|Roche CEO Severin Schwan|
Roche ($RHHBY) CEO Severin Schwan isn't worried about the company's progress in emerging markets. While the helmsman acknowledged a slowdown in China and currency issues in Brazil, the company is still on track to post growth in the long term, Schwan said in an interview with Bloomberg.
"I have no doubt whatsoever that our growth in the future will come from emerging markets," Schwan said, as quoted by Bloomberg. Roche is "extremely worried" about GDP growth in China of 7%, but "we would be more than happy to have this problem in Europe," he added, where the company has faced pricing pressure for its oncology meds. "It's all relative."
As Bloomberg points out, Brazil will have the world's fourth-highest healthcare spending next year, compared with 10th in 2005, according to IMS Health data. And the drugmaker has been quick to cash in on the market. Demand for Roche's cancer meds such as melanoma fighter Zelboraf is increasing, but declines in local currency are taking a bite out of sales. The company's sales in Brazil fell to 447 million Swiss francs ($457 million) in the first half, down from 461 million francs ($470 million) a year before. But sales also rose 17% in the country without taking currency fluctuations into account.
Currency problems in emerging markets aren't a new phenomenon for Roche, Schwan told Bloomberg. The Brazilian real going from 2 to 3.50 against the dollar "has an immediate impact" on the company's consolidated margins, he acknowledged. But Roche's consolidated results in Swiss francs are always impacted if there's devaluation against the franc, he pointed out. "We see that across emerging markets."
Meanwhile, the company continues to chart progress in emerging markets despite the currency hiccups. Roche counts 24% of its sales from the developing world, beating out rivals such as Merck ($MRK), Eli Lilly ($LLY) and GlaxoSmithKline ($GSK), which is still recovering from a bribery scandal in China. During the company's Q2 earnings call, COO Daniel O'Day said its international business showed "good growth," particularly in Latin America, Turkey and Korea. With the help of new approval in China for Avastin as a first-line treatment for non-small cell lung cancer, the company could be poised for more growth in the country.
- read the Bloomberg story
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