Roche results spotlight targeted-drug strategy
After a series of Big Pharma letdowns, Roche's ($RHHBY) results announcement was a series of positives: An increase in 2011 net income, a sales-growth forecast in the "low to mid-single digits," and expectations of "high single-digit" growth in core EPS. Sales actually dropped, thanks to lower Tamiflu revenues and the strong Swiss franc, but in constant currency terms, Roche eked out a 2% increase.
Not that the light was all rosy. Some analysts were "underwhelmed" by the forecast. MarketWatch pointed out that there's a risk of biosimilar and other competition to major sellers Rituxan and Herceptin. Avastin sales dropped 2%. Some investors wanted a dividend increase, Bloomberg reports.
But it's the company's personalized-medicine strategy that commands the most attention. Sanford C. Bernstein analyst Jack Scannell told Bloomberg that Roche's targeted melanoma drug Zelboraf is "doing very, very well" among the patients who are eligible for it. "It may end up being the first-line choice, which isn't what everyone had expected," Scannell added. The company's diagnostics division posted 6% sales growth, and diagnostics are expected to deliver market-beating growth for the year.
And then there's Roche's $5.7 billion bid for Illumina ($ILMN). The gene-sequencing company won't engage, or hasn't yet, so Roche has backed up its hostile offer with nominations for a slate of directors. CEO Severin Schwan says Roche's offer is "very attractive" and promises it "creates value for both organizations." And he says Roche prefers to be friendly. "Although we are taking this step, our strong preference remains to engage in a constructive dialogue with Illumina," he said in a statement.
"Roche will continue to try to convince (Illumina) ... there can be a friendly outcome to this acquisition if they want," Vontobel analyst Andrew Weiss told Reuters. "As seen in the past with Genentech and Ventana, sweetening the terms works wonders." But Schwan may not want to be that friendly. Roche has said it has no intention of raising the $44.50-per-share bid.