BASEL, Switzerland, July 21, 2004 (PRIMEZONE) -- Roche Group:
-- Sales* up 14% in local currencies to 14.6 billion Swiss francs
-- Operating profit** climbs 33% in local currencies to 3.7 billion
Swiss francs
-- Net income doubled to 2.9 billion Swiss francs
-- Debt reduced by a further 4.1 billion Swiss francs
-- Operating profit and EBITDA margins in core businesses increase
significantly
Roche Pharmaceuticals
-- Sales grow by 16% in local currencies -- more than twice as fast
as the global market
-- Continued growth in key oncology, virology and transplantation
segments
-- Novel anticancer medicine Avastin successfully launched in the
United States
-- Pegasys, for hepatitis C, quickly achieves global market leadership
-- Major development projects well on track
Roche Diagnostics
-- Division extends global market lead as sales rise 9%
-- Sales grow significantly faster than the market in core diabetes
care, molecular diagnostics and immunochemistry segments
-- Market share gains in all regions
Outlook
-- Strategic focus on prescription medicines and diagnostics --
Roche Consumer Health to be sold
-- Continued above-market sales growth in the Pharmaceuticals and
Diagnostics Divisions
-- Double-digit increase in operating profit and a substantial rise
in net income expected for full-year 2004
* Basis: continuing businesses / ** Basis: continuing businesses, before exceptional items
Commenting on the first-half figures, Roche Chairman and CEO Franz B. Humer said: "In the first half of 2004 Roche once again achieved all of its goals, and even exceeded the most important ones by outperforming its sales and profit targets. Sales in our two core businesses continued to grow well ahead of the global market. This strong top-line growth was the key performance driver during the reporting period and resulted in our gaining additional market share in all regions worldwide. Both divisions posted substantial increases in their operating profits and operating profit margins. In strategic terms we also took another major step forward: the sale of Roche Consumer Health, announced early this week, will enable us to focus more sharply on our research-intensive diagnostics and prescription medicines businesses, both of which are high value-creating businesses with tremendous potential for growth. For full-year 2004 we expect to see continued above-market growth in our core businesses, a double-digit increase in operating profit and a substantial rise in net income."
Key figures in millions of CHF
Roche Group Continuing businesses a)
First half % Change First half % Change
In In local In In local
2004 2003 CHF currencies 2004 2003 CHF currencies
Sales 15,413 15,188 +1 +2 14,633 12,923 +13 +14
EBITDA b) 5,010 4,236 +18 +20 4,859 3,911 +24 +26
Operating 3,845 3,087 +25 +27 3,710 2,826 +31 +33
profit
before
exceptional
items
Operating 3,560 2,474 +44 +46 3,428 2,592 +32 +34
profit
Net income 2,920 1,289 +127 2,828 1,443 +96
Diluted 3.41 1.52 +124 3.31 1.70 +95
earnings
per share
and
non-voting
equity
security
(in CHF)
a) Continuing businesses include the core pharmaceuticals and diagnostics businesses, Chugai's OTC business and treasury and other corporate activities. Roche Consumer Health and the Vitamins and Fine Chemicals Division are reported as discontinuing businesses.
b) EBITDA: Earnings before exceptional items and before interest and other financial income, tax, depreciation and amortisation, including impairment. This corresponds to operating profit before exceptional items and before depreciation and amortisation, including impairment.
Roche Group
Both core businesses deliver significant sales growth
Sales revenues from Roche's continuing businesses were up 14% for the first half of 2004 in local currencies (13% in CHF) to 14.6 billion Swiss francs; this excludes Roche Consumer Health and the Vitamins and Fine Chemicals Division, which was sold last year. Sales in both the Pharmaceuticals and the Diagnostics Division grew substantially faster than the market. Prescription drug sales advanced 16% in local currencies (15% in CHF) to 10.6 billion Swiss francs, with positive contributions to growth coming from Roche's own pharmaceutical activities (+13% in local currencies) and from the strategic alliances with Genentech in the United States (+38% in US dollars) and Chugai in Japan (+7% in Japanese yen). In the Diagnostics Division, where sales increased 9% in local currencies (9% in CHF) to 3.9 billion Swiss francs, growth was driven primarily by the Diabetes Care and Molecular Diagnostics businesses.
