Roche shines in its annual operations

Cancer drugs and Tamiflu have helped make record sales (Roche) Roche

The Roche pharmaceutical group has reported record sales and operating profit for 2005 but, as expected, net income fell slightly after one-off gains in 2004.

Basel-based Roche, which includes the world’s leading diagnostics business, announced on Wednesday that group sales rose by 20 per cent to more than SFr35 billion ($27.39 billion).

Net income was SFr6.73 billion or five per cent below the 2004 figure which had been influenced by income of SFr2.3 billion from the divested consumer health business.

The pharmaceuticals division was the key growth driver, with sales increasing four times as fast as the global market. Sales in the unit reached SFr27.268 billion or 26 per cent higher than the 2004 performance.

Growth was fuelled by strong demand for the division’s flagship oncology portfolio, now boosted by cancer treatments Avastin and Tarceva, by strong sales of CellCept (transplantation) and Pegasys (hepatitis B and C).

Tamiflu

The anti-flu drug Tamiflu, which many governments have been stockpiling as part of bird flu pandemic readiness programmes, also contributed to growth.

In the diagnostics division, sales were up by five per cent at SFr8.243 billion.

“2005 was an excellent year for Roche. The pharmaceuticals division achieved its best result ever and diagnostics showed a solid performance leading to record sales and operating profit on a group level,” commented Roche chairman and CEO Franz Humer in a statement.

“With the introduction of many novel diagnostics and life-saving drugs, and a great effort to increase the availability of Tamiflu we have again created sustainable value for physicians and patients,” he added.

Humer later told journalists he thought Tamiflu sales would rise to SFr1-1.2 billion this year.

He ruled out any large acquisitions at Roche but left the door open for small deals.

“I would buy products, product lines and small firms if it were to make strategic sense. Mega-acquisitions destroy more value than they create,” he said.

As a result of the 2005 figures, the board of directors is proposing the 19th consecutive dividend increase – up 25 per cent to SFr2.50 per share and non-voting equity security.

Strong numbers

“These are very strong numbers,” commented analyst Karl-Heinz Koch at Lombard Odier Darier Hentsch.

“The main surprise is in the top line growth in the pharmaceuticals division and that is trickling through to the operating line.”

Koch said the figures were in line with his own expectations and above the market consensus, but noted that Roche’s diagnostics business continued to show signs of weakness.

“The outlook is solid and the only disappointment is diagnostics which did not live up to expectations but that is more than compensated by the strong drug sales growth,” he added.

Positive outlook

Roche reaffirmed its positive outlook for 2006, commenting that both pharmaceuticals and diagnostics were expected to grow ahead of the market in local currencies.

It added that the group anticipated continued double-digit growth for the pharmaceuticals division as a whole.

Sales growth is expected to be stronger in the second half of the year than in the first.

Two weeks ago, rival Novartis announced its net profit had increased by ten per cent over 2004 to $6.1 billion, on net sales of $32.212 billion.

swissinfo with agencies

Key facts

Roche 2005 financial figures

Sales: SFr35.511 billion (up 20% over 2004 in Swiss francs)
Operating profit: SFr9.025 billion (+ 33%)
Net profit: SFr6.730 billion (- 5%)
Research and development spending: SFr5.705 billion (+11%)
Proposed dividend: SFr2.50 (+ 25%)
Number of employees at December 31: 68,218 (+3.6%)

In brief

Roche, which was founded in 1896 in Basel, has core businesses in pharmaceuticals and diagnostics.

The group is the number one in the global diagnostics markets and is a leading supplier of medicines for cancer and transplantation.

Cross-city rival Novartis has just under a one-third stake in Roche, with Novartis CEO and chairman Daniel Vasella repeatedly making it clear that he would like a merger of the two.

Roche and its founding families have consistently rejected the idea.