Roche: An All-Time High Is on the Horizon

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  Christian Ingerl
  Redaktor

The world’s largest manufacturer of cancer drugs did not surprise the market with a spectacular jump in revenue at the half-year mark, but it did impress with a quality that counts at least as much on the stock market: The pharmaceutical giant is growing profitably while keeping its costs under control. At constant exchange rates, sales rose by 6% to CHF 30.4 billion in the first half of the year, while core operating profit increased even more sharply—by one-tenth—to CHF 11.9 billion. As a result, Roche slightly above expectations in terms of revenue and significantly above expectations in terms of earnings. Core earnings per share exceeded the consensus by 7%.

Different Revenue Drivers

However, this lead should not be viewed without qualification. Part of the additional revenue comes from licensing fees and other income, which are unlikely to be repeated in every half-year. Without these effects, the operating surprise would have been closer to 2.0% to 2.5%. Nevertheless, there is a positive sign: Roche managed its research and development, as well as its sales and administration, more disciplinedly than expected. This is particularly important because the revenue mix was by no means consistently strong. The Pharmaceuticals division increased its sales by 6% at constant exchange rates. Growth drivers included Xolair, Hemlibra, Ocrevus, and Phesgo. Evrysdi and Polivy also performed well. In the second quarter, Hemlibra, Tecentriq, Perjeta, and Evrysdi exceeded market expectations, thereby offsetting weaknesses in other products. The most notable setback came from Vabysmo. The eye medication fell short of market expectations. In particular, the key U.S. market has so far been recovering more slowly than hoped. Roche emphasizes, however, that Vabysmo continues to gain market share. Sales of older blockbusters such as Avastin and Herceptin, on the other hand, are declining under pressure from biosimilars.

The Diagnostics segment also made a solid contribution. Its sales rose by 3 percent at constant exchange rates to CHF 6.74 billion. Solutions for immunodiagnostics, molecular diagnostics, clinical chemistry, and pathology were in particularly high demand. Core operating profit improved by 6% on a currency-adjusted basis. However, higher costs resulting from new products, the expansion of the installed base, and U.S. tariffs prevented an even stronger increase in margins.

Forecast Achievable

The fact that the reported figures in Swiss francs look less impressive is primarily due to the strength of the Swiss franc. In Swiss francs, Group sales fell by 2%, and core operating profit by 1%. Currency effects cost Roche 8 percentage points in sales and 11 percentage points each in operating profit and core earnings per share. Operationally, however, the Group remains on track. Roche confirms sales growth in the mid-single-digit percentage range and an increase in core earnings per share in the high single-digit range for 2026, both at constant exchange rates. Following growth of 6% and 9%, respectively, in the first half of the year, this forecast appears well within reach. Free cash flow is also impressive: it increased by 26% in Swiss francs to CHF 4.2 billion.

The pipeline offers further promise. A key regulatory decision regarding giredestrant for the treatment of early-stage breast cancer is expected in the U.S. in late November. The KRAS inhibitor divarasib recently delivered positive trial data. In addition, Roche is investing in, among other things, cevostamab for multiple myeloma, new metabolic therapies, and the Alzheimer’s candidate trontinemab. Acquisitions such as SAGA and PathAI, as well as the collaboration with Nurix, are simultaneously strengthening the company’s position in precision diagnostics and oncology.

Thumbs up

For investors, this paints an attractive overall picture: solid growth, an improved cost base, rising cash inflows, and several opportunities in the pipeline. Analysts at Bernstein and Morgan Stanley have rated Roche a “Buy” and have just raised their price targets significantly. The latter sees potential up to CHF 410, while Bernstein sees it as high as CHF 434.50. These levels are well above the preferred share’s previous all-time high of CHF 374.90. Technical analysis also provides additional momentum. The 100-day moving average is currently curving upward, and the 200-day moving average is providing support from below. Roche participation certificates could therefore gradually set their sights on their record high.

Investment solutions

Traders can speculate using the Long Mini Future IROXHZ offered by ZKB. This leveraged product offers a multiplier of 3.5 and thus benefits disproportionately from rising prices of the underlying asset. The knock-out level is at CHF 274.0273, which is a good quarter of the way from the current price level. The structurally identical securities from Leonteq MROKBT and UBS SQBXKU. These derivatives have leverage of 6.7 and 7.2, respectively. However, this comes at the expense of the risk buffers, which are reduced to 12.4% for MROKBT and 12.5% for SQBXKU.

Conservative investors can use the Barrier Reverse Convertible SBURJB from Julius Bär, which matures in November 2027, as a conditionally partially protected product. It offers a potential return of 8.6% per annum, with the barrier set at 29.6%.