Operating profit up significantly
This strong first-half sales growth had a very positive impact on earnings performance. The Group's operating profit from its continuing businesses (before exceptional items) rose significantly to 3.7 billion Swiss francs, up 33% in local currencies (31% in CHF) from the same period a year earlier. Operating profit margins also improved further, advancing from 23.9% to 26.9% in the Pharmaceuticals Division and by 2.9 percentage points to 24.2% in the Diagnostics Division. Thanks to strong operating performances in both divisions, EBITDA (gross cash flow) from continuing businesses increased significantly, advancing 26% in local currencies (24% in CHF) to 4.9 billion Swiss francs. The EBITDA margin in the Pharmaceuticals Division reached 34.2%, compared with 32.0% in the first half of 2003, and the Diagnostics Division increased its EBITDA margin by another 3.4 percentage points to an industry high of 33.9%.
Massive reduction in debt; net income doubled
The financial statements show a net financial expense of 248 million Swiss francs for the first half of this year (compared with an expense of 367 million Swiss francs a year ago). Group debt was reduced by a further 4.1 billion Swiss francs. While interest expenses remain high, they have been lowered by the decrease in outstanding debt, and the conditions are being put in place for a balanced financial result next year. The conversion of the LYONs IV notes into Genentech shares, redemption of the LYONs III notes and the partial redemption of Chameleon bonds yielded an exceptional pre-tax gain of 1 billion Swiss francs, primarily from the Group's partial disposal of its interest in Genentech from the conversion of the LYONs IV notes. Net income for the first six months showed a 127% increase to 2.9 billion Swiss francs.
Outlook: Group set to meet or exceed guidance
Barring unforeseen events and based on current accounting principles, the Roche Group reaffirms its ability to meet, and in some respects, exceed the sales and earnings guidance communicated early this year. For full-year 2004 Roche expects both its pharmaceuticals and its diagnostics business to grow faster than the global market. Moreover, it anticipates a double-digit increase in operating profit and a substantial rise in net income. The Pharmaceuticals Division expects an operating margin (before exceptional items) for the full-year of around 26% and expects the 2005 operating profit margin (before exceptional items) to be broadly in line with 2004, despite additional product launch activities, development costs and the generic onset of Rocephin. The Diagnostics Division is on track to achieve an operating profit margin of around 23% before exceptional items in 2006. Several months ago Roche announced that it would be aiming for a Group operating profit margin of more than 22% by 2005 rather than in 2006. This goal was already met in the first half of 2004, and Roche expects to exceed it for full-year 2004 -- two years earlier than originally planned.
Pharmaceuticals Division Growth outpaces market in all regions
Key figures In millions % Change % Change in As % of
of CHF in local sales
CHF currencies
Sales - Roche worldwide 10,647 15 16 100
prescription group
EBITDA 3,638 23 26 34.2
Operating profit before 2,869 30 33 26.9
exceptional items
Sales in the Pharmaceuticals Division, excluding OTC, increased by 16% in local currencies (15% in CHF) in the first half of 2004, helped by impressive gains in the division's three most important therapeutic areas: oncology (+28%), virology (+71%) and transplantation (+19%). Pharmaceuticals Division sales for the first six months advanced more than twice as fast as the global market. Operating profit before exceptional items reached 2.9 billion Swiss francs, and EBITDA increased to 3.6 billion Swiss francs. The operating profit margin before exceptional items increased from 23.9% to 26.9%.
The division posted strong results in all key regions. Sales of the Group's prescription medicines in North America and Europe grew more than twice as fast as their respective markets. Sales by Chugai in Japan also advanced well ahead of the market as a whole. Latin American sales increased by 14%.
