Roche has moved rapidly to head off the impact of potential tariffs on its medicines by increasing US production and is confident about maintaining its profits this year.
Speaking on the Swiss company’s Q1 results media call, CEO Thomas Schinecker said it “can and will” absorb costs if tariffs are imposed this year and said it was maintaining its 2025 guidance. This is for a mid-single digit rise in group sales (on a constant exchange rate), with core earnings per share expected to rise in the high-single digit range.
Key Takeaways
- Roche said its ramping up of US production on four key products should eliminate any extra costs from tariffs, if imposed.
- The company believes it can absorb any extra costs in the short-term but warned that new trade barriers would eventually mean higher medicines prices.
The company was upbeat about its prospects, thanks to 6% revenue growth to CHF15.4bn ($18.7bn) in Q1. Pharma sales rose by 8% to just shy of CHF12bn with its breast cancer drug Phesgo (pertuzumab/trastuzumab) among the top growth drivers.
Schinecker cautioned that trade barriers and greater demand for investment in local manufacturing would, however, drive up costs in the long-term.
He also said wider uncertainty was bound to hit M&A deals, where Roche has been especially active over the last 12 months. “I don’t think this is a Roche-specific topic … if there are questions around tariffs, this will be more difficult to make financial sense of any M&A deals.”
He predicted a sector-wide reduction in dealmaking activity in the near-term but added: “We’ll see how things develop. Things can change very quickly in this environment.”
Increasing US And Other Regional Manufacturing
Big pharma share prices have tumbled since US President Trump unveiled plans for country-by-country tariffs on 2 April and were hardest hit after he announced on 8 April that a “major” tariff system would soon be imposed on pharmaceuticals.
Roche has been among the worst affected big pharma companies – its share price has dropped by nearly 15% (to around CHF259) in the last month. Despite a cooling off in the US administration’s rhetoric around tariffs, investors seemingly still expect new trade barriers to pharma.
In response to these fears, Roche this week unveiled a $50bn package of investments in the US, including the construction of new R&D and manufacturing sites, in moves which the company said would eventually make it a net exporter from the US.
The company detailed on the Q1 call how four of its medicines would account for 94% of its potential tariff exposure, and that production of three had already moved to the US. The CEO said the tech transfer to switch to US production was already underway for the fourth, but he declined to name the products in question. The company is also stockpiling supplies in the US and China to avoid any tariff impact or shortages.
Schinecker said he hoped tariffs would still be averted and said the company leaders “keep reminding everyone, including the EU” that there is a World Trade Organization agreement to exempt medicines from any tariffs.
He confirmed that the company was directly engaged with governments on how to mitigate any impact, including in the US, China and Switzerland, the economy of the latter being particularly dependent on pharma exports.
The CEO also confirmed that the new US investment would not come at the expense of jobs in Europe but also that Roche would not be increasing its overall R&D spending.
Other European big pharma leaders, namely Sanofi’s Paul Hudson and Novartis’ Vas Narasimhan, have this week called on the EU to bring its drug prices more into line with the US. Schinecker chimed in on criticism of EU and Swiss pricing and market access, but said that the US system of allowing pharmacy benefit managers to add up to 50% to medicine prices also required urgent reform.
Among the disruption and uncertainty caused by the new US administration, including cutbacks to the US Food and Drug Administration, one policy was welcome – the promise to end the so-called “pill penalty”. Trump this week pledged to repeal the provision in the 2022 Inflation Reduction Act which imposes shorter market exclusivity for small molecules than biologics.
