Roche Holding AG forecast falling sales and profit this year amid cratering demand for Covid-19 tests and treatments.
(Bloomberg) — Roche Holding AG forecast falling sales and profit this year amid cratering demand for Covid-19 tests and treatments.
Sales and earnings excluding some items will likely decline in the low single-digit range, the Swiss drugmaker said on Thursday. The company anticipates a sales shortfall of 5 billion Swiss francs ($5.5 billion) due to the Covid plunge. Without that, it pointed to solid underlying sales growth.
The unexpected boon of pandemic revenue had shored up Roche’s results as once top-selling drugs lost market share to cheaper generics. Pressure is growing on the company to deliver results from its portfolio of experimental drugs after high-profile failures last year in both cancer and Alzheimer’s disease.
Revenue is waning from several directions. Sales will plunge from the portfolio of Covid tests, which delivered 4.1 billion francs last year. The drop will also affect the arthritis drug Actemra, which is used to treat Covid patients. And biosimilar competition to a blockbuster trio of cancer medicines will cut an additional 1.6 billion francs from sales.
Roche shares fell as much as 1.3% in Zurich trading. The outlook for this year is worse than expected, Peter Welford and colleagues at Jefferies wrote in a note.
The Swiss drugmaker faces “mounting doubts around its widely perceived best in class research and development,” Welford said, “with signs of unease and frustration around R&D productivity both from investors and internally.”
New Leaders
Roche is in the midst of a leadership reshuffle, with former diagnostics chief Thomas Schinecker taking over next month from longtime Chief Executive Officer Severin Schwan.
The company said Thursday that Teresa Graham, who leads product strategy for Roche’s pharmaceuticals unit, will take over as head of the unit next month.
What Bloomberg Intelligence Says:
Roche guidance is driving the outlook for a low-single-digit sales and core operating-profit decline this year, giving the new CEO, new Diagnostics head and newly announced Pharma head much to do. It remains to be seen if this is Roche’s traditionally conservative early-year view.
— John Murphy, BI pharma analyst
Roche will hew to its existing strategy despite the headwinds, said Schwan, who is set to become chairman next month after 15 years as CEO. That also holds for acquisitions, he said, predicting more bolt-on deals to complement the company’s current portfolio.
“Opportunities are scarce, especially for later-stage opportunities,” Schwan said on a conference call. “Typically, you see fierce competition. And even though overall markets are down, prices for specific assets can still be very high. If it doesn’t make sense from an economics point of view, I don’t think we should participate.”
Roche has underperformed peers in the past 12 months, with the stock dropping more than 20% while the Bloomberg Europe Pharmaceutical Index fell less than 1%.
(Updates with share drop in fifth paragraph)
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