Oncology portfolio sustains strong growth; Avastin successfully launched in United States
MabThera/Rituxan, for non-Hodgkin's lymphoma (NHL), continues to deliver strong sales and is experiencing an acceleration of growth in Europe. In June the European authorities issued a positive opinion on first-line use of MabThera in indolent NHL. Once approved, this new first-line indication will double the number of patients with indolent NHL who are eligible to receive the drug. Herceptin, for the treatment of advanced breast cancer, continued to post strong double-digit growth. Sales are expected to strengthen further following EU approval in June of Herceptin in combination with Taxotere as first-line therapy for HER2-positive metastatic breast cancer. Sales of Xeloda, for breast and colorectal cancer, were down in the first half of 2004 as US sales declined 46%, primarily due to changing wholesaler inventory levels and buying patterns. However, US prescriptions are up 10% compared with the year-earlier period, and Roche anticipates that inventory levels will be aligned with demand later this year. In Europe and Japan Xeloda continued to show solid growth. Following its rapid approval in February by the US Food and Drug Administration (FDA), Avastin has outperformed expectations, achieving sales of 217 million Swiss francs in its first few months on the market. Avastin represents a totally new approach in the treatment of cancer and is currently indicated in the United States for first-line use in combination with conventional chemotherapy in patients with metastatic cancer of the colon or rectum. An EU filing was submitted in December 2003. The drug, which offers a significant survival benefit, has been granted priority review status in Switzerland, Australia and Canada. Roche continued the European roll-out of Bondronat for the treatment of patients with metastatic bone disease. Additional market launches are expected to steadily build sales of the product. Roche is also commencing an international phase III programme that will investigate Bondronat in the treatment of metastatic bone pain, irrespective of primary tumour type.
Virology -- strong sales of hepatitis C products
Pegasys and Copegus, Roche's combination therapy for hepatitis C, posted combined sales of 783 million Swiss francs in the first half of 2004. Less than one and a half years after its first launch Pegasys has now achieved global market leadership. Strong data showing the benefits of Pegasys in patients co-infected with HIV and HCV were announced in early 2004, and data demonstrating the drug's superior efficacy in patients with hepatitis B will be presented later this year. Filings for both indications are being submitted this year as part of ongoing market development activities. Sales of Roche's HIV fusion inhibitor Fuzeon have improved steadily following further launches this year in some of the larger European countries and other markets. Among the initiatives taken to promote the growth of Fuzeon are a switch to multi-channel distribution in the United States and the intensification of programmes to support health professionals and patients. At the recent World AIDS Conference Roche presented excellent data showing consistent and continuous improvements in immune strength over a period of 96 weeks in patients receiving Fuzeon.
Anemia -- continued market leadership
Combined sales of NeoRecormon (Roche) and Epogin (Chugai) exceeded 1 billion Swiss francs in the first six months of 2004, against a background of continued price pressure in the anemia market as a whole. Roche expects NeoRecormon sales in the oncology segment to increase with the start of European launches of a convenient and cost-effective new pre-filled syringe for once-weekly dosing in patients with lymphoid malignancies.
Transplantation -- CellCept now the global market leader
CellCept reinforced its leadership in transplantation, posting impressive growth in the first half of 2004. Combined sales of Valcyte and Cymevene showed strong double-digit growth, driven primarily by launches of Valcyte in additional countries for the prevention of cytomegalovirus infections in transplant patients.
Other major products - supplemental new drug application for Boniva
Sales of Rocephin in the United States and Italy, the product's biggest markets, remained high in the first half of 2004, with generic erosion in the rest of Europe less than anticipated. However, generic pressure on the product is expected to increase in the second half of this year. In May a supplemental new drug application was filed with the FDA for approval of once-monthly Boniva for the prevention and treatment of postmenopausal osteoporosis. The product is expected to be the first once-monthly oral treatment for osteoporosis, offering more convenient dosing and thus the potential for better patient adherence. A marketing application is planned in Europe later this year.
