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Roche Posts Strong Sales, Operating Profit for 2005
February 1, 2006 5:06 a.m.
Roche Holding AG reported a 5% drop in 2005 net profit despite higher sales because its prior-year results were boosted by a one-time gain related to debt restructuring.
Roche said its net profit totaled 6.73 billion Swiss francs ($5.25 billion) last year, down from 7.06 billion francs for 2004. The 2004 results included an extraordinary gain of 2.3 billion francs from the sale of its consumer health business to Bayer AG.
Operating profit rose 33% to 9.03 billion francs from 6.77 billion francs, driven by a 20% rise in sales to 35.50 billion francs from 29.52 billion francs.
For 2006, Roche expects sales to rise at least 10%, both for the group and its flagship pharmaceutical unit. Roche is based in Basel, Switzerland.
Like cross-town rival Novartis AG, Roche said it expects to beat average industry growth this year. Novartis Chief Executive Daniel Vasella warned two weeks ago that drug prices will probably come under even more pressure as health insurers and governments are looking at ways to stall the rise in health-care costs.
Roche is considered less exposed to such pricing risks because most of its profits come from drugs to specialists and hospitals. These market segments are suffering less from price pressure than primary care drugs are.
Last year "was an excellent year for Roche," said Chief Executive Franz Humer. "The pharmaceutical division achieved its best results ever and diagnostics showed a solid performance leading to record sales and operating profit at group level."
Sales of Roche's antiviral drug Tamiflu rose nearly four times last year to 1.56 billion francs. Tamiflu has been recommended by the United Nation's World Health Organization for use in a possible outbreak of a flu pandemic. Concerns about a pandemic have mounted over the past year on worries a deadly strain of bird flu could mutate into a form that's transmittable between humans.
Mr. Humer said Roche expects 2006 sales of Tamiflu to total between one billion francs and 1.2 billion francs. Mr. Humer said he expects "significantly" more Tamiflu sales in the second half of 2006 than in the first. Roche will have extended Tamiflu production capacity by the second half, and the bulk of government orders for Tamiflu are for delivery in the second half.
Reflecting the good results, Roche will increase its dividend to 2.50 francs a share from two francs a share.
Roche said it's been awarded double-A ratings from both Standard & Poor's and Moody's Investors Service -- the first time the Basel-based company has gained a credit rating.
Sales at Roche's flagship pharmaceutical division rose 26% to 27.27 billion francs, markedly above the industry average, which advanced at an estimated 7% pace last year.
Cancer drug MabThera remained the company's best-selling product, with sales rising 22% to 4.15 billion francs. Sales of breast cancer drug Herceptin advanced 48% to 2.15 billion francs, helped by strong data from clinical trials, which allows for wider prescription of the drug.
Tamiflu's high profile has pushed Roche's portfolio of oncology drugs into the background. Still, cancer drugs such as Avastin and Herceptin remain the driving force at the company's pharmaceutical division.
By 2007, more than 50% of pharmaceutical sales will come from cancer drugs, Goldman Sachs analysts said in a recent report.
Roche's diagnostics division reported 5% growth to 8.24 billion francs and a 1% increase in operating profit to 1.69 billion francs. The unit accounts for roughly a quarter of Roche's sales.
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