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Roche Holding AG ADR RHHBY

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Maintaining Our Roche FVE as Solid Performance Supports Double-Digit Second-Quarter Sales Growth

Karen Andersen, CFA Sector Strategist

Analyst Note

| Karen Andersen, CFA |

We're maintaining our $59/CHF 438 fair value estimate for Roche following strong second-quarter results, with top-line growth of 14%. The strong performance was partly due to pandemic headwinds in the second quarter of 2020 creating weaker comparisons and partly due to strong sales growth for Roche's diagnostics and innovative drugs. Core operating profit was up 4% in constant currency in the first half versus sales growth of 8%, due to a higher contribution from the lower-margin diagnostics arm as well as increased investment in pharma R&D. Roche continues to re-route its investment from sales and marketing and into R&D, with 19% growth in R&D expenses in the first half of 2021 for the pharma division, which we think bodes well for Roche's long-term competitive advantages. Roche confirmed its guidance for the full year of low- to mid-single-digit constant currency top-line growth and core earnings per share growth in line with sales growth. We think Roche's combination of branded drugs and diagnostics continues to support a wide moat.

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Company Profile

Business Description

Roche is a Swiss biopharmaceutical and diagnostic company. The firm's best-selling pharmaceutical products include a variety of oncology therapies from acquired partner Genentech, and its diagnostics group was bolstered by the acquisition of Ventana in 2008. Oncology products account for 60% of pharmaceutical sales, and centralized and point-of-care diagnostics for more than half of diagnostic-related sales.

Contact
F. Hoffmann-La Roche Ltd
Basel, CH-4070, Switzerland
T +41 616888880
Sector Healthcare
Industry Drug Manufacturers - General
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 101,465

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