Development pipeline -- continuous flow of products for future growth
Key development projects in Roche's established and emerging portfolios made significant progress in the first six months of 2004. Results, released in June, from a phase III trial show that monotherapy with Tarceva significantly prolongs survival in patients with advanced lung cancer. The drug was shown to be effective across all subgroups represented in the study. Regulatory filings are planned in the United States and the European Union later this year. Clinical trials are under way to evaluate Tarceva in other malignancies, including pancreatic cancer and glioblastoma, a type of brain tumour. Roche is developing Tarceva in partnership with Genentech and OSI Pharmaceuticals. CERA is the first continuous erythropoietin receptor activator being developed for the treatment of anemia associated with chronic renal disease and cancer. An extensive programme of phase III clinical trials in renal anemia has already begun. MRA will enter phase III clinical development for rheumatoid arthritis (RA) in the fourth quarter of 2004. The programme to develop MabThera/Rituxan for this indication is on track. Following positive phase II data, two further studies are under way to investigate dose ranging and long-term efficacy of the drug in RA patients with an inadequate response to currently prescribed biologics. Phase II studies of R483 in the treatment of type 2 diabetes have shown the compound to have significant efficacy. Following new guidance by the FDA on the class of drugs to which R483 belongs, Roche has decided to revise its phase III development plans for the compound and wait for the results of ongoing long-term toxicity studies. These studies will be completed in 2005.
Roche Consumer Health
In the first half of 2004 sales by Roche Consumer Health (RCH) increased 4% in local currencies (4% in CHF) to 780 million Swiss francs. Operating profit before exceptional items totalled 135 million Swiss francs and includes restructuring costs of 17 million Swiss francs. Early this week Roche announced that it will sell RCH and five pharmaceutical production sites to Bayer. In addition, Roche will out-license the US non-prescription rights to orlistat to GlaxoSmithKline. The total transaction price will exceed 3.7 billion Swiss francs. RCH is therefore reported as a discontinuing business.
Diagnostics Division Sales growth outpaces market again
Key figures In millions % Change % Change in As % of
of CHF in local sales
CHF currencies
Sales 3,879 9 9 100
- Diabetes Care 1,414 12 12 36
- Near Patient Testing 274 2 1 7
- Centralized Diagnostics 1,378 7 6 36
- Molecular Diagnostics 539 12 13 14
- Applied Science 274 9 10 7
EBITDA 1,315 22 21 33.9
Operating profit before 938 24 23 24.2
exceptional items
In the first half of 2004 the Diagnostics Division continued to strengthen its position as the number-one supplier of diagnostic products (IVDs) as sales rose 9% in local currencies (9% in CHF). The division's operating profit margin before exceptional items also advanced -- from 19.0% for full-year 2003 to 24.2% -- fuelled in particular by above-market sales growth in the division's three most profitable businesses: diabetes care, molecular diagnostics and immunochemistry.
Divisional sales significantly outpaced the average growth rate in all market regions. In the United States the upturn in the diabetes monitoring market was reflected by an increase in sales of test strips, while Latin American sales were helped in part by the continued return to more stable economic conditions in the region.
Diabetes Care -- dynamic growth continues
Roche Diabetes Care continued to extend its lead in the blood glucose monitoring segment. Once again, sales of the Accu-Chek Compact blood glucose meter posted the strongest gain. The market response to the recently launched Accu-Chek Go and Accu-Chek Advantage III meters was very positive, helping to drive growth. The first half of 2004 also saw the launch of Accu-Chek Pocket Compass 2.0, the world's first commercial diabetes management software that allows users to download data directly from both a glucose meter and an insulin pump to their personal digital assistant. Blood glucose meters from Roche Diagnostics are now being manufactured in China, strengthening the division's presence in this growth market and in other countries in Eastern Asia. The next generation of insulin pumps was successfully piloted in the Netherlands and will be rolled out, as planned, within the next few months.
Near Patient Testing -- excellent results in major segments
Roche Near Patient Testing reinforced its number-one position in coagulation monitoring, primary care (compact systems for doctors' offices) and hospital point-of-care (rapid diagnostic products for use in emergency rooms and intensive care units). This solid performance was largely driven by sales of OMNI S, Roche's latest multifunctional blood gas analyser. The instrument's expanded test menu will help to stimulate additional growth, as will Cobas IT 1000, a data management software package launched in the second quarter. This Internet-based software gives customers an added incentive to take advantage of the wide range of Roche point-of-care products. Sales of CoaguChek S advanced at a double-digit rate, helping the product to extend its market lead, thanks to the continued trend towards patient self-monitoring of coagulation status.
