Covid sales hit, Roche warns that 2023 profits will fall by 5b Swiss francs
SWISS pharmaceuticals and diagnostics company Roche on Thursday (Feb 2) warned that its profits would decline in 2023, as falling demand for its Covid-19 treatments and diagnostic kits will knock its sales by over 5 billion Swiss francs (S$7.2 billion).
This is the latest sign that the pharmaceutical industry’s years-long pandemic boost is ebbing.
Roche said its sales and core earnings per share were expected to decrease at a “low single-digit” percentage this year.
Meanwhile, its Covid-related sales – mainly from lab tests and antibody treatment Ronapreve – were forecast to fall by 5 billion Swiss francs for the full year.
Revenue growth from new drugs, including its haemophilia treatment and multiple sclerosis drug, would not make up for the steep drop.
But “the underlying business is growing very strongly in the high single digits”, said chief executive Severin Schwan.
The pivot away from the coronavirus pandemic, which boosted the profits of many healthcare companies over the past three years, also weighed on rival diagnostics group Siemens Healthineers. It reported a 28 per cent drop in its quarterly operating profit.
Roche’s shares fell as much as 1.4 per cent to their lowest level since March 2020 as investors worried about the weaker-than-expected outlook.
Analysts from Barclays said the company’s 2023 guidance was slightly below the bank’s projections, but that it was encouraged by the performance of its key pharmaceutical business. This included newly-launched drug Vabysmo, which treats a common cause of blindness in the elderly.
Last year, Roche group revenue edged 1 per cent higher to 63.3 billion Swiss francs, slightly beating market expectations of 63.2 billion Swiss francs. Its core operating profit gained 1 per cent to stand at 22.2 billion Swiss francs, just shy of the average analyst estimate of 22.4 billion Swiss francs.
Analysts have said that confidence in the company’s drug-development abilities – once among the highest in the industry – has taken a blow from trial setbacks last year. These included a treatment for Alzheimer’s disease and a cancer immunotherapy hopeful.
The stock has fallen about 11 per cent over the past three years, lagging its main global rivals Pfizer and AstraZeneca.
Reinvigorate pipeline
The onus to reinvigorate the pipeline will be on chief executive officer-designate Thomas Schinecker, who was previously the company’s head of diagnostics. He is due to be promoted to group chief executive in March, while Schwan will become chairman.
In the wake of Schinecker’s appointment, the head of Roche’s pharmaceuticals division, Bill Anderson, decided in December to leave after 16 years with the Swiss drugmaker.
The group said on Thursday that Teresa Graham, currently head of global product strategy for Roche Pharmaceuticals, would succeed Anderson.
Schwan told reporters that the company was analysing the failed trials thoroughly, but structural changes in research and development were not required, despite the planned change in management.
Roche is not alone in this. GSK, one of the world’s top drugmakers, disappointed analysts on Wednesday by withholding details on how it planned to find its next set of blockbuster treatments.
Roche’s best-selling multiple sclerosis drug, Ocrevus, gained a currency-adjusted 17 per cent in sales to just over 6 billion Swiss francs during the year. Meanwhile, its haemophilia treatment, Hemlibra, jumped 27 per cent to 3.8 billion Swiss francs, slightly above market expectations.
The company’s near-term commercial performance will depend on newly-launched drugs such as Evrysdi, an oral treatment for muscle-wasting disease spinal muscular atrophy, and Vabysmo, which Schwan highlighted.
The treatment generated 591 million Swiss francs in its market debut year, one of Roche’s best performances. REUTERS
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