Roche Joins Pfizer in Seeing U.S. Tax Boost to Bottom Line
(Bloomberg) -- Roche Holding AG said U.S. tax cuts will boost profit this year, blunting the impact of competition to the company’s top-selling cancer medicines.
Core earnings per share will grow by a percentage in the high single digits, the Basel, Switzerland-based company said in a statement on Thursday. That compares with a 5 percent increase last year, when profit fell short of analyst estimates despite the introduction of new medicines.
Sales growth will slow in 2018 as Roche’s two biggest drugs, cancer therapies Rituxan and Herceptin, face lower-cost rivals in Europe. Roche is counting on new medicines -- in cancer as well as new areas such as hemophilia and multiple sclerosis -- to offset the lost revenue, even as it spends money carving out market share for the new treatments.
The company’s guidance “will settle the nerves,” Jack Scannell, an analyst at UBS Group AG in London, said by telephone. “What Roche have done is bounded uncertainty. They have suggested to markets that the worst end of the plausible range is very unlikely to happen.”
Roche shares fell 1.1 percent to 227 francs at 1:54 p.m. in Zurich. The stock has dropped 7.9 percent in the past six months, even as the Bloomberg index that tracks the performance of 20 European drugmakers showed little change.
Roche reported core earnings per share of 15.34 Swiss francs, below analysts’ estimates of 15.53 francs per share. Three key new medicines helped sales growth rise 5 percent to 53.3 billion francs ($57 billion) last year: Ocrevus for multiple sclerosis as well as cancer treatments Tecentriq and Alecensa. Ocrevus will probably become a blockbuster this year, the company said.
“The guidance reflects a lot of confidence,” Chief Executive Officer Severin Schwan said in a conference call. “This confidence again is based on the strength of our portfolio and the success of new medicines.”
Thanks to changes in U.S. law, Roche’s tax rate will drop from 26.6 percent last year to the low 20s range, the company said. Without the tax cuts, core earnings per share would be little changed to rising by a low single-digit percentage this year, much like sales, according to the Basel, Switzerland-based company.
Roche and Pfizer Inc. have been among the beneficiaries of President Donald Trump’s corporate tax changes, with Pfizer gaining nearly $11 billion from the revamp in 2017. Roche estimates its benefit will be in the high three-digit millions of Swiss francs.
Two of Roche’s biggest sellers saw sales erode last year. Avastin, Roche’s third-biggest drug, dropped 2 percent due to competition from new immune therapies in the U.S. and as French authorities stopped paying for the drug for breast-cancer patients.
Rituxan faced competition from biosimilars in Europe, causing overall pharmaceutical sales to drop about 2 percent in the region. The medicine’s slide will likely accelerate there, according to Schwan. Rituxan is also due to face biosimilar competition in the U.S. later this year, though pharma unit chief Daniel O’Day said the full impact will probably not be felt until 2019.
Roche raised its dividend to 8.30 francs per share and said it intends to increase it again this year.
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