Roche profits soar on cancer-drug sales

PROFITS at Roche Holdings leapt 34% 2006 on strong sales of cancer treatments Herceptin and Avastin and flu drug Tamiflu, but worries over margin growth hit the stock yesterday.

Results from the Swiss healthcare group were broadly in line with analyst expectations, with net income of 9.17 billion Swiss francs (€5.63bn) close to the average forecast of 9.11bn francs in a poll of 15 analysts. Roche employ close to 250 at their plant in Clarecastle, Co Clare.

The figures, however, disappointed those hoping for more from the darling of the European pharmaceuticals sector. Its cautious comments on prospects for margin expansion in 2007 knocked the stock back from recent record highs.

For the coming year, Roche expects above market sales growth in both its pharmaceuticals and diagnostics divisions — with the group as a whole and pharma showing double digit percentage growth rates in local currencies — although sales of Tamiflu are expected to slip compared to 2006.

Core earnings per share, meanwhile, are forecast to grow in line with sales.

“In spite of higher than expected sales, the profit split within the pharmaceuticals is worse than expected and the profit contribution from diagnostics is lower than forecast,” said bank Vontobel analyst Karl-Heinz Koch.

“This, together with the EPS growth outlook provided by management, raises some question markets regarding earnings estimates.”

Analysts said Roche’s diagnostics division, where operating profit fell 20% before exceptionals, also disappointed.

Six years ago, Roche was the sick man of the European sector, following a series of product setbacks.

But its strong portfolio of new drugs to fight cancer — the fastest growing area of medical advances — has recently led to growth at the top end of the pharmaceutical industry, with drug sales doubling and profits tripling in the past five years.

The Basel-based company’s full-year sales rose 17% to 42.04bn francs, which compared with the average forecast of 41.65bn francs.