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Roche SWOT & PESTLE Analysis

ID : 52340853| Jan 2018| 16 pages

COMPANY PROFILE -Roche

Business Sector :Pharmaceutical

Operating Geography :Europe, Switzerland

About Roche :

Roche is a Swiss pharmaceutical multinational which was founded in 1896 by Fritz Hoffmann-La Roche inBasel, Switzerland. Roche is a pioneer in innovation centric healthcare with a strong market holding in drugs and diagnostics. It is the global leader in biotech with differentiated drugs in tumor treatment, immunology, infectious diseases, eye related diseases and neuro. It is also the front runner in in-vitro diagnostics and tissue-based cancer diagnostics, and the leading light in diabetes management. Its market cap is around $219 Billion as on May 2017. It has around 94,502 employees worldwide in over 100 countries as of 2016. In 2016 Roche filed for maximum number of patent applications (around 664) with the European Patent Office than any other company in Switzerland.

Roche Revenue :

$51.34 billion (FY May 2017)

Competitive Analysis of Roche

SWOT
PESTLE
The SWOT analysis for Roche is presented below:
Strengths
Weaknesses
1. Strong sales trajectory
2. Launch of new drugs like Ocrevus, Tecentriq and Alecensa have led to increased earnings
3. Innovation & New Product Development
4. Strong Financials
5. Strong presence in global markets
1. Dip in sales of Tarceva, Avastin, Herceptin, MabThera, Xeloda& Tamiflu
2. Slow Growth in Herceptin MabThera /Rituxan, etc
Opportunities
Threats
1. Increase in life expectancy opening up new ways to grow sales
2. New Acquisition of Ignyta to aid in revenue growth
3. Opportunities for growth and development with technological advancement
1. Stiff Competition from Shire, CSL Behring, etc.
2. Uncertainties due to biosimilar versions
3. Multiple patents expiring may lead to loss of market share
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Detailed SWOT Analysis of Roche

 

Strength

1. Strong Sales Trajectory: Roche has reported strong sales growth in both pharma division (5%) and diagnostics division (5%) . As per the 9- month report from January to September2017, sales grew from 37,505 to 39,434. The Pharma division sales increased from 29,140 in 2016 to 30,636 in 2017 and diagnostic division sales increased from 8,365 in 2016 to 8,798 2017. Internationally, sales grew by 4%, which were led by the Latin America and Asia-Pacific sub regions. In 2017, Roche’s sales expectations growth is in mid-single digit, at constant exchange rates. The core earnings per share are targeted to grow broadly in tandem with sales, at constant exchange rates. Roche anticipates to increase its dividend in Swiss francs. According to Forbes Roche is #14 in Multinational performers, #23 in market value, #31 in profit, #79 in Global 200, #146 in sales, #165 top regraded companies & #372 in assets in 2016.

2. Revenue increase due to Launch of new drugs: The surge in sales is mainly driven by the new launches viz-a- viz Ocrevus, Tecentriq and Alecensa contributed CHF 0.9 billion to the new sales which accounted for more than 50% growth in division’s progress. In the US, overall sales of Ocrevus, Tecentriq & Xolair surged by 10%. The pharmaceuticals division sales moved up 5%, driven mainly by Ocrevus, Tecentriq and Perjeta at CER. The advances in product disposals were CHF 231 million compared to CHF 50 million in the first half of 2016. Ocrevus has had a good uptake in US markets as well as Japanese markets due to growing demand. In US sales grew by 8% led by the approval of Tecentriq and Ocrevus which were launched in April 2017. The interim sales of Ocrevus was 192 CHF million. The growth of Tecentriq sales was due to approval in the US in metastatic bladder cancer and in metastatic non-small cell lung cancer. Roche continues to gain market share & new business with recently launched products.

3. Innovation & New Product Development: Roche launched four new medicines: Cotellic (advanced melanoma), Alecensa (lung cancer), Venclexta (chronic lymphocytic leukemia, jointly commercialized with AbbVie) and Tecentriq (bladder and lung cancer). New approaches to clinical endpoints and trial designs have so far helped it in remaining the front runner. A major highlight was the US launch of Roche’s cancer immunotherapy medicine Tecentriq which is the foremost FDA-approved treatment for people with a specific type of bladder cancer in more than 30 years. Roche spent colossal amount of CHF11.53 billion ($11.42 billion) in 2016, nearly 23% of its CHF 50.57 billion in revenue. It also recorded a 20% surge in R&D spending as compared to 2015. It was the biggest increase among the top 10, with most of this increase going into its pharmaceuticals divisions & the rest into diagnostics.

4. Strong Financials: An upsurge of 4% was accounted in Roche’s core operating profits in 2016. Its core operating income increased to 18,420 CHF Millions. The sales of pharma division rose by 3% and its core operating profits accounted 4% growth at CER. The operating free cash flow of pharma division was 13,859 CHF Million & 720 CHF Million for Diagnostics division. This counterbalanced the dividends paid & net debt which decreased to 13.2 Billion. The net debt as a percentage of total assets stood at 17%. The pharma net working capital increased by 3% and diagnostics recorded 10% increase in net working capital in 2016. The dividend per share showed 1%(CHF) increase. As per the half yearly report of 2017, the dividends paid increased from 6,969 in 2016 to 7,070. Operating free cash flow increased by CHF 2.1 billion, or 37% at CER, to CHF 7.6 billion. One major factor in this significant increase was the growth in the underlying cash generated from operations, which increased to CHF 11.2 billion, as cash revenues grew more quickly than cash expenses.

5. Strong presence in global markets: Roche’s wide geographical scale and reach ensures a strong presence worldwide. To efficiently meet the increasing demand for their products and distribute them, they are expanding their global biologics manufacturing network. In North America, a strong, above-market growth performance was recorded. China generated more than 50% of the absolute sales growth. The CINtec Histology test has become a global standard of care. Thus, due to their global presence they understand the specific challenges and circumstances in all the markets and therefore, have greater market penetration.

Weakness

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Opportunity

1. Increase in life expectancy opening up new ways to grow sales: As the world’s population is growing, the changing healthcare landscape proposes countless opportunities for research-focused healthcare companies with extensive know-how. By investing in future Roche targets key emerging markets which may be recording lower levels of growth than expected but keep growing steadily. In China, a growing population with access to innovative medicines should sustain market growth notwithstanding geopolitical risks, and continued access growth.

2. Opportunities for growth and development through technology: Roche aims to ensure access to medicines worldwide. The Middle East markets is one example of how patients in emerging markets can benefit from their innovative medicines and hence helps in increase of sales. Roche aims at the espousal of the finest technology and partnerships which can leverage the influence of their unique pharmaceutical-diagnostic structure to advance science and develop new therapies in the most efficient and cost effective way. This will also make their pharma and diagnostics division more competitive.

2. New Acquisition of Ignyta to aid in revenue growth: Ignyta’s acquisition will enhance its expertise in rare cancers & hence would strengthen as well as broaden Roche’s oncology portfolio. Its target is cancers with rare mutations. Ignyta’s lead molecule, entrectinib, is at present in 2nd Phase of clinical trials & targets rare mutations in non-small cell lung cancer and solid tumors. Once the trials are over and requisite permissions are obtained, Roche has a fair chance of expanding its market share in cancers with rare mutations despite growing competition.

Threat

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Roche SWOT and PESTLE analysis has been conducted by Kanupriya Sheopuri and reviewed by senior analysts from Barakaat Consulting - an Ezzi IT and Business Consulting venture.

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Roche SWOT & PESTLE Analysis
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