Bloomberg News

Roche Sales Miss Estimates as Franc Gains, Avastin Falls

October 13, 2011

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Oct. 13 (Bloomberg) -- Roche Holding AG reported third- quarter sales that missed analysts’ estimates, falling 15 percent as the Swiss franc gained and revenue of its top three medicines declined.

Sales dropped to 9.82 billion francs ($11 billion), the Basel, Switzerland-based company said in an e-mailed statement today. That missed the 10.2 billion-franc average estimate of 15 analysts surveyed by Bloomberg. Roche doesn’t release quarterly earnings. Excluding currency swings, sales were little changed.

Roche shares fell the most in two months. Sales of cancer therapies Avastin, Rituxan and Herceptin didn’t meet analysts’ expectations, taking into account currency effects, said Karl Heinz Koch, a Zurich-based analyst for Helvea SA. Roche got 99 percent of its revenue outside of Switzerland last year, with about a third each from the U.S. and the European Union.

“The key drugs really underperformed,” Koch, who rates Roche’s shares “neutral,” said by phone. “These are not very encouraging numbers.”

The stock fell 4.5 percent to 140.90 francs in Zurich.

‘Need for New Products’

Third-quarter sales of Avastin declined 24 percent to 1.22 billion francs while revenue from Herceptin dropped 12 percent to 1.19 billion francs. Sales of Avastin were 3.9 percent short of the average estimate of four analysts surveyed by Bloomberg. Herceptin sales missed the average estimate by 5.6 percent.

Revenue from top-selling non-Hodgkin’s lymphoma and rheumatoid arthritis drug Rituxan, also known as MabThera, missed expectations by 2.9 percent. Rituxan sales fell about 10 percent to 1.36 billion francs.

“The slow growth in sales at the moment does rather highlight the need for new products,” Michael Leacock, a London-based analyst at RBS, said by phone. He has a “buy” on the stock. “I think there will be some good clinical data over the next six to nine months to encourage us that sales will rise.”

Roche may introduce nine products with potential annual sales of more than 1 billion francs each by 2016, according to a presentation the company posted on its website today. They include breast cancer medicine T-DM1, targeted for introduction in 2013, which combines Herceptin and a cell-killing drug. Dalcetrapib, a pill to raise so-called good cholesterol, is listed for introduction in 2014.

‘Miss Is Real’

The Swiss currency gained 25 percent against the dollar from the end of last year’s third quarter through Sept. 5, the day before the Swiss National Bank imposed a ceiling on the exchange rate. The franc gained about 20 percent against the euro in the same period.

“Stripping out these large foreign exchange effects, it still appears to us that the third-quarter miss is real,” Jack Scannell, a London-based analyst for Sanford C. Bernstein Ltd., said in a report to investors today. He rates Roche’s shares “market-perform.” Much of the miss may have come from weaker- than-expected sales in Japan, according to Scannell.

Avastin Peak

Roche said it still expects peak annual Avastin sales of 7 billion francs. A U.S. Food and Drug Administration panel ruled in June that use of the drug in breast cancer should be stopped because it didn’t work as well in follow-up studies and can cause deadly bleeding.

Avastin is approved for lung, brain, kidney and colon tumors and remains on the market for breast cancer in Europe. It will remain available for U.S. breast cancer patients, too, until FDA Commissioner Margaret Hamburg makes a final ruling.

Roche repeated its forecasts for the year, saying earnings per share excluding some items will rise about 10 percent in local currencies, while sales increase in line with the market at low “single-digit” rates. The company said it would at least maintain last year’s dividend in francs.

--Editors: Thomas Mulier, Jerrold Colten, Bruce Rule.

To contact the reporter on this story: Naomi Kresge in Berlin at

To contact the editor responsible for this story: Phil Serafino at

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