Swiss drugmaker Roche gave a bullish forecast for the next two years after its $47 billion acquisition of Genentech and said it would expand capacity for H1N1 flu drug Tamiflu.
Roche missed forecasts with a 29 per cent drop in first-half net profit today, hit by costs related to the Genentech purchase earlier this year, but its stock was indicated to rise thanks to its healthy underlying business.
Roche, which is the world's largest maker of cancer drugs, also upped its earnings guidance and now expects double-digit core earnings per share growth in 2009 and 2010 and said it will use cash flow to repay debt.
“Surprisingly strong results and an optimistic guidance for the current year,” said DZ Bank analyst Thomas Maul. “Roche was expected to raise its 2009 guidance but the extent is a positive surprise.”
Roche's stock was indicated to rise 1.3 per cent at the open, according to pre-market data from bank Clariden Leu.
Healthcare is normally one of the last areas where consumers cut back during a recession and the sector has posted a string of strong earnings performances, with the world's two biggest drugmakers - Pfizer and GlaxoSmithKline - beating forecasts, as did Roche's Swiss rival Novartis.
The sector does however face looming threats of more competition, problems getting new drugs to market and cheaper medicines from generics manufacturers.
Investors will now eye numbers from US drugmakers Bristol-Myers Squibb and Wyeth due later today.
Roche's first-half net profit fell to 4.1 billion Swiss francs from 5.7 billion francs in the same period last year and compared to an average forecast of 5 billion francs, according to a Reuters poll of 15 analysts.
Total production capacity for antiviral Tamiflu, which has been boosted by sales linked to the swine flu pandemic, will be expanded to 400 million packs annually by the start of 2010, Roche said.
Roche trades at a premium to European rivals like Glaxo, Sanofi-Aventis, Novartis and AstraZeneca thanks to its strong position in cancer and biotech drugs and its lack of exposure to generic competition.
Reuters