Roche Holding AG’s (RHHBY) CEO Daniel O’Day on H1 2014 Results – Earnings Call Transcript

Executives

Severin Schwan – Chief Executive Officer and Director

Daniel O’Day – Chief Executive Officer of Roche Molecular Diagnostics and President of Roche Molecular Diagnostics

Roland Diggelmann – Chief Operating Officer of Roche Diagnostics

Alan Hippe – Chief Financial Officer and IT Officer

Analysts

Matthew Weston – Crédit Suisse AG, Research Division

Tim Anderson – Sanford C. Bernstein & Co., LLC., Research Division

Andrew S. Baum – Citigroup Inc, Research Division

Sachin Jain – BofA Merrill Lynch, Research Division

Keyur Parekh – Goldman Sachs Group Inc., Research Division

Michael Leuchten – Barclays Capital, Research Division

Tim Race – Deutsche Bank AG, Research Division

Richard Vosser – JP Morgan Chase & Co, Research Division

Vincent Meunier – Morgan Stanley, Research Division

Roche Holding AG (OTCQX:RHHBY) H1 2014 Earnings Call July 24, 2014 7:00 AM ET

Operator

Ladies and gentlemen, good morning or good afternoon. Welcome to the Roche Half Year Results 2014 Conference Call. I’m Stephanie, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to turn over to Dr. Severin Schwan, Chief Executive Officer. You will now be joined into the conference room. Thank you.

Severin Schwan – Chief Executive Officer and Director

Good afternoon, and welcome to our Roche half year briefing. We had a strong performance in the first half, mainly driven by our new oncology products in the HER2 area, with Perjeta and Kadcyla, also Avastin growing very strongly with 6%, and we see continued double-digit growth for immunodiagnostics driving the diagnostics division as a whole. We’d increased our core EPS earnings by 7% at constant rates, ahead of the sales growth, and we made significant progress in terms of our product pipeline. We almost lose the oversight in terms of priority reviews, breakthrough therapy designations or fast track designations. Actually, in the first half alone, we have 5 of those, and Dan or Dave will cover this in more detail later.

With this progress in the pipeline, we have now 66 new molecular entities in our clinical portfolio, and we moved a number of those into late stage, where we have now 12 new compounds.

Both divisions are growing in all regions, particularly strong performance in the United States, where we have a 5% growth, despite the patent loss of Xeloda earlier this year.

Operating margins are up at 41% on a group level. Operating core profit, up 7%, and this is also very much reflected in our core EPS result, which is up at 7% versus previous year. If we take a deeper look into the development of the core EPS versus previous year, you can see there is a number of one-off items affecting the results. But putting all those one-off items together, actually, they net out overall, so really, a very strong growth of the underlying business for the first 6 months.

Looking forward, there is a number of important clinical data to be presented at upcoming congresses. Let me highlight ESMO, where we will present overall survival data for Perjeta. We’re very excited to share those data. And we are also looking forward to presenting data on the combination of Zelboraf and cobimetinib in malignant melanoma.

Based on the strong results, we are confident to meet our full year targets to grow sales at low to mid-single-digit rates, our core EPS ahead of sales, and on that basis, we should also be able to further increase our dividend. And with this, I hand over to Dan O’Day, head of the pharmaceutical division.

Daniel O’Day – Chief Executive Officer of Roche Molecular Diagnostics and President of Roche Molecular Diagnostics

So good morning, good afternoon, everyone. Pleasure to go over the pharmaceutical results for the first half of the year. Beginning right into the pipeline first, because I think that explains a little bit about the future prospects as well. We had a really terrific first half year in terms of data readouts and regulatory designations. I just want to cover a couple of them here. And throughout my presentation, I’ll be speaking about different medicines here.

But first of all, all of these key data readouts and actually regulatory designations happened in the second quarter. I think the key theme around oncology is that we continue to innovate in terms of new molecules, new medicines in this area. Secondly, we have a really strong immunotherapy, cancer immunotherapy program that I’ll cover in more detail. And of course, the combination strategy is coming together, including the 4 combinations we presented at ASCO and the many more we have in our development labs.