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The pharmaceutical company Roche is working on a new inexpensive drug against Sars-CoV-2. Last year, the company suffered from the pandemic in many business areas, except for the boom in molecular diagnostics.
View of the Roche site in Basel.
At Roche it has been the custom for years that at the annual press conference, after the CEO, the head of the pharmaceutical division speaks and only then the head of the diagnostics business. But this time it was the other way around.
High demand for PCR tests
The company’s activities in medical diagnostics came to light in early 2020 due to the coronavirus pandemic. In March, Roche was the first company to launch a PCR test to detect virus infection. Throughout the year, the range was expanded to 15 different products.
The huge demand for Covid-19 tests caused sales in the diagnostics division, which is otherwise overshadowed by Roche’s much larger pharmaceutical business, to skyrocket. Overall, sales increased 6% to 13.8 billion Swiss francs; On the basis of constant exchange rates, growth was even 14%.
In molecular diagnostics, which benefited mainly from the pandemic, sales in local currency almost doubled to CHF 3.8 billion. This huge increase was offset by a decrease in revenue from the marketing of certain diagnostic products for diseases other than Sars-CoV-2. used. Roche also struggled last year with patients postponing doctor visits for fear of becoming infected with the virus or that entire hospitals were only accessible to people with Covid.
Patients avoid visiting the doctor
In the pharmaceutical division, whose growth has been frustrated for years, the group even had to accept a significant drop in sales. Sales fell 8% to 44.5 billion Swiss francs. Division manager Bill Anderson put the net revenue shortfall due to the pandemic at 2 billion Swiss francs and named the Lucentis eye drug business and the multiple sclerosis preparation Ocrevus as particularly affected areas.
Across the group, sales were down 5%. In local currencies, the company, which is heavily oriented towards North America, suffered in advance from the weakness of the dollar, there was a 1% increase despite the pandemic. This made it possible to achieve the 1 to 5% growth that management had promised.
Costs under control
At the financial statements press conference – due to the pandemic, only virtual – Alan Hippe said Roche should continue to closely monitor the unfavorable development in the currency markets. Still, your concern is limited. Hippe noted that Roche benefits from a strong natural hedge against currency losses at the expense of profitability. Whenever the company has high costs, it also generates significant revenue.
Overall, Roche appears to have good cost control. The so-called main operating profit, which excludes extraordinary items, increased disproportionately to sales by 4% in local currency. The corresponding margin increased further from 36.6 to 36.9%. At this level, the company is one of the most profitable pharmaceutical groups in the world.
For the current year, management has again set an exchange rate adjusted sales increase in the low to medium single digit percentage range. Basic operating profit per share will increase to the same extent. Roche clearly sees itself in a position to continue growing despite the ongoing pandemic. Last week, competitor Novartis had identical expectations regarding sales development.
Biosimilars remain a significant burden
Roche is also convinced that the health situation will normalize in many places from the second half of the year thanks to vaccines. At the same time, they are confident that additional businesses with newer-origin drugs can continue to overcompensate for losses in commercialization of the three oldest cancer drugs, Mabthera, Herceptin and Avastin.
Roche lost 5.7 billion Swiss francs in revenue last year due to competition from copycat biosimilars. According to chief pharmacist Anderson, further sales losses of around 4.6 billion Swiss francs can be expected in 2021.
When it comes to treating Covid 19 patients, Roche continues to rely on the use of its old drug Actemra, which is administered primarily for rheumatoid arthritis (sales increased 32% to CHF 2.9 billion in 2020). In addition, there is a combination of two antibodies that are marketed together with the American biotechnology company Regeneron.
A new hope, for which studies are underway in phases II and III, is a simple pill. It would only have to be taken for five days, it would be cheap and easy to sell worldwide, Anderson enthused. The group is also working with a partner on this project, the young American company Atea Pharmaceuticals.
Employees in constant use
Roche also appears to have come to the conclusion that despite all the advancements on the vaccine front, people will continue to develop Sars-CoV-2. In the diagnostics sector, however, it is also preparing for the fact that the demand for Covid tests will soon no longer be as high as it is now. This risk is offset by accelerated depreciation of production equipment, often recently acquired, explained division manager Thomas Schinecker. Roche can afford this.
Employees who have been burdened with a heavy workload for months shouldn’t be unhappy that they can take things a little easier in the future. According to Schinecker, production was suspended for a single day, on Christmas Day, between Christmas and New Years.
