Like Pfizer, Roche sees US tax cut boosting 2018 profit

[BERLIN] Roche said US tax cuts for businesses will boost profit this year, offsetting the impact of the company's most significant transformation in decades.

Core earnings per share will grow by a percentage in the high single digits, the Basel, Switzerland-based company said in a statement on Thursday. That compares to a 5 per cent increase last year, when new medicines helped push Roche's profit to 15.34 Swiss francs a share, less than analysts had estimated. Sales growth will slow this year.

Roche is counting on new drugs - in cancer as well as new areas such as hemophilia and multiple sclerosis - to offset revenue lost as its trio of top oncology medicines face competition. The drugmaker must try to bolster profit while spending money carving out market share for the new medicines. Pressure from so-called biosimilar copies will increase this year, with a copy of top-seller Rituxan expected to hit the US in the second half.

"The strength of our portfolio and the success of our recent launches makes us confident we can compensate," chief executive officer Severin Schwan said in a conference call with journalists.

New Drugs

Thanks to changes in US law, Roche's tax rate will drop from 26.6 per cent 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, according to the Basel, Switzerland-based company.

Roche and Pfizer have been among the beneficiaries of the US tax code changes, with Pfizer gaining nearly US$11 billion from the revamp in 2017.

Revenue rose 5 per cent to 53.3 billion francs (S$74.75 billion), in line with analysts' estimates. Most of the drug sales growth came from three key new medicines: Ocrevus for multiple sclerosis, and cancer treatments Tecentriq and Alecensa.

Roche raised its dividend to 8.30 francs per share and said it intends to increase it again this year. Roche's drug sales fell two per cent in Europe, mostly because of competition from biosimilars for its top-selling Rituxan. The medicine's sales drop will likely accelerate this year in Europe, according to Mr Schwan.

BLOOMBERG