Roche confirms guidance as H1 core operating profit up 6%

Roche reported a better-than-expected first-half operating profit of 12 billion Swiss francs, up 6% (11% currency-adjusted), driven by robust sales of breast cancer drug Phesgo and allergy treatment Xolair, alongside effective cost management. The Swiss drugmaker confirmed its full-year guidance for a high single-digit percentage increase in adjusted earnings per share, underscoring confidence in its innovative portfolio despite adverse currency impacts and stable diagnostics sales offsetting China's healthcare pricing reforms.

Analysis

Roche has delivered a robust first-half performance, with core operating profit of 12 billion Swiss francs surpassing consensus forecasts of 11.7 billion. The reported 6% profit growth was driven by strong sales from key drugs, specifically Phesgo for breast cancer and Xolair for allergies, complemented by effective cost management. Critically, this growth figure is masked by significant currency headwinds from the appreciating Swiss franc; at constant exchange rates, operating profit growth was a more impressive 11%. The company's resilience is further demonstrated by its Diagnostics division, which maintained stable sales of 7 billion francs by offsetting the adverse effects of China's healthcare pricing reforms with growth in pathology and blood screening solutions. Management has reaffirmed its full-year guidance for a high single-digit percentage increase in adjusted earnings per share, signaling strong confidence in its innovative portfolio and operational momentum despite macroeconomic and regulatory pressures.

Key Decisions for Investors

• Investors should look beyond the headline 6% profit growth to the more indicative 11% currency-adjusted figure, which reveals stronger underlying operational performance and momentum.
• The reaffirmation of full-year guidance, despite acknowledged currency headwinds and regulatory pressures in China, provides a strong signal of management's confidence and may support a bullish outlook on the stock.
• Monitor the continued impact of the Swiss franc's strength on future reported earnings and keep a close watch on developments in China's healthcare pricing policies as a key risk factor for the Diagnostics division.