Roche Sees Profit Growth Outpacing Sales With Deals Ahead
(Bloomberg) — Roche Holding AG said profit will probably outpace sales growth this year as the Swiss drugmaker works to keep research costs in check and looks for deals to build its pipeline of experimental medicines.
Earnings per share excluding some items will grow in the high single-digit range at constant currencies, the Swiss drugmaker said Thursday. Sales will likely rise in the mid single-digit range, it said.
Chief Executive Officer Thomas Schinecker is working to reshape Roche’s pipeline from the inside as well as via external assets after slashing projects that were deemed less likely to succeed. The company is ready to deploy about 10 billion Swiss francs ($11 billion) a year for dealmaking, Teresa Graham, chief of the pharmaceutical unit, told investors this month.
Roche shares were little changed in Zurich trading. The stock has gained about 14% in the past 12 months, outshining local rival Novartis AG, which is scheduled to report earnings Friday, and the Bloomberg index that tracks European drugmakers.
This year will be an important one for Roche’s internal pipeline as well. The company expects 12 key late-stage trials to read out. Milestones will be findings on experimental treatments for breast cancer, multiple sclerosis and chronic obstructive pulmonary disease, according to JPMorgan analysts.
The drugmaker on Thursday also said core earnings per share rose 7% in 2024 including the impact of the resolution of tax disputes a year earlier. Net income slumped, mainly due to impairment charges to goodwill of 3.2 billion francs related to the takeovers of Flatiron Health, a cancer-focused medical records tech company bought in 2018, and Spark Therapeutics, acquired in 2018 to position Roche in the growing field of gene therapies.
“That’s the nature of our industry,” Chief Financial Officer Alan Hippe said at a press conference. “We take significant risks.”
Seven Drugs
Chairman Severin Schwan, who was CEO at the time of those deals, had a total compensation of 5.7 million francs last year, including a cash base salary of 2.5 million francs.
Seven experimental drugs already in the pipeline have the potential to deliver more than 3 billion francs in annual sales, Roche said. Targets include obesity, hypertension, hemophilia, Alzheimer’s disease and Parkinson’s.
What Bloomberg Intelligence Says:
Roche’s 2025 guidance of mid single-digit percentage sales growth and high single-digit core earnings per share growth — both at constant currency — may at first glance look lower than consensus, but Roche’s EPS calculation is from a 2024 base of 19.33 francs, suggesting consensus should rise at least 2-3%. Further, Roche’s historically conservative approach to full-year guidance suggests potential room for further upside.
— John Murphy, BI analyst. Read the research here.
Roche will keep looking for acquisition opportunities, including in the area of obesity, Schinecker said in an interview with Bloomberg TV. It’s also making sure that its research and development “is very efficient,” he said. Roche spent 13 billion francs on R&D last year, about 22% of its sales. Though the absolute spending was roughly unchanged from a year earlier, it was lower as a percentage of Roche’s total sales.
Roche anticipates being able to work well with the Trump administration, according to Schinecker. The drugmaker already has 25,000 employees in the US, more than in Germany and Switzerland, he said.
The company invested 11 billion francs in the US over the past decade, he said, and expects to continue to expand on its manufacturing footprint in the country.
“We want to build our plants close to where the markets are, and the US is a very important market for us,” Schinecker said.
–With assistance from Anna Edwards.
(Updates with earnings details in sixth paragraph)
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