Roche annual profit disappoints, outlook muted

By John Miller

Roche tablets are seen positioned in front of a displayed Roche logo in this photo illustration shot in Zenica

Roche tablets are seen positioned in front of a displayed Roche logo in this photo illustration shot in Zenica, Bosnia and Herzegovina, January 22, 2016. REUTERS/Dado Ruvic

BASEL, Switzerland (Reuters) – Cancer drug maker Roche <ROG.VX> followed Swiss rival Novartis <NOVN.VX> in disappointing shareholders with a muted forecast for the year, sending its shares lower on Thursday.

Analysts voiced concerns that Roche’s three big cancer treatments — Herceptin, Rituxan and Avastin — could be facing slower growth even before the first copycat drugs aiming for a share of their revenue go on the market in 2017.

Roche missed analysts’ sales and profit forecasts for 2015. It now expects revenue to rise at a “low-to-mid-single digit percentage rate” this year and core earnings per share would expand faster than sales at constant exchange rates.

On Wednesday, Novartis forecast only stagnant results for this year. The Roche forecast of slow growth failed to impress investors and shares fell 4 percent by 1230 GMT.

The outlook is more muted than Roche’s final forecast for 2015, although Chief Executive Severin Schwan saw scope for things to turn out better.

“We don’t want to promise too much — we would rather surpass expectations than do the opposite,” Schwan said in an interview.

“I think it’s a solid outlook. We want to boost growth again and increase profitability at the same time.”

One analyst said the guidance implied flat 2016 earnings, well below market consensus, once the impact of exchange rates was factored in.


Other analysts focused on the outlook for Herceptin, Rituxan and Avastin that account for better than half of drug sales.

“Sales growth in our opinion could lose momentum in 2016, because Roche’s three main products are moving inexorably toward a plateau, even without the arrival of biosimilars,” wrote Michael Nawrath, a Zuercher Kantonalbank analyst.

He added that the dividend hike to 8.10 francs per share missed expectations for more, too.

For 2015, Roche posted core net income of 11.84 billion Swiss francs ($11.64 billion), compared to a Reuters poll for 12.2 billion francs.

Sales rose 1 percent to 48.145 billion francs in 2015, compared to analyst forecasts of 48.4 billion francs. In constant currencies, sales rose 5 percent.

Schwan, a plain talking Austrian lawyer and economist by training, is counting on new immunotherapy treatments for cancer as well as medications for multiple sclerosis to offset patent expiries that will leave Roche vulnerable to biosimilar copycats in two years.

“We now expect to launch up to eight new medicines over the next three years, that’s actually an unprecedented number for Roche,” Schwan said.

This month, Roche submitted its anti-PDL-1 treatment atezolizumab for U.S. Food and Drug Administration for bladder cancer and expects to reap the first sales by year’s end, Schwan said. ($1 = 1.0173 Swiss francs)

(Editing by Michael Shields and Keith Weir)

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