Roche Sees Slower Growth as Profit Drops 5%
Swiss drug maker Roche sees growth slowing this year after its 2008 profit fell 5 percent and missed expectations, hurt by a loss of pandemic Tamiflu sales and the strong Swiss franc.
Roche, which has made a $42 billion hostile bid for U.S. biotech group Genentech, said on Wednesday it expected mid-single-digit sales growth for both divisions and the group, a cut from its 2008 forecast of high-single-digit growth.
"Roche (stock) may fall today," said DZ Bank analyst Thomas Maul. "Nevertheless, for long-term investors we see Roche as a basic investment in pharmaceuticals due to its outstanding pipeline and strong position in the cancer market." Pharmaceutical companies like Roche have proven relatively resilient during the economic downturn as healthcare is usually one of the last areas where customers cut back spending.
Full-year net profit fell to 10.8 billion Swiss francs ($9.30 billion), the company said, and gave few more details on its outstanding Genentech bid.
Its stock was indicated to open more than 2 percent lower, according to pre-market data from bank Clariden Leu.
It saw core earnings per share (EPS) remaining at its 2008 level this year, despite expecting a lower net financial result as it ramps up research and development spending, and proposed a higher-than-expected dividend of 5 francs a share.
The Swiss company last week launched a surprise hostile offer for Genentech, at a price below its original rejected bid, reflecting tougher financing conditions and a drop in the U.S. group's shares.
Roche said it expects the acquisition of Genentech to have a positive impact on core EPS within the first year of closing and it will update targets after the deal has been closed.
The Swiss group expects to finance the deal through its own funds, bonds, commercial paper and bank loans. Its operating free cash flow rose 16 percent to 12.4 billion francs.
Roche trades at about 13 times forecast 2009 earnings, a premium over its local Swiss rival Novartis and other big European drug makers like GlaxoSmithKline and Sanofi-Aventis due to its promising portfolio of cancer drugs and growth prospects.
Roche is also a step ahead of many competitors because it has limited exposure to generic or copycat versions of its drugs and is trying to reinforce that position with its attempt to buy the 44 percent of Genentech it does not already own.
Its cancer drugs posted a solid performance, underpinned by blockbusters MabThera, Avastin and Herceptin, all of which sold more than 5 billion francs.
Roche had been expected to post net profit of 11.4 billion francs and sales of 45.6 billion, according to a Reuters poll. Analysts had seen its dividend at 4.94 francs.