Roche warns 2023 profits will fall on $5 billion COVID sales hit
By Ludwig Burger
BASEL (Reuters) - Roche warned on Thursday profits will decline in 2023 as falling demand for its COVID-19 therapy and diagnostics kits will knock sales by over $5 billion, the latest sign that the pharmaceutical industry's years-long pandemic boost is ebbing.
Sales and core earnings per share were expected to decrease at a "low single-digit" percentage this year, the Swiss pharmaceuticals and diagnostics company said in a statement.
COVID-related sales, mainly from lab testing and antibody treatment Ronapreve, are seen falling by 5 billion Swiss francs ($5.5 billion) for the full year, it said.
Revenue growth from new drugs, including its haemophilia treatment and multiple sclerosis drug, would not make up for the steep COVID drop.
But "the underlying business is growing very strongly in the high single digits," said Chief Executive Severin Schwan.
The pivot away from the coronavirus pandemic, which has boosted profits of many healthcare companies over the past three years, also weighed on rival diagnostics group Siemens Healthineers, which reported a 28% drop in quarterly operating profit.
Roche's shares fell as much as 1.4% to their lowest since March 2020 as investors worried about the weaker-than-expected outlook. They were down 0.9% at .
Barclays analsyts said 2023 guidance was slightly below their forecasts, but they were encouraged by the performance of its key pharma business, including newly-launched Vabysmo, which treats a common cause of blindness in the elderly.
Last year, Roche group revenue edged 1% higher to 63.3 billion Swiss francs, the company reported, slightly beating market expectations of 63.2 billion francs, while core operating profit gained 1% to 22.2 billion Swiss francs, just shy of the average analyst estimate of 22.4 billion francs.
Analysts have said that market confidence in Roche's drug development abilities, previously among the highest in the industry, has taken a blow from trial setbacks last year in Alzheimer's disease and a cancer immunotherapy hopeful.
The stock has fallen about 11% over the past three years, lagging its main global rivals like Pfizer and AstraZeneca.
Roche has lagged rivals https://fingfx.thomsonreuters.com/gfx/mkt/myvmokkmmvr/roche.PNG
The onus to reinvigorate the pipeline will be on chief executive officer-designate Thomas Schinecker, who was previously Roche's head of diagnostics and due to be promoted to group CEO in March. Schwan will become chairman.
In the wake of Schinecker's appointment, the head of Roche's pharmaceuticals division, Bill Anderson, decided in December to leave after 16 years with the Swiss drugmaker.
Family-controlled Roche said on Thursday that Teresa Graham, currently Head of Global Product Strategy for Roche Pharmaceuticals, would succeed Anderson.
In a media call, Schwan said the company was analysing the failed trials thoroughly, but structural changes in research and development (R&D) were not called for, despite the planned changeover in management.
Roche is not alone. Analysts were disappointed on Wednesday that GSK did not give more details on how one of the world's top drugmakers plans to find its next set of blockbuster drugs.
Roche's bestseller multiple sclerosis drug Ocrevus gained a currency-adjusted 17% in sales to just over 6 billion francs during the year, while its haemophilia treatment Hemlibra jumped 27% to 3.8 billion francs, both slightly above market expectations.
Its near-term commercial performance will depend on newly launched drugs such as Evrysdi, an oral drug against muscle-wasting disease spinal muscular atrophy (SMA), and Vabysmo.
Schwan pointed in particular to Vabysmo, with 591 million francs in its market debut year, one of Roche's best.
($1 = 0.9079 Swiss francs)
(Reporting by Ludwig Burger; Editing by Paul Carrel, Rashmi Aich, Josephine Mason and Emelia Sithole-Matarise)