Swiss drug maker Roche Holding AG reported a small 4 percent rise in full-year net profit on Wednesday, as currency swings and severance pay depressed earnings, and warned that healthcare reform in the U.S. and austerity measures in Europe will hurt earnings this year.
Profit edged up to 8.89 billion Swiss francs ($9.52 billion) while sales fell 3 percent to 47.47 billion francs last year.
Growth in sales of anti-cancer drugs such as Avastin, Rituxan and Herceptin were unable to compensate for the anticipated drop in sales of influenza treatment Tamiflu of 2.3 billion francs, and the surge in the Swiss franc compared to other currencies.
"The group results are solid despite an increasingly challenging market environment," Roche chief executive Severin Schwan was quoted as saying in a statement.
Investors made clear their disappointment as Roche shares fell 2.2 percent to 141.40 francs on the Zurich exchange.
Analysts at Zuercher Kantonalbank said the results were far below their forecast of profit 10 billion francs.
Basel-based Roche, which reports earnings only for the half year and full year, said it expects tax changes and health care reforms in the United States, and European austerity measures to dampen growth in 2011.
To mollify investors, Roche indicated it would increase dividends and bring leading European CEOs including Paul Bulcke of Nestle, Christoph Franz of Lufthansa and Peter Voser of Royal Dutch Shell onto the board of directors at its next shareholders meeting.
Excluding Tamiflu, which saw unusually high sales in 2009 due to the swine flu pandemic, sales grew 5 percent in local currencies. The fact that reported sales in francs fell by 3 percent attests to the impact that the weak U.S. dollar and euro are having on Swiss-based companies' results.
Rheumatoid arthritis Actemra, which Roche gained with the acquisition of U.S.-based Genentech, reached sales of 397 million francs in 2010. This helped make up for the loss of sales of CellCept, a drug given to transplant patients to prevent organ rejection, which lost U.S. patent protection and has been the subject of U.S. Food and Drug Administration warnings.
Roche's diagnostics division saw sales rise 4 percent last year to 10.4 billion francs.
A plan to save 2.4 billion francs by cutting almost 5,000 jobs by the end of 2012 has so far cost the company 1.3 billion francs in severance and impairments.
CEO Schwan said developing countries would continue to increase their share of Roche's worldwide sales. The company already makes a quarter of its sales in developing countries.
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