Roche joins Pfizer in predicting US tax boost to earnings
Swiss company Roche said US tax cuts will boost profit this year, blunting the impact of competition to the company’s top-selling cancer medicines, and joining rival Pfizer which has reported a boost from US President Donald Trump’s tax overhaul.
Core earnings per share will grow by a percentage in the high single digits, the company said. That compares with a 5% increase last year, when profit fell short of analyst estimates despite some new medicines.
Sales growth will slow in 2018 as Roche’s two biggest drugs, cancer therapies Rituxan and Herceptin, face lower-cost rivals in Europe. Roche is counting on new medicines -- in cancer as well as new areas such as hemophilia and multiple sclerosis — to offset the lost revenue, even as it spends money carving out market share for the new treatments.
The company’s guidance “will settle the nerves,” Jack Scannell, an analyst at UBS, said. “What Roche have done is bounded uncertainty. They have suggested to markets that the worst end of the plausible range is very unlikely to happen, he said. Roche shares fell 1.5 in Zurich trade. The shares have however dropped almost 8% in the past six months.
Three key new medicines helped sales growth rise 5% to 53.3 billion francs (€45.97bn) last year: Ocrevus for multiple sclerosis as well as cancer treatments Tecentriq and Alecensa. Ocrevus will probably become a blockbuster this year, the company said.
“The guidance reflects a lot of confidence,” chief executive Severin Schwan said in a conference call. “This confidence again is based on the strength of our portfolio and the success of new medicines.”
Thanks to changes in US law, Roche’s tax rate will drop from 26.6% last year to the low 20s range, the company said. Without the tax cuts, core earnings per share would be little changed to rising by a low single-digit percentage this year, much like sales, it said. Roche and Pfizer have been among the beneficiaries of President Donald Trump’s corporate tax cuts, with Pfizer gaining nearly $11b (€8.85bn) from the revamp in 2017. Roche estimates its benefit will be in the high three-digit millions of Swiss francs.
Two of Roche’s biggest sellers saw sales erode last year. Avastin, Roche’s third-biggest drug, dropped 2% due to competition from new immune therapies in the US and as French authorities stopped paying for the drug for breast-cancer patients. Rituxan faced competition from biosimilars in Europe. The medicine’s slide will likely accelerate there, said Mr Schwan at UBS.
- Bloomberg
