Roche with good half year performance
Group sales up 5% at constant exchange rates1, -1% in Swiss francs
Core earnings per share up 7% at constant exchange rates, 0% in Swiss francs
Cancer medicine sales growing well; in particular HER2 breast cancer medicines, Herceptin, Perjeta and Kadcyla
Diagnostics Division showing good growth, especially in the Professional Diagnostics business
FDA Breakthrough Therapy Designation for cancer immunotherapy candidate anti-PDL1
Panel recommends EU approval for Gazyvaro to treat chronic lymphocytic leukemia
Full-year outlook confirmed
Commenting on the Group's half year results, Roche CEO Severin Schwan said: "We had a good first half, driven mainly by our cancer medicines, especially the new breast cancer medicines, Perjeta and Kadcyla, as well as by Diagnostics. We made significant progress in our product pipeline, as the FDA granted Breakthrough Therapy Designation for our cancer immunotherapy candidate anti-PDL1, as well as priority reviews for Avastin in two new indications and fast track designation for a promising new antibiotic. In Diagnostics, we also gained an important FDA approval for use of our HPV test in primary screening for cervical cancer. Based on our half year performance, I am confident that we will meet our full-year targets."
Group Results
HER2 breast cancer medicines drive growth
Group sales rose to 22,974 million Swiss francs (+5%) with strong growth from HER2-positive breast cancer medicines, Herceptin, Perjeta and Kadcyla; other oncology medicines Avastin and MabThera/Rituxan; and Actemra/RoActemra for rheumatoid arthritis. Sales of Xeloda, a chemotherapy drug which is no longer patent-protected, were lower as a result of generic competition in a number of markets. In Diagnostics, demand for Professional Diagnostics' products for clinical laboratories remained strong, whilst Diabetes Care sales were unchanged.
Reported sales in Swiss francs were 1 percent lower than the first half of 2013, as the US dollar, along with a number of Latin American currencies and the Japanese yen, have weakened against the Swiss franc.
Core operating profit and cash flow increased
Group core operating profit increased 7%3 in the first half as a result of the strong operating performance, as well as cost containment in both divisions. Core earnings per share also increased by 7% to 7.57 Swiss francs.
Operating free cash flow was 7,869 million Swiss francs, up 11% in the first half. Cash generation in both divisions was strong, despite the increase in net working capital and capital investments in site development and manufacturing expansion. Net working capital was higher as a result of increased inventory levels to ensure supply to patients. IFRS net income, which includes impairment charges of 414 million Swiss francs related to intangible assets in Tissue Diagnostics, was 5,641 million Swiss francs, an increase of 2% at constant exchange rates over the first half of 2013.
Significant progress in Pharma product pipeline
The pipeline currently has 66 new molecular entities in clinical development, of which 12 are in late-stage development.
During the first half, Roche presented data on 27 different medicines at the 50th American Society of Clinical Oncology meeting, most notably the results of a Phase I study that showed that the investigational cancer immunotherapy anti-PDL1 (MPDL3280A) shrank tumours in advanced bladder cancer. This medicine has now been granted Breakthrough Therapy Designation by the FDA. Anti-PDL1 moved into Phase III for lung cancer earlier in the year and a broad programme of development in a number of other indications and combinations is ongoing.
There was positive regulatory newsflow throughout the first half, with both the subcutaneous formulations of MabThera/Rituxan for blood cancer and Actemra/RoActemra for rheumatoid arthritis approved in the EU. The EU's committee on medicinal products (CHMP) also recommended that Gazyvaro (known as Gazyva outside the EU) be approved for the treatment of chronic lymphocytic leukemia and Avastin be approved for platinum-resistant recurrent ovarian cancer. In the United States, the FDA has given Avastin filings priority review in treatment for cervical cancer, as well as platinum-resistant ovarian cancer and a fast track designation for LptD, a new antibiotic currently in Phase II trials. In Japan, Alecensa (alectinib) was approved for the treatment of ALK-positive non-small cell lung cancer in July based on a Japanese trial. The FDA has granted Breakthrough Therapy Designation for alectinib and further global studies are ongoing.
The FDA approved a new indication for Xolair, which can now be used to treat chronic idiopathic urticaria, a form of chronic skin hives. This is in addition to its current use in allergic asthma. Phase II data for lebrikizumab, an experimental medicine for severe asthma showed good results for a sub-group of patients who can be identified using a companion diagnostic test. Another investigational medicine, cobimetinib, used in combination with skin cancer medicine Zelboraf, also showed positive top line results in advanced melanoma.
Full-year outlook confirmed
For the full year 2014, Roche expects low- to mid-single digit growth in Group sales at constant exchange rates. Core EPS is targeted to grow ahead of sales. Roche expects to further increase its dividend.
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About Roche
Headquartered in Basel, Switzerland, Roche is a leader in research-focused healthcare with combined strengths in pharmaceuticals and diagnostics. Roche is the world's largest biotech company, with truly differentiated medicines in oncology, immunology, infectious diseases, ophthalmology and neuroscience. Roche is also the world leader in in vitro diagnostics and tissue-based cancer diagnostics, and a frontrunner in diabetes management. Roche's personalised healthcare strategy aims at providing medicines and diagnostics that enable tangible improvements in the health, quality of life and survival of patients. Founded in 1896, Roche has been making important contributions to global health for more than a century. Twenty-four medicines developed by Roche are included in the World Health Organisation Model Lists of Essential Medicines, among them life-saving antibiotics, antimalarials and chemotherapy.
In 2013 the Roche Group employed over 85,000 people worldwide, invested 8.7 billion Swiss francs in R&D and posted sales of 46.8 billion Swiss francs. Genentech, in the United States, is a wholly owned member of the Roche Group. Roche is the majority shareholder in Chugai Pharmaceutical, Japan. For more information, please visit roche.com.
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1) Unless otherwise stated, all growth rates in this document are in constant exchange rates CER (average full-year 2013).
2) IFRS: International Financial Reporting Standards.
3) Included in the Group's core operating profit were some one-time items, including the divestment gain from the sale of the filgrastim franchise rights back to Amgen and the base effect of income from changes to the Group's pension plans in 2013. In aggregate they had no material net impact on the results.
Disclaimer: Cautionary statement regarding forward-looking statements
This document contains certain forward-looking statements. These forward-looking statements may be identified by words such as 'believes', 'expects', 'anticipates', 'projects', 'intends', 'should', 'seeks', 'estimates', 'future' or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this document, among others: (1) pricing and product initiatives of competitors; (2) legislative and regulatory developments and economic conditions; (3) delay or inability in obtaining regulatory approvals or bringing products to market; (4) fluctuations in currency exchange rates and general financial market conditions; (5) uncertainties in the discovery, development or marketing of new products or new uses of existing products, including without limitation negative results of clinical trials or research projects, unexpected side effects of pipeline or marketed products; (6) increased government pricing pressures; (7) interruptions in production; (8) loss of or inability to obtain adequate protection for intellectual property rights; (9) litigation; (10) loss of key executives or other employees; and (11) adverse publicity and news coverage. The statement regarding earnings per share growth is not a profit forecast and should not be interpreted to mean that Roche's earnings or earnings per share for any current or future period will necessarily match or exceed the historical published earnings or earnings per share of Roche