RHHBY Roche Holdings Ltd AG (QX)

By Denise Roland 

BASEL, Switzerland-- Roche Holding AG Chief Executive Severin Schwan shrugged off President Donald Trump's criticism of drug prices Wednesday, saying he remained optimistic about the U.S. market.

Mr. Schwan said the conditions in the U.S., which typically pays more for medicines than other countries, were unlikely to shift under the new administration, despite Mr. Trump's comments to a group of drug company bosses Tuesday that "we have to get the prices way down."

One reason for Mr. Schwan's confidence, he said, was the fundamental belief in the U.S.--where Roche generates nearly half of its total pharmaceuticals revenue--that it would be unacceptable to block access to an innovative drug on the basis of price.

He said those "good overall conditions" had made the U.S. one of the biggest beneficiaries of investment by the pharmaceutical industry. He said Roche invested "over-proportionally" in the U.S., where it employs more than 25,000 people, in part through its California-based Genentech division.

Mr. Schwan has also long argued that Roche is less exposed to pricing pressure than some other companies because its drugs aren't easily substitutable with those from rivals. "If you have true innovation, with true added value, the U.S. will be the first country to honor that innovation," he said.

His praise of the U.S. market stands in sharp contrast with the criticism he reserves for the U.K. and some other European markets, where government-run health systems routinely exclude innovative medicines if they aren't considered cost-effective.

Mr. Schwan's comments came as Roche posted an upbeat set of full-year results, as several of its top-selling drugs continued to prosper in the absence of cheaper competitors.

Net profit rose 8% from a year earlier to 9.6 billion Swiss francs ($9.7 billion), while revenue increased 5% to 50.6 billion francs, with both measures missing analyst expectations. Core operating profit--a measure that strips out certain items such as impairments, tax and financing costs--rose 5% to 18.4 billion Swiss francs.

Basel, Switzerland-based Roche has to date suffered less than its pharmaceutical peers from the launch of cheap copycats to its drugs, in part because its biggest medicines are manufactured with living cells rather than by chemical processes, making them more complex to imitate.

By contrast, its cross-town rival Novartis AG last week reported flat revenue for 2016 as it battled falling sales of cancer medicine Gleevec, which since last year has faced competition from low-cost generic copies.

Still, Roche's strong position is likely to shift later this year, when cheaper copycats of two of Roche's biggest-selling treatments--cancer drugs Herceptin and Mabthera--are expected to be launched in Europe in the second half of the year.

Mr. Schwan said Roche was prepared for this onset of new competition with a lineup of new drugs that he said would offset a decline in its older medicines.

Roche said it expects sales and core earnings per share to grow by a low-to-mid single-digit percentage in 2017, at constant exchange rates.

The company proposed a full-year dividend of 8.20 Swiss francs, up from 8.10 francs last year.

It said sales of its medicines increased to 39.1 billion Swiss francs, a 5% increase from 37.3 billion francs a year earlier.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

February 01, 2017 07:47 ET (12:47 GMT)

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