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Roche net up 15%
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August 19, 1999: 3:47 p.m. ET
Drug maker's profit grows despite $640M vitamin scandal charge; revenue up 7%
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LONDON (CNNfn) - Swiss pharmaceutical maker Roche Thursday reported solid first-half profit growth and reiterated optimism about its full-year outlook after discounting the costs of a vitamin price-fixing scandal and gains from the sale of its Genentech biotech unit.
Separately, Roland Bronnimann, a former executive at subsidiary Hoffman-LaRoche, agreed to plead guilty for his role in the price-fixing case, serve a five-month jail sentence and pay a $150,000 fine. The second former senior executive to be charged in the case, he follows Kuno Summer, who was sentenced in May to four months in prison.
Roche credited dynamic sales growth and improved operating margins in the face of continued price pressure for a 15 percent rise in first-half net income to 2.87 billion Swiss francs ($1.89 billion).
The half included a 995 million Swiss franc ($640 million) charge related to U.S. legal claims in the price-fixing matter and the 776 million franc ($500 million) settlement reached in the case. These were partly offset by a 1.6 billion Swiss franc gain from a refloat of shares in its Genentech biotech division, in which Roche now holds an 83 percent stake.
Revenue in the first six months grew 7 percent to 13.40 billion Swiss francs.
Operating profit jumped 17 percent to 2.54 billion francs, on par with market expectations, helped by productivity improvements and reduced operating expenses, the company said.
Non-operating net income increased 8 percent to 1 billion francs, despite an average net debt of 3.1 billion francs in the first six months.
Robust performances in the company's pharmaceutical and diagnostics divisions overcame losses in the vitamins and fragrances businesses.
Pharmaceutical sales grew 11 percent to 8.08 billion Swiss francs, outpacing the global market amid strong demand for new products such as the anti-obesity drug, Xenical.
Roche acknowledged the impact of a vitamin price-fixing case in which the company pleaded guilty earlier this year of orchestrating a nine-year worldwide conspiracy. In May, Roche reached a settlement with the U.S. Justice department in which it agreed to pay a fine of $500 million. Germany's BASF agreed to pay $225 million for its role in the price-fixing conspiracy.
More charges for vitamin scandal
Roche CEO Franz Humer told Reuters the $640 million charge for legal costs related to private civil suits brought by individual vitamin purchasers covers the company through the end of the year.
"I would expect this is the best estimate for the year -- the fine of $500 million and these $640 (million) for class-actions covers the U.S.," Humer said.
He added, though: "In Europe I do not believe the investigation is advanced far enough that it will come to a conclusion this year."
Roche also expressed optimism about its earnings prospects looking ahead.
"Another good result (is) in view thanks to a broad portfolio of newly introduced and well-established prescription drugs, the highly successful Xenical launch and the promising late-stage products in its development pipeline," the company said.
The company said applications have been filed for a wide array of drugs in the late-developmental stage. These include the flu-drug Tamiflu; an osteoporosis drug, Bonviva; Pegasys, used to treat Hepatitis C; and the Alzheimer's drug, Tempium.
"Excluding special items related to the vitamin case and the results of the Genentech transaction -- and barring unforeseen events -- Roche anticipates another good full-year result for 1999," the company said. 
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Roche
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