July 21 (Bloomberg) -- Roche Holding AG, the world’s biggest maker of cancer drugs, raised its profit forecast, citing savings from a cost-cutting plan, even as second-quarter sales slumped.
Earnings per share excluding some items will rise by about 10 percent in local currencies this year, the Basel, Switzerland-based company said today in a statement. Roche on Feb. 2 had forecast a profit increase in the high single-digits.
Roche is counting on cost reductions to bolster profit as revenue from its best-selling medicine Avastin declined. Roche in November said it would eliminate 4,800 jobs to offset drug-development setbacks and price pressure from changes to health-care systems in the U.S. and Europe.
“It’s a smaller but slimmer Roche,” Jack Scannell, an analyst at Sanford C. Bernstein Ltd. in London, said by telephone today. “Had we just seen today’s sales numbers, it would be disappointing.” He rates Roche’s shares “market perform.”
Sales fell 11 percent to 21.4 billion Swiss francs ($26.1 billion) in the second quarter, excluding revenue from the Tamiflu influenza treatment, hurt by the franc’s surge against the dollar and euro. Analysts predicted 22.2 billion francs, the average of 18 estimates. Sales rose 2 percent in local currencies.
Roche rose 1.80 Swiss francs, or 1.3 percent, to 141.50 francs at the 5:30 p.m. close of trading in Zurich. Before today, the shares had returned 2.5 percent in the past year including reinvested dividends, compared with a 18 percent return for the Bloomberg Europe Pharmaceutical Index.
Revenue this year will rise at low single-digit rates in local currencies, in line with the market, the company said.
Helped by the acquisition of Genentech Inc., the cost-reduction plan saved 950 million Swiss francs ($1.16 billion) in the first half and is on track to save 1.8 billion francs this year, Roche said. The annual savings goal is about 2.4 billion francs as of 2012.
Roche generated more than a third of its sales in the U.S. last year. The franc strengthened by 28 percent against the dollar in the 12 months ended June 30, reducing the value of revenue in U.S. currency. The franc gained about 8.1 percent against the euro.
First-half profit dropped 5.8 percent to 5.15 billion francs from 5.47 billion a year earlier. Roche doesn’t report quarterly earnings.
Second-quarter revenue from Avastin fell 24 percent to 1.31 billion francs. A U.S. Food and Drug Administration panel recommended against using the drug for breast cancer on June 29. Commissioner Margaret Hamburg will make a final ruling on the medicine’s use.
Roche is sticking to its peak Avastin sales forecast of 7 billion francs, Chief Executive Officer Severin Schwan said in a press briefing today in Basel.
Breast-cancer treatment pertuzumab also has the potential to be a blockbuster drug with more than $1 billion in annual sales, Schwan said in an interview. Roche will ask regulators to approve the drug this year after a late-stage clinical trial showed it delayed the worsening of the disease. The trial combined the medicine with chemotherapy and Roche’s older Herceptin treatment.
Such successor product combinations will help Roche combat price pressure from copies of its older medicines, including Herceptin, Chief Financial Officer Alan Hippe said in an interview. Cheaper copies are likely to result in “moderate” price reductions, Hippe said.
Roche expects to file three drugs for approval this year, including pertuzumab, vismodegib for advanced basal cell carcinoma and Zelboraf, or vemurafenib, a metastatic melanoma medicine already submitted to regulators in the second quarter.
The Swiss drugmaker said it aims to increase its dividend in line with core earnings per share growth, at least maintaining last year’s dividend in francs.
Second-quarter revenue for the pharmaceutical division fell 16 percent to 8.1 billion francs, while the diagnostics division posted a 10 percent decrease to 2.45 billion francs.
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