Saturday, October 15, 2011

Strong Swiss franc hits Roche sales

By Katie Reid

ZURICH (Reuters) - Roche Holding AG <ROG.VX> posted slightly weaker-than-expected third-quarter sales, as the strong Swiss franc hit its top line and some of its key cancer drugs fell short of estimates.

Third-quarter sales at Roche, which is grappling with lower sales of its key cancer drug Avastin and the effects of cuts in global healthcare spending, fell 14.5 percent to 9.82 billion Swiss francs, below the average estimate of 10.2 billion in a Reuters poll.

"Roche ... sales ... came in 2 percent below consensus estimates due to a lower than anticipated performance of flagship cancer franchises within the pharmaceuticals division. Diagnostics sales were in line with forecasts," Helvea analyst Karl-Heinz Koch said.

Despite these headwinds, the Basel-based drugmaker is sticking to its full-year guidance of core earnings per share growth of around 10 percent in local currencies, as well as its target of low single-digit sales growth in local currencies.

Roche's sales guidance excludes Tamiflu, a pill to treat flu.

Stripping out the currency impact, third-quarter sales rose 2 percent, excluding Tamiflu, underscoring the hit from the franc, which has soared to a series of records against the dollar and the euro this year.

Like many Swiss companies, Roche has battled with the strong franc throughout the year, but says it is still firmly committed to its Swiss base thanks to the deep talent pools, excellent infrastructure and low tax rates.

Last month, the Swiss National Bank set an exchange rate cap on the franc against the euro of 1.20 per euro -- a move that ease the pain for exporters and also help Swiss biotech group Actelion, which is due to report quarterly figures next week.

SALES IMPACT

Roche, whose statement kicks off third-quarter reports from big pharmaceutical companies, said the franc had lopped 13 percent off its top line in the first nine months of the year and that if exchange rates were to remain stable, the full-year sales impact would be 12 percent.

Core earnings per share are expected to take a 14 percent currency hit, while core operating profit would see a negative impact of 15 percent, the group said.

Roche also said it was on track to shave off 1.8 billion francs in costs this year and to realize annual savings of 2.4 billion francs by the end of 2012, in line with its "Operational Excellence" program laid out last year.

The 115-year-old group has faced slowing demand for Avastin, one of its top-selling cancer drugs, after U.S. authorities proposed revoking its approval in advanced breast cancer at the end of last year. The group is still awaiting a final decision.

Avastin sales slipped 10 percent at constant exchange rates in the third quarter to 1.2 billion francs, also trailing expectations.

Analysts are, however, turning more upbeat about Roche's prospects thanks to a string of positive product news over the past few months -- a far cry from Roche's disappointing year last year.

It recently won U.S. approval for its new skin cancer drug Zelboraf and European regulators have just recommended approval for Avastin in advanced ovarian cancer.

Investors are keenly awaiting new data on a number of promising medicines, such as breast cancer drug pertuzumab, which Roche is aiming to submit for approval by the end of this year.

Roche, along with many other pharma companies, is also trying to deal with pricing pressures as cash-strapped governments seek to cap healthcare spending, and some analysts believe there still could be more cuts in Europe.

Despite these pressures, drug stocks have performed relatively well recently, outperforming broader indices on both sides of the Atlantic, and there are some signs that pipelines are starting to improve.

Investors will now await quarterly results from other major pharma players such as Abbott <ABT.N>, GlaxoSmithKline <GSK.L>, due later this month, and Pfizer <PFE.N> at the beginning of November for more insight into how big pharma is coping with pricing pressures.

(Editing by Mike Nesbit and David Holmes)

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Source: http://www.huffingtonpost.com/2011/10/13/strong-swiss-franc-hits-r_n_1008326.html

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