Roche reports good half year performance

Commenting on the group’s half year results, Roche CEO Severin Schwan said: “We had a good first half, driven mainly by our cancer medicines, especially the new breast cancer medicines, Perjeta and Kadcyla, as well as by diagnostics. We made significant progress in our product pipeline, as FDA granted breakthrough therapy designation for our cancer immunotherapy candidate anti-PDL1, as well as priority reviews for Avastin in two new indications and fast track designation for a promising new antibiotic. In diagnostics, we also gained an important FDA approval for use of our HPV test in primary screening for cervical cancer. Based on our half year performance, I am confident that we will meet our full-year targets.”

Group results

HER2 breast cancer medicines drive growth

Group sales rose to 22,974 million Swiss francs (+5%) with strong growth from HER2-positive breast cancer medicines, Herceptin, Perjeta and Kadcyla; other oncology medicines Avastin and MabThera/Rituxan; and Actemra/RoActemra for rheumatoid arthritis. Sales of Xeloda, a chemotherapy drug which is no longer patent-protected, were lower as a result of generic competition in a number of markets. In Diagnostics, demand for Professional Diagnostics’ products for clinical laboratories remained strong, whilst Diabetes Care sales were unchanged.

Reported sales in Swiss francs were 1% lower than the first half of 2013, as the US dollar, along with a number of Latin American currencies and the Japanese yen, have weakened against the Swiss franc.

Core operating profit and cash flow increased

Group core operating profit increased 7% in the first half as a result of the strong operating performance, as well as cost containment in both divisions. Core earnings per share also increased by 7% to 7.57 Swiss francs.

Operating free cash flow was 7869 million Swiss francs, up 11% in the first half. Cash generation in both divisions was strong, despite the increase in net working capital and capital investments in site development and manufacturing expansion. Net working capital was higher as a result of increased inventory levels to ensure supply to patients. IFRS net income, which includes impairment charges of 414 million Swiss francs related to intangible assets in tissue diagnostics, was 5641 million Swiss francs, an increase of 2% at constant exchange rates over the first half of 2013.

Significant progress in pharma product pipeline

The pipeline currently has 66 new molecular entities in clinical development, of which 12 are in late-stage development.

During the first half, Roche presented data on 27 different medicines at the 50th American Society of Clinical Oncology meeting, most notably the results of a Phase I study that showed that the investigational cancer immunotherapy anti-PDL1 (MPDL3280A) shrank tumours in advanced bladder cancer. This medicine has now been granted breakthrough therapy designation by FDA. Anti-PDL1 moved into Phase III for lung cancer earlier in the year and a broad programme of development in a number of other indications and combinations is ongoing.

There was positive regulatory newsflow throughout the first half, with both the subcutaneous formulations of MabThera/Rituxan for blood cancer and Actemra/RoActemra for rheumatoid arthritis approved in the EU. The EU’s committee on medicinal products (CHMP) also recommended that Gazyvaro (known as Gazyva outside the EU) be approved for the treatment of chronic lymphocytic leukemia and Avastin be approved for platinum-resistant recurrent ovarian cancer. In the US, the FDA has given Avastin filings priority review in treatment for cervical cancer, as well as platinum-resistant ovarian cancer and a fast track designation for LptD, a new antibiotic currently in Phase II trials. In Japan, Alecensa (alectinib) was approved for the treatment of ALK-positive non-small cell lung cancer in July after a Japanese trial. The FDA has granted breakthrough therapy designation for alectinib and further global studies are ongoing.

FDA approved a new indication for Xolair, which can now be used to treat chronic idiopathic urticaria, a form of chronic skin hives. This is in addition to its current use in allergic asthma. Phase II data for lebrikizumab, an experimental medicine for severe asthma showed good results for a sub-group of patients who can be identified using a companion diagnostic test. Another investigational medicine, cobimetinib, used in combination with skin cancer medicine Zelboraf, also showed positive top line results in advanced melanoma.

Full-year outlook confirmed

For the full year 2014, Roche expects low- to mid-single digit growth in group sales at constant exchange rates. Core EPS is targeted to grow ahead of sales. Roche expects to further increase its dividend.