Swiss drugmaker Roche Holding AG (ROG.VX) Wednesday reported a
5% drop in net profit for 2008, citing the strong franc and lower
financial income.
Roche reports strong results in a challenging market
environment: Group sales up significantly, increasing by 10% in
local currencies excluding Tamiflu pandemic sales.
-Strong organic growth of key products more than outweighs lower
Tamiflu pandemic sales.
Including Tamiflu pandemic sales, Group sales in local currency
rise 6%.
-Operating profit exceeds last year's record by 4% in local
currencies, reaching 13.9 billion Swiss francs despite increased
level of R&D investment.
-Net income down by 5% in Swiss francs to 10.8 billion Swiss
francs, primarily due to the strong Swiss franc, but also to lower
net financial income.
-Core Earnings per share at constant exchange rates 2% above
previous year's record level.
Pharmaceuticals-Pharmaceuticals sales advance 10% * - twice the
global market growth rate. This is the sixth double-digit increase
in as many years.
-Oncology product sales grow by 15% to 19.7 billion Swiss
francs. For the first time, three cancer products achieve sales of
over 5 billion Swiss francs.
-Operating profit margin increases by 0.7 percentage points to
36.2% despite significantly lower Tamiflu pandemic sales and
increased investments in the development pipeline.
-Avastin receives accelerated approval for breast cancer in US;
applications for approval in brain cancer filed in US and EU.
-Actemra/RoActemra approved for rheumatoid arthritis in Japan,
EU and Switzerland; additional data will be submitted to US FDA in
2009.
-Twelve major phase III programmes initiated.
-Acquisitions of Piramed, Mirus and ARIUS significantly
strengthen R&D pipeline with new compounds and technology
platforms.
Diagnostics-Divisional sales show double-digit growth, rising
10%.
-Operating profit margin declines 5.3 percentage points to
12.3%, mostly due to acquisition impacts and strong competition in
the US diabetes care market.
-Integration of Tissue Diagnostics (Ventana) completed; the new
business's performance exceeds expectations.
2 Outlook-Above-market sales growth in both divisions.
-Mid-single-digit sales growth for both divisions and Group.
-Core Earnings per share target to remain at the high level of
2008 in spite of increased investments in research and development
and expected lower net financial result.** Barring unforeseen
events.
Unless otherwise stated, all growth rates are in local
currencies.
*Excluding Tamiflu pandemic sales.
**Core Earnings per share target is based on constant exchange
rates.
Severin Schwan, CEO of Roche, on the Group's 2008 results:
"Roche continued the positive trend of recent years. Once more
sales by both the Pharmaceuticals and Diagnostics Divisions grew
considerably faster than the market. Core Earnings per share in
local currencies also rose again." Speaking of Roche's future
strategic direction, Schwan said: "In these times of economic
upheaval it is more important than ever that we adhere rigorously
to our strategy. We will continue to focus on our core
pharmaceuticals and diagnostics businesses. Our aim remains to
offer patients ever better treatments that are tailored to their
condition." In 2008, the Group continued its strong sales
performance. Total sales grew by 6% in local currencies (-1% in
Swiss francs; 10% in US dollars) to 45.6 billion Swiss francs, with
the Pharmaceuticals Division representing 79% of Group sales and
the Diagnostics Division contributing 21%. The sales increase in
the underlying business more than compensated for the anticipated
decline in Tamiflu pandemic sales of 1.6 billion Swiss francs.
Local currency sales growth excluding Tamiflu pandemic sales was
10%. Both 3 the Pharmaceuticals and Diagnostics Divisions grew well
ahead of their respective markets.
Demand for the Group's oncology drugs Avastin, MabThera/Rituxan,
Herceptin, Tarceva and Xeloda continued to be strong. Additional
growth drivers in the Pharmaceuticals Division were Bonviva/Boniva
in metabolism/bone and CellCept in transplantation. In the
Diagnostics Division the main growth areas were Professional
Diagnostics and Applied Science, with both business areas growing
well ahead of their respective markets. Following the acquisition
of Ventana at the beginning of February 2008, sales in the Tissue
Diagnostics business grew significantly faster than the market,
contributing 4 percentage points to local currency sales growth of
the Diagnostics Division.
Significant increase in operating free cash flow The Group's
operating profit increased by 4% in local currencies to 13.9
billion Swiss francs. The operating profit margin declined slightly
by 0.9 percentage points to 30.5% due to a margin reduction in the
Diagnostics Division of 5.3 percentage points. The main reason
being the impact of recent acquisitions, strong competition in the
US diabetes care market and portfolio mix effects. The
Pharmaceuticals margin improved by 0.7 percentage points to 36.2%
despite significantly lower Tamiflu pandemic sales and increased
investments in the strong development pipeline. Operating free cash
flow increased by 16% to 12.4 billion Swiss francs despite
significant currency translation effects.
Strong balance sheet The financial crisis had only a minimal
adverse effect on net financial income due to the conservative
investment approach with limited exposure to equity securities. In
2008, net financial income reached 0.2 billion Swiss francs. The
reduction of 0.6 billion Swiss francs compared with 2007 is
primarily due to lower interest income resulting from lower liquid
funds and reductions in interest rates. Due to the strong Swiss
franc and the lower net financial income, group net income
decreased by 5% to 10.8 billion Swiss francs. Core EPS increased by
2% in local currencies to 11.04 Swiss francs. The Group continues
to have a strong balance sheet, also when compared internationally,
with equity (including non-controlling interests) representing 71%
of total assets and 84% of total assets financed long-term.
Barring unforeseen events, the Roche Group expects to continue
to perform strongly in 2009. Full-year sales in both the
Pharmaceuticals and the Diagnostics Division are expected to grow
ahead of the market, with increases in the mid-single-digit range
in local currencies. Roche will continue to invest in the
largescale confirmatory clinical trials that are vital to the
Group's long-term success. Despite the higher research and
development costs involved and the expected lower net financial
result, the Group is aiming for Core Earnings per share (Core EPS)
at constant exchange rates to remain at the same high level as in 4
2008. Following the proposed purchase of the outstanding Genentech
shares, Roche expects that the transaction will have a positive
impact on Core EPS within the first year after closing. Roche will
update its targets once the transaction has been closed.
22nd dividend increase in a row In view of Roche's latest
excellent results, the Board of Directors will propose that the
dividend for 2008 be increased by 9% to 5.00 Swiss francs per share
and non-voting equity security (up from 4.60 Swiss francs for
2007). Subject to approval at the next Annual General Meeting of
Shareholders, this will be Roche's 22nd consecutive annual dividend
increase.
Company Web Site: http://www.roche.com
-Zurich Bureau, Dow Jones Newswires; +41 43 443 8040;
zurichdjnews@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.