Sales Rise at Roche, View Backed

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Roche Holdings Ltd.’s (RHHBY) earnings came in at $1.87 per share for the first half of fiscal 2012, compared with $1.85 per share reported in the year-ago period. Earnings in the reported period benefited from increased revenues.

All growth rates mentioned below are on a year-on-year basis and at constant exchange rates.

Roche’s revenues for the first half of 2012 climbed 4% from the year-ago period, driven by growth in both its segments – Pharmaceuticals Division and Diagnostics Division.

Half-yearly Details

Sales for the Pharmaceuticals Division climbed 4%, driven by strong sales of Pegasys (up 31%), MabThera/Rituxan (up 9%), and Herceptin (up 11%). Actemra/RoActemra (up 39%), as well as the recently launched Zelboraf, Erivedge and Perjeta also added to the segment’s revenues.

Revenues from the Diagnostics Division went up 5%, attributable primarily to a 17% increase in the Tissue Diagnostics segment, a 9% rise in the Professional Diagnostics segment and a 6% jump in the Molecular Diagnostics segment. Roche’s core operating profit increased 7%, driven by top-line growth.

2012 Outlook Reiterated

The company reiterated its forecast for 2012. Roche continues to expect total revenue and revenue from the Pharmaceuticals Division to grow in the low-to-mid single digits in 2012. Sales from the Diagnostics segment are expected to surpass market growth. Moreover, Roche anticipates earnings to experience high single-digit growth in 2012 despite the unfavorable market environment.

Pipeline Update

Roche received several positive results on its late-stage candidates during the period. We remind investors that the company stopped developing dalcetrapib during the reported period. Roche was developing the candidate to treat stable coronary heart disease (CHD) following an acute coronary syndrome (:ACS).

Roche is set to file for approval for its HER2-positive metastatic breast cancer treatment T–DM1 for both US and Europe in the second half, this year. The approval of T–DM1 will strengthen Roche’s HER2 franchise

The company also expanded its Diagnostics Division portfolio by launching 25 major products in key markets.

Our Recommendation

Roche currently carries a Zacks #3 Rank (short-term Hold rating).

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