Roche is blaming the strong Swiss franc for its third-quarter revenue miss, but analysts say its leading drugs underperformed, too. The Basel-based company reported a 15% drop in sales for the period, to 9.82 billion francs, or $11 billion. Backing out the currency effects, the numbers look better: Sales are flat rather than in decline.
Part of the sales stall can be attributed to lower-than-expected revenues from top Roche cancer drugs Avastin, Rituxan and Herceptin, Bloomberg reports. Avastin dropped by 24% to 1.22 billion francs, or 8% at constant exchange rates; Herceptin fell 12% to 1.19 billion francs; Rituxan declined by 10% to 1.36 billion francs.
Meanwhile, the osteoporosis therapy Boniva also faltered, with sales dropping by 19% to 550 million francs. Declining Tamiflu numbers also cut into results, and for the second year in a row, InPharm points out. The H1N1 pandemic boosted 2009's Tamiflu sales, and, predictably, those sales dropped for the same period in 2010. They fell again this year.
Analysts weren't impressed. Helvea's Karl Heinz Koch told Bloomberg, "The key drugs really underperformed. These are not very encouraging numbers." Deutsche Bank analysts figure that the Q3 numbers will have operational consequences: "The results are weak and suggest Roche will require continued underlying cost savings in order to achieve guidance," they said (as quoted by Reuters).
But Bernstein's analysts pinpointed an important culprit: Japan. The third-quarter shortfall in sales is "real," the firm said in a note to investors, but much of the sales miss can be traced to weaker-than-expected Japanese numbers. Herceptin sales in Japan, for instance, fell by 23% for Q3, a big change from the 30% increase for Q2. "Sales are still depressed by this year's terrible earthquake and tsunami," the analysts said, as reported by Reuters.
Will recovery in Japanese sales turn the trend around? Roche is sticking to its guidance, both for earnings growth and sales growth (excepting Tamiflu). That's despite the 12% hit it expects from the strong franc, provided the currency stays as strong.