Roche Sees Sales Growth at Last Year’s Pace on New Drugs

Roche Holding AG forecast that sales and profit will rise this year, helped by new products such as a breast-cancer drug that’s slated for approval in February.

Revenue will climb at about the same pace as last year’s 4 percent growth at constant exchange rates, the Basel, Switzerland-based company said today in a statement. Core earnings per share will increase faster than sales, Roche said as it reported 2012 profit that missed analyst estimates.

Three new cancer drugs helped boost sales last year. Roche, the world’s biggest maker of oncology treatments, also has applied for regulatory approval of T-DM1, a breast cancer medicine that the company expected to bolster a franchise that includes the drug Herceptin. Roche disappointed some investors with an 8 percent dividend increase.

“All in all, it’s a decent result,” said Birgit Kulhoff, a Zurich-based fund manager for Rahn & Bodmer Co. “The only slightly disappointing aspect is that they have increased the dividend only by 8 percent, despite the fact that the operating free cash flow has been rising by 10 percent.”

Roche fell 1.4 percent to 198.60 francs in Zurich. Through yesterday, the stock returned 34 percent in the past year including reinvested dividends, compared with a 24 percent return for the Bloomberg Europe Pharmaceutical Index.

Higher Profit

Net income last year rose 2.4 percent to 9.77 billion francs ($10.6 billion) from 9.54 billion francs a year earlier. Earnings per share excluding some items were 13.62 francs, below the 13.67-franc average estimate of 24 analysts surveyed by Bloomberg.

Revenue climbed 7 percent to 45.5 billion francs. Analysts predicted 45.3 billion francs, the average of 18 estimates.

The profit forecast was disappointing because, unlike last year, the company isn’t committing to percentage growth in the high single digits, but rather only that earnings will rise at a faster pace than 4 percent, said Eric Le Berrigaud, an analyst at Bryan, Garnier & Co. in Paris. Analysts will need to reduce their 2013 profit forecasts, he said. Le Berrigaud cut his rating on the stock to neutral from buy.

The average analyst estimate is for 2013 earnings of 15.12 francs a share, which would be 11 percent above last year’s 13.62 francs.

FDA Decision

The U.S. Food and Drug Administration is due to rule by Feb. 26 on T-DM1. Review in Europe is under way.

Perjeta, a drug to treat women with a fast-growing type of breast cancer, had sales of 56 million francs last year after winning U.S. approval in June. Among other new medicines, Zelboraf had sales of 234 million francs and Erivedge brought in 29 million francs.

Roche raised the dividend to 7.35 francs a share, the 26th consecutive increase, though the payout was below the Bloomberg forecast of 7.40 francs. The proposed payout is “a slightly disappointing signal,” said Fabian Wenner, a Zurich-based analyst for Kepler Capital Markets. Kepler has a “buy” rating on Roche’s shares.

Roche will continue paying down the debt from the $46.8 billion purchase of Genentech in 2009, Chief Executive Officer Severin Schwan said in a press conference today. The dividend question, he said, “is really a question of what is the ideal leverage on our balance sheet.”

Meanwhile, the company will keep looking for small- to mid-sized acquisitions, Schwan said. Roche walked away from a $6.7 billion bid for U.S. gene-sequencing company Illumina Inc. last year after investors held out for a higher offer.

Before it's here, it's on the Bloomberg Terminal.