Roche welcomes US tax changes
Swiss drug maker Roche forecast on Thursday that US tax changes would help profit growth outstrip sales growth in 2018, while new drugs for multiple sclerosis and cancer would offset revenue declines from older medicines.
Roche said it expected sales to stay flat or grow by a lowsingle-digit percentage.
But core earnings per share (EPS) were targeted to grow by a high single digit, helped by US tax reform, which will reduce Roche’s tax rate from 26.6% in 2017 to “the low twenties”.
Tax changes under US President Donald Trump have had a big effect on investor sentiment towards drug makers in recent weeks, with AbbVie’s stock rising after it projected a big benefit, while Pfizer’s was hit by disappointment that its tax rate would not be lower. Excluding the tax changes, profit would rise in line with sales, Roche said, as CE Severin Schwan confirmed the drug maker expected to boost sales and profit even as its $22.5bn-a-year drugs trio of Rituxan, Herceptin and Avastin faces more competition from cheaper copies following patent losses.
“While we are ... facing the entry of biosimilars for important medicines, the strength of our portfolio and the success of our recent launches makes us confident we can compensate for this impact,” Schwan said. “There is definitely the chance that we will not simply compensate for biosimilars but that we will be able to overcompensate with our new drugs.”
He highlighted new medicines Ocrevus for multiple sclerosis, cancer immunotherapy Tecentriq and lung cancer drug Alecensa, which together contributed Sf1.4bn ($1.5bn) of new sales in 2017.
Total sales increased in 2017 by 5% to Sf53.3bn, close to the average estimate in a Reuters poll of analysts.
Net income under International Financial Reporting Standards accounting measures fell to Sf8.8bn from Sf9.7bn a year earlier as Roche took charges including for its lung medicine Esbriet, which had slow sales in early treatment indications.
Roche, whose impairments on intangible assets more than doubled to Sf3.5bn, spent $8.3bn in 2014 to buy InterMune, which sells Esbriet.
Some analysts said Roche’s guidance was conservative and could set up positive surprises later, like in 2017 when Roche raised its sales forecast.
Others cautioned the tax benefits could not mask the growing pressure from biosimilars. “Despite a US tax benefit that was indeed much better than consensus had expected, Roche’s weak underlying 2018 guidance of sales and core EPS ‘stable to low single digit’ growth will likely not be taken well,” Kepler analysts said.
The share price of Roche — which relies on its Genentech unit in the US for much of its sales and profit — yielded early gains to fall 0.5% in morning trading.
Schwan said the US tax changes would “without a doubt” underpin the strength of the world’s largest economy.
“You cannot underestimate the impact of the US tax reform on the country’s competitiveness,” he said.