Roche Holding AG’s profit fell just short of estimates in the first half as revenue from new drugs failed to offset the dwindling market for Covid-19 tests and treatments.
(Bloomberg) — Roche Holding AG’s profit fell just short of estimates in the first half as revenue from new drugs failed to offset the dwindling market for Covid-19 tests and treatments.
Earnings per share declined to 10.10 Swiss francs ($11.74) excluding some items, the drugmaker said. Analysts expected 10.15 francs in a survey. The stock dropped in Zurich trading Thursday afternoon amid concern about the company’s growth outlook.
Long celebrated for its pipeline of experimental drugs, Roche is in the unusual situation of needing to prove to investors that it can deliver the new products to fuel growth. High-profile projects in cancer and Alzheimer’s disease failed in clinical trials last year. The drugmaker is also coming off a leadership reshuffle, with Chief Executive Officer Thomas Schinecker taking the reins from Severin Schwan, now the company’s chairman.
Roche’s performance has lagged peers in the pharmaceutical sector this year. Chief Financial Officer Alan Hippe acknowledged that the company’s portfolio of experimental drugs had suffered setbacks in late-stage development.
“We have to now fill up the pipeline again,” Hippe said at a meeting in Basel, Switzerland. “Once that happens I am not concerned about the share price.”
The eye medicine Vabysmo, which just became a blockbuster, and other new treatments helped make up for the loss of pandemic-related revenue.
“There is really only one word for Vabysmo, and that is: momentum,” said Teresa Graham, who heads the pharmaceutical unit.
The comparison effect, after Covid fueled sales of medicines and tests, will probably end after the first quarter next year, according to Roche.
Meanwhile, final results from a key study of experimental drug tiragolumab in lung cancer may be pushed to next year, Schinecker said. The medicine failed to help patients live longer without their disease progressing, and Roche is still waiting for results on whether it can extend lives.
Potential Deals
The company is open to deals if they bring transformational medicines, Schinecker said.
“We’re continuously working on our pipeline, looking at how we can get more medicines that have first-in-class, best-in disease potential,” he said in a Bloomberg Television interview.
Revenue fell 8% to 29.8 billion francs in the first half, the company said. Besides the pandemic comparison, the franc’s strength is also hurting results. Sales of the top five medicines, led by newcomer Vabysmo, rose more than 40% to 7.5 billion francs.
Roche reiterated its forecast that sales and core earnings per share will decline in the low single-digit range this year, at constant exchange rates. The company confirmed that it expects to lose 5 billion francs in Covid-related sales. Once that decline is accounted for, it expects solid growth in its base businesses.
What Bloomberg Intelligence Says:
Vabysmo continues to outperform and Polivy has started to accelerate but weaker Tecentriq sales are of concern, making the outcome of the eagerly awaited Skyscraper-01 lung cancer study (due 4Q/1Q) a critical event in this transition year.
— John Murphy, BI pharma analyst
–With assistance from Manus Cranny.
(Updates with share decline in second paragraph, CFO comment from fourth paragraph)
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