The Wall Street Journal-20080131-Earnings Digest- Roche Posts 24- Rise in Net- Sets Optimistic Sales Forecast

Return to: The_Wall_Street_Journal-20080131

Earnings Digest: Roche Posts 24% Rise in Net, Sets Optimistic Sales Forecast

Full Text (381  words)

BASEL, Switzerland -- Roche Holding AG reported a 24% increase in 2007 net profit, driven by brisk sales of high-margin cancer drugs, and the drug maker said it expects prescription-drug sales to again grow about twice as fast as the market average in 2008.

Roche's positive results and outlook contrast with many other drug companies, which have been announcing layoffs and reporting weaker sales and profits in recent months. One of the biggest factors hurting those companies' earnings: drug buyers' efforts to cut costs and use more generic drugs, which are less expensive. Some analysts say that trend will accelerate only if there is an expected slowdown in the global economy.

Roche Chief Executive Franz Humer said the company won't be able to completely escape such pressures, but that he expects them to affect Roche more mildly than other drug companies.

That is because few of Roche's best-selling drugs are facing current or imminent generic competition. Also, Roche sells a lot of cancer treatments, which have traditionally commanded higher prices than mass-market pills for cholesterol or hypertension, Mr. Humer said.

"I continue to believe that Roche isn't affected by some of the worries that are haunting our competitors," he said.

Basel, Switzerland-based Roche, the world's second-largest pharmaceutical company by market capitalization after Pfizer Inc., said it plans to move experimental drug R1658, designed to raise the levels of so-called good cholesterol HDL, into late-stage testing. The move comes despite a setback Pfizer had with a similar drug last year. That drug, torcetrapib, failed in late testing after more deaths were recorded among people taking it in a clinical trial than in a control group. Merck & Co., Whitehouse Station, N.J., has a similar drug in development.

"We came to the conclusion that it is worth taking the risk," Mr. Humer said. To mitigate the risk, Roche will evaluate data "at certain decision points, where we could stop the trial," he said.

Opportunities for acquisitions will most likely arise in the diagnostics sector, Mr. Humer said. Roche considers diagnostics key to disease treatment and the development of effective medicines.

Roche said net profit rose to 9.76 billion Swiss francs ($8.93 billion) from 7.88 billion francs a year earlier. Sales increased 10% to 46.13 billion francs.

---

Jeanne Whalen contributed to this article.