Roche CEO predicts Trump will ‘honor’ innovation and won't mess with prices

roche building
Roche CEO Severin Schwan told investors he remains committed to keeping a strong U.S. presence.

Roche turned in so-so sales and earnings for 2016 on Wednesday, a day after President Trump told some pharma CEOs "we have to get prices way down" on drugs in the U.S.—a market that accounts for nearly half of the Swiss company’s sales.

But Roche CEO Severin Schwan wasn’t fazed. On the contrary, he predicted the U.S. would continue to pay more for new medicines than other countries do, despite Trump’s bravado at the White House Tuesday, not to mention the president’s earlier claim that drug companies are “getting away with murder” on drug prices.

"If you have true innovation, with true added value, the U.S. will be the first country to honor that innovation," Schwan said, as quoted by The Wall Street Journal.

Roche has plenty of work to do to prove that innovation will propel its growth going forward. The company announced (PDF) that its sales grew just 4% in 2016 at constant exchange rates to $50.6 billion Swiss francs ($51 billion) and that its net profit was up 7% to 9.7 francs ($9.8 billion). Both numbers were slightly below consensus estimates.

A few key drugs delivered disappointments, too. The company’s first cancer immunotherapy drug, Tecentriq, brought in sales of 157 million francs ($158 million)—missing a consensus prediction of 162 million francs. Analysts are hoping for a strong Tecentriq turnaround, though, because the FDA approved the drug to treat non-small cell lung cancer in October, which helped push sales a bit in the fourth quarter.

In fact, Bernstein analyst Timothy Anderson spotted eight Roche products that underperformed his expectations for the fourth quarter, including cancer mainstays Rituxan, Herceptin and Avastin, he told investors in a Wednesday note. The marketing challenge on Rituxan and Herceptin will only grow more difficult this year, as cheaper biosimilar versions of both drugs are set to hit the market in Europe in the second half.

The company also provided its companywide outlook for 2017 for the first time, guiding analysts to expect sales growth in the low- to mid-single digits and earnings to rise “broadly in line with sales,” according to the earnings release. That also fell slightly short of consensus estimates. The company’s gross margin fell in the second half of the year, and Schwan made no promises of a margin turnaround this year.

Revenues from Roche’s diabetes unit dropped 4% last year to $2 billion francs, fueling spinoff speculation, first raised by Bloomberg. The company blamed declining reimbursement rates in the U.S., but Schwan denied plans to abandon the business during a conference call after the earnings release. A spokesperson for Roche told Fierce the company "remains committed" to the diabetes business because the "underlying fundamentals" remain strong and "volumes continue to grow."

Roche launched four new drugs and nine diagnostics in 2016 and is expecting some key approvals this year. It's awaiting FDA approval for Ocrevus to treat multiple sclerosis, for example, though the PDUFA date on that product was pushed back by three months to March 28 because of the agency’s questions about the manufacturing process for the drug. That med has been pegged as the hottest prospective launch of 2017, but the MS market is tough these days, and pricing will thus be important.

As for Trump’s pleas to the pharma industry, they included demands that companies bring drug manufacturing back to the U.S. Schwan had an answer for that, too. He said Roche is investing “over-proportionally” in the U.S., according to the WSJ, pointing out that the company employs more than 25,000 Americans around the country, including at its Genentech division in California.