Roche Upbeat On Outlook As Profit Rises

Roche Holding AG (ROG.VX) Wednesday issued an upbeat outlook for 2012 after reporting a rise in full-year net profit due to tight cost controls and despite a drop in annual sales.

The world's largest maker of cancer drugs said it expects sales this year to grow at a low to mid-single-digit rate and has set itself a target of high single-digit core earnings per share growth despite the ongoing difficult market situation.

Net profit rose to 9.34 billion Swiss francs ($10.19 billion) from CHF8.67 billion a year earlier, missing analysts' forecasts for CHF9.52 billion.

The rise in earnings rise came despite sales sliding to CHF42.53 billion from CHF47.47 billion a year earlier, hurt by an absence of revenue from flu drug Tamiflu and as the strong Swiss franc shaved off part of the company's revenue. A Dow Jones Newswires survey of 12 analysts had expected full-year sales to be CHF42.71 billion.

"We achieved our sales and earnings targets for the year and also made significant progress with our pipeline," Roche Chief Executive Severin Schwan said in a statement.

Roche, which last week launched a hostile $5.7 billion cash offer for U.S.-based Illumina Inc. (ILMN), said "the planned acquisition of Illumina will strengthen our presence in the fast-growing sequencing market and enable the discovery of complex biomarkers for research and clinical use."

Roche has recently been buoyed by a more promising product pipeline, but is still struggling with increased regulatory scrutiny and global austerity programs that have hurt its business, prompting the Swiss drug maker to launch a multi-billion-dollar restructuring program, which should be largely completed by the end of this year. Roche launched a revamp in 2010 after a series of drug development setbacks.

Still, analysts believe the Basel-based drug maker is returning to top-line growth which, combined with further cost savings, is likely to produce a period of consistent earnings-per-share growth. A key risk to long-term forecasts and the defensive perception of Roche's future cash flows, however, remains biosimilar and bio-better competition to super-selling cancer drugs Rituxan and Herceptin this year and onwards.

Roche is also a leader in targeted therapies, where gene sequencing is central, allowing scientists to predict a patient's response to a particular drug during clinical practice and in drug trials. Roche thus wants Illuminia to extend its leadership in the area. But Chief Executive Schwan has said the Swiss company has no intention of raising its offer of $44.50 a share for the San Diego, Calif.-based group.

Roche lifted its dividend by 3% to CHF6.80 a share.

Roche shares closed Tuesday at CHF155.80.

-By Sten Stovall, Dow Jones Newswires; +44 207 842 9292; sten.stovall@dowjones.com

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