Centralized Diagnostics -- moving towards leadership in immunochemistry
Roche Centralized Diagnostics posted sales gains significantly above the market average. This growth is largely attributable to recent strategic moves in the immunochemistry and cardiovascular testing segments. The acquisition of Igen, completed in February 2004, and a new 10-year agreement with Hitachi are important milestones in Roche's pursuit of market leadership in immunochemistry -- a market currently estimated to be worth about 8 billion Swiss francs in sales. In the cardiovascular testing segment, out-licensing agreements for NT-proBNP have expanded the potential for commercial development of this key marker for heart failure. Roche Diagnostics augmented its own product portfolio for this segment by in-licensing the marker hsCRP (high sensitivity C-reactive protein), which is used to assess cardiovascular risk. Molecular Diagnostics -- on growth track with blood screening and women's health products Women's health and blood screening were major growth drivers for Roche Molecular Diagnostics. An agreement signed with the Republic of Korea National Red Cross -- under which 70% of its roughly 2.5 million annual blood donations will be screened using PCR-based tests from Roche -- will reinforce Roche Diagnostics' position as the leading supplier of blood and plasma screening products in the Asia-Pacific region. In the near future Roche also expects to conclude an agreement extending its partnership with the Japanese Red Cross by an additional four years. The first PCR-based HPV test for clinical use was launched in Europe in April. HPV (human papillomavirus) is the leading cause of cervical cancer. Among other advantages, the new test offers improved sensitivity compared with earlier tests. Roche Diagnostics is working to obtain FDA marketing clearance for the test by 2006. Roche expects to launch AmpliChip CYP450 this year as an IVD in Europe, and a filing for FDA clearance of the test for clinical use in the United States is planned in the third quarter. The test, which is currently available for research use, identifies genetic variations that can influence drug metabolism.
Applied Science -- positive sales growth
Roche Applied Science posted a sales increase of 10% for the first half of 2004. LightCycler 2.0 was a key contributor to growth. Introduced in 2003, this system for DNA amplification has rapidly gained market share thanks to an expanded range of PCR capabilities.
Additional information - Investor Update including a full set of tables: www.roche.com/inv-update-2004-07-21b - Half-Year Report 2004: www.roche.com/home/figures/fig_halfyearrep_2004.htm - Tentative publication date of third-quarter sales release: 14 October 2004
Disclaimer This release contains certain forward-looking statements. These forward-looking statements may be identified by words such as "believes," "expects," "anticipates," "projects," "intends," "should," "seeks," "estimates,", "future" or similar expressions or by discussion of strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this presentation among others: (1) pricing and product initiatives of competitors; (2) legislative and regulatory developments and economic conditions; (3) delay or inability in obtaining regulatory approvals or bringing products to market; (4) fluctuations in currency exchange rates and general financial market conditions; (5) uncertainties in the discovery, development or marketing of new products or new uses of existing products; (6) increased government pricing pressures; (7) interruptions in production; (8) loss of or inability to obtain adequate protection for intellectual property rights; (9) litigation; (10) loss of key executives or other employees; and (11) adverse publicity or news coverage.
07.00 CET (Central European time) This Release will be posted on the Roche IR website. Presentation slides and the Half Year Report 2004 will be posted on the Roche IR website http://ir.roche.com.
Conference call, 21st July 2004
08.00 CET
Conference call will commence with presentations by senior management followed by a 45-minutes Q&A session (live access to the speakers). Participants will be:
Dr. Erich Hunziker, Chief Financial Officer
William M. Burns, Head of the Pharmaceuticals Division
Heino von Prondzynski, Head of the Diagnostics Division
Dr. Karl Mahler, Head of Investor Relations
Analysts are invited to dial in to the conference using the following
dial-in numbers:
+41 (0) 91 610 5600 (Europe and ROW) or
+44 (0) 207 107 0611 (UK) or
+1 (1) 866 291 4166 (USA Toll Free).
Please dial into the conference call 10-15 minutes before the call is scheduled to start. Alternatively, you can follow the conference call as a live audio webcast through the Internet site http://ir.roche.com. A replay of the webcast will be available on demand at http://ir.roche.com.
