Roche Struggles to Regain Momentum After a Difficult Year

(Bloomberg) — Roche Holding AG forecast a sluggish recovery in sales and earnings this year as it emerges from a difficult 2023 and a string of research setbacks.

Sales and earnings per share excluding some items will grow in the mid-single-digit range at constant currencies, the Swiss drugmaker said Thursday. That’s below analyst expectations, though better than Roche’s prediction a year ago. 

The stock fell as much as 4.5% in Zurich trading, the biggest decline in more than three months. It has underperformed peers over the past year. 

Chief Executive Officer Thomas Schinecker clinched several deals to replenish the company’s pipeline in recent months, expanding Roche’s footprint beyond the cancer therapies that long anchored its business. The planned acquisition of Carmot Therapeutics Inc. announced in December brings three experimental medicines in obesity and diabetes — a booming field for the industry. 

The drugmaker is still interested in acquisition opportunities but “it’s like looking for the needle in the haystack,” Schinecker said on a conference call. “You have to look at the entire haystack to find the gems.”

Roche’s clinical-trial stumbles have left some investors questioning the company’s ability to deliver on high-profile projects and its research productivity. 

“Doubts around R&D productivity will take time to lift,” Peter Welford and Lucy Codrington at Jefferies wrote in a note. 

A year ago, Roche predicted that sales and earnings would decline amid plunging demand for Covid-19 products. 

Schinecker, in a Bloomberg Television interview, defended the company’s strategy and said Roche would  “continue the trajectory,” with new medicines emerging from its pipeline and potential in obesity to twin an experimental drug from Carmot with one of its own that could counter the effect of lost muscle mass. 

The combination could reach the market by 2030, according to Schinecker. Roche doesn’t need to already have a drug that’s close to market in order to be a winner in the long run, he said. 

Spending on pharmaceutical R&D rose 6% last year to 11.5 billion Swiss francs ($13.3 billion). Unusually for the industry, the company has three independent R&D units, one based in Basel, one in California and one in Japan.

Roche said sales were little changed in the fourth quarter at 14.7 billion francs, below analysts’ estimates. New medicines like Vabysmo for eye disease, Ocrevus for multiple sclerosis and Hemlibra for hemophilia helped compensate for falling sales of aging cancer drugs and pandemic products. Vabysmo, launched in 2022, has turned into one of the company’s best-sellers. 

Earnings per share rose 6% last year excluding some items at constant currencies. Five percentage points of the growth were due to a one-time effect from the resolution of a tax dispute. Roche declined to disclose the jurisdiction or nature of the dispute.

–With assistance from Paula Doenecke and Anna Edwards.

(Updates with CEO comments on obesity drug in 10th paragraph)

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