Roche Holding AG (RHHBY.PK)

Q2 2010 Earnings Call

July 22, 2010 2:00 pm ET


Severin Schwan – CEO

Pascal Soriot – COO, Pharmaceuticals

Daniel O'Day – COO, Diagnostics

Erich Hunziker – CFO and IT Officer



Severin Schwan

Good afternoon. Ladies and Gentlemen, welcome to our Half-Year Conference.

We posted very strong returns for the first six months; sales ahead of the market and we delivered a record operating profit for the first six months.

We are, however, disappointed about the recent setbacks in our pipeline. We are disappointed about the delay of [inaudible] recommendation two days ago.

Let me make two introductory comments in this respect. First of all, the market environment is getting more challenging and we have had these setbacks in our pipeline. This is a reality we cannot deny this reality. We have to adapt to this reality.

And that means an even more rigorous focus on operational excellence on our cost factors, and further improving our operation for productivity.

And you see this already very much reflected in the first six months of this. It ties management on all our cost lines across the organization. They are also fully on track to deliver our synergy target related to the challenging transaction.

Now second, let me also point out, in spite of these setback, we do have one of the leading product pipeline in the industry. We have more than ten new molecular entities in the late-stage pipeline. We have more than over 30 line extensions in the late-stage pipeline. And this is the basis of our long-term success.

And I do believe that the filing of T-DM1, which we just did this month in July, is a reference and a testimony to the excellence in science that we want to pursue.

Now, let me go quickly through the figures, which you’ve already seen this morning. Pharma, six percentage points up in local currency if they exclude Tamiflu, primarily driven, as in the past by the oncology portfolio up 9%, but also a strong performance in Lucentis.

And importantly, a very good start on the [inaudible] in the U.S. and outside of the U.S., which is starting to have an impact on our top line.

Diagnostics, an excellent recite for the first six months; 9% growth. This is twice the market growth, which we estimate to grow at about 4% to 5%, which gets us 5% growth on the group level, including Tamiflu and 6% excluding Tamiflu.

We did have a record result on an operating-profit level. You see this also reflected in the strong margin improvement driven by both additions, primarily on the [inaudible] level by the productivity improvements in the Pharma Division, and see again the synergies from the Genentech transaction and the various initiatives along the way are starting to kick in.

This is also reflected in the core EPS, which has grown in local currencies by 11% versus the previous year.

And again, as I said in my introduction, the core for the long-term success of this company will be the quality of our pipeline. And in spite of the recent setbacks, which we have, in spite of the delay with [inaudible], and in spite of the Roche recommendation, I do believe, and I’m convinced that we have a very, very strong pipeline that is very worthwhile to invest in. It’s the pipeline which will drive the success in the future.

We did announce to you that we will have a flat and slightly-decreasing development on the R&D side. And you see this already coming through in the first six months as we stick to our guidance in this regards.

We also confirmed this morning our [inaudible] core EPS score. We do face some stronger headwinds as we go into the second half of this year. Certainly the affect for the U.S. Healthcare Reform, the measure in Europe, we’re starting to feel them. But we have planned this into our guidance and we stick to our guidance as we go forward for the full year.

We stick to our guidance in terms of core EPS growth. The same is true on the sales side with the mid-single digit growth for Pharma and the Group. We expect to continue to significantly outgrow the market in diagnostics.

As I mentioned, we are on track for our synergy targets. And on the balance-sheet side, actually due to the strong cash flow over the last 12 months we decided to recall $ 2 ½ billion bonds, which actually means that by the end of this year, we will already have paid off 1/3 of our debt related to the Genentech transaction. And we will maintain our dividend policy as announced.

With this, I’d like to hand over to Pascal Soriot. So we all thank you very much.

Pascal Soriot

Thank you, Severin. Good afternoon everybody. It is a pleasure to be here today and report to you on the very, very good first half of this year. Of course, unfortunately, tentatively negative, but the decision of the [inaudible] a few days ago, I think we mentioned and we’ll come back to this in a few minutes.

But if we start with our sales results for the end of June, as you saw in the release that came out a little bit earlier, we experienced very good growth and [inaudible] 6% excluding Tamiflu. So very much in line with our guidance for the year. A very strong first half.

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