A replay of the conference call will be available one hour after the conference call, for 48 hours. Access is by dialing: +41 91 612 4330 (in Europe) or +44 207 866 4300 (UK) and +1 412 317 0088 (in USA) and enter the conference ID 225 followed by the # sign.
Presentation in Zurich, 21st July 2004
For our European clients, Roche will be hosting a group presentation at the Renaissance Zurich Hotel, Zurich-Glattbrugg.
14.15 CET
General Presentation and Q & A session will be held by:
Dr. Franz B. Humer, Chief Executive Officer
William M. Burns, Head of the Pharmaceuticals Division
and
Heino von Prondzynski, Head of the Diagnostics Division
Dr. Erich Hunziker, Chief Financial Officer
Following the general presentation will be four break-out sessions, held simultaneously, covering the topics Strategy & Finance, Diagnostics, Pharmaceuticals and Accounting.
For those who cannot attend in person, the presentation and Q&A session can be listened to via telephone (listen only mode, no live access to speakers). Please dial into the call 10-15 minutes before is scheduled to start. The dial-in numbers are:
+41 (0) 91 610 5600 (Europe and ROW) or
+44 (0) 207 107 0611 (UK) or
+1 (1) 866 291 4166 (USA Toll Free).
A replay of the conference call will be available one hour after the conference call, for 48 hours. Access is by dialing: +41 91 612 4330 (in Europe) or +44 207 866 4300 (UK) and +1 412 317 0088 (in USA) and enter the conference ID 018 followed by the # sign.
You are also invited to follow the presentation via a live audio webcast with synchronized presentation slides, to be accessed through the Internet site http://ir.roche.com. A replay of the webcast will be available on demand at http://ir.roche.com.
The break-out sessions will be recorded and placed on the Internet site within 48 hours.
Presentation in New York, 22nd July 2004
For our US clients, Roche will be hosting a group presentation at the Grand Hyatt Hotel in New York.
12.30 New York EDT (Eastern Daylight Time) / 18.30 CET General Presentation and Q & A will be held by:
Dr. Franz B. Humer, Chief Executive Officer
William M. Burns, Head of the Pharmaceuticals Division
and
Heino von Prondzynski, Head of the Diagnostics Division
Dr. Erich Hunziker, Chief Financial Officer
Following the general presentation will be four break-out sessions, held simultaneously, covering the topics Strategy & Finance, Diagnostics, Pharmaceuticals and Accounting.
For those who cannot attend in person, the presentation and Q&A session can be listened to via telephone (listen only mode, no live access to speakers). Please dial into the call 10-15 minutes before is scheduled to start. The dial-in numbers are:
+41 (0) 91 610 5600 (Europe and ROW) or
+44 (0) 207 107 0611 (UK) or
+1 (1) 866 291 4166 (USA Toll Free).
A replay of the conference call will be available one hour after the conference call, for 48 hours. Access is by dialing: +41 91 612 4330 (in Europe) or +44 207 866 4300 (UK) and +1 412 317 0088 (in USA) and enter the conference ID 057 followed by the # sign.
In addition, you can follow the conference call as a live audio webcast through the Internet site http://ir.roche.com. A replay of the webcast will be available on demand at http://ir.roche.com.
The break-out sessions will be recorded and placed on the Internet site in due time.
**********************
Roche IR Contacts:
Dr. Karl Mahler Eva-Maria Schafer
Phone: +41 (0)61 687 85 03 Phone: +41 (0)61 688 66 36
e-mail: karl.mahler@roche.com e-mail: eva-maria.schaefer@roche.com
Dianne Young Dr. Zuzana Dobbie
Phone: +41 (0)61 688 93 56 Phone: +41 (0)61 688 80 27
e-mail: dianne.young@roche.com e-mail: zuzana.dobbie@roche.com
North American investors please contact: Richard Simpson Phone: +1 973 235 3655 e-mail: richard.simpson@roche.com
The full report including tables can be downloaded from the following link: http://hugin.info/100334/R/953398/135749.pdf