat third-quarter forecasts with a 10% rise in sales. The firm reported that revenues rose to 12.4 billion Swiss francs ($12.2 billion), versus expectations of $12.2 billion. Roche raised full-year sales expectations for Tamiflu from two billion francs to 2.7 billion this year and also boosted its forecast for its drug division, saying it sees "at least" high single-digit sales growth compared to an earlier forecast of high single digits. The company doesn t break out quarterly earnings but confirmed its full-year guidance.

Drug companies are facing a tough business climate, of course, and traders will get a better sense of how the industry is faring when firms such as Novartis (NVS), Merck (MRK) and Bristol-Myers Squibb (BMY) report next week. So far this earnings season, the industry has issued a mixed report card. Johnson & Johnson (JNJ) missed third-quarter estimates with revenues dropping 5.3% to $15 billion, below forecasts of $15.2 billion (though its per-share profit of $1.20 beat estimates by seven cents). Abbott Laboratories (ABT), meanwhile, beat earnings forecasts on strong sales of its arthritis drug Humira.

As for Roche, sales of its oncology drugs were slightly weaker than expected. But some analysts say those drugs, which Roche added with its $46 billion acquisition of Genentech, still have strong momentum. Revenues from Avastin, the blockbuster of the bunch, should hit $7 billion this year and $10 billion in the next two to three years, says analyst James Knight with Collins Stewart in London. Avastin alone accounts for 14% of Roche s estimated sales of $49 billion this year. But key patents on it don t expire until 2017, giving Roche time to develop other potential blockbusters. And because Avastin is a biologic drug that s complex to manufacture, generic competition may not be an issue for years.

Roche's stock has long commanded a premium and trades at 14 times estimated 2009 earnings, slightly higher than Novartis and other European drug companies. Knight, for one, has a "hold" recommendation on the shares, seeing better opportunities in other pharmaceutical firms. Still, he adds, Roche has sales growth momentum while rival firms are seeing slowing growth. And Roche's price/earnings ratio is a reasonable 13 times estimates for 2010 earnings.