Roche profit takes a tumble

Roche manufactures the obesity drug Xenical (Roche) Roche fabrique le médicament contre l'obésité Xenical. (Image Roche)

The Roche pharmaceuticals and diagnostics group has reported that first-half adjusted net profit fell 24 per cent to SFr1.585 billion ($1.16 billion).

The decline was blamed on a fall in financial income and the strength of the Swiss franc.

In a statement, the company said it had nonetheless marked a return to a “solid earnings performance” compared with the second half of 2002.

Roche reported a significant improvement in its group operating profitability, with operating profit from core businesses increasing by 15 per cent in Swiss francs to SFr2.8 billion.

Total sales for the first six months on the group’s underlying ongoing operations were SFr13.88 billion, up six per cent on last year.

“Roche can look back on a very successful first half-year, particularly in terms of its operating performance,” commented Roche chairman and CEO Franz Humer.

“Our core pharmaceuticals and diagnostics businesses grew faster than the market and at the same time we significantly improved profitability,” he added.

Roche repeated it expected full-year sales and operating profit to rise by double-digit percentage rates at both the diagnostics and pharmaceuticals divisions, while the group’s operating margin should remain stable.

Division sell-off

The company said it was cutting the sale price of its vitamins and fine chemicals division to the Netherlands group DSM by €200 million because of the global downturn in the market for vitamins.

European Union approval for the sale to DSM was given on Wednesday.

Roche has recorded an additional impairment charge of SFr375 million against net assets in its half-year financial statement. The company said it expected to complete the sale in the third quarter.

Humer said Roche was making “good progress” in resolving problems within the group, including a long-running licensing dispute with the United States company, Igen International.

Igen acquisition?

He confirmed that Roche was in talks with Igen but said he would not be pressured into buying the biotechnology concern.

“I will not have a gun held to my head. I do not react very kindly to blackmail,” he told journalists.

Analysts believe that an acquisition could cost Roche more than $1 billion. But the company would win back access to a line of Igen testing systems used in laboratories and blood banks that earns it some $500 million a year.

Roche, which has been under pressure to perform after rejecting merger advances from its Basel rival Novartis, said it was keeping its medium-term goal of boosting drugs margins to near 25 per cent by the end of 2004 and diagnostics margins to above 20 per cent of sales in 2006.

swissinfo with agencies

roche summary

Roche first-half adjusted net profit has fallen by almost a quarter to SFr1.585 billion ($1.16 billion).
Roche blamed a fall in financial income and the strength of the Swiss franc for the decline.
It said this nonetheless marked a solid earnings performance compared with the second half of 2002.
Roche posted a record net loss of SFr4.03 billion in 2002.
Cross-town rival Novartis has a stake of almost one-third in Roche.
On Monday, Novartis reported a first-half net income of SFr2.38 billion.