Roche’s first half net income rises 23%; profit beats on pharma margin strength

Investing.com -- Roche Holding AG (SIX:RO) on Thursday reported a 23% rise in net income to CHF 7.83 billion for the first half of 2025, with group profit ahead of expectations on stronger pharmaceutical margins, according to its half-year report.

Sales of CHF 30.94 billion were in line with Visible Alpha consensus of CHF 30.80 billion.

Pharmaceuticals delivered CHF 23.99 billion in sales, 1% above consensus, while Diagnostics revenue of CHF 6.96 billion came in 2% below expectations. 

Roche’s core operating income rose 11% at constant exchange rates (CER) to CHF 12.01 billion, a 4% beat over consensus of CHF 11.59 billion. Core earnings per share were CHF 11.08, 7% above estimates of CHF 10.38.

Growth in Pharmaceuticals was led by Hemlibra, Phesgo and Tecentriq. Hemlibra exceeded expectations with CHF 2.42 billion in sales, up 17%, driven by international demand. 

Phesgo rose 55% to CHF 1.20 billion, while Tecentriq delivered CHF 1.73 billion, down 1% but ahead of forecasts. 

Ocrevus was in line at CHF 3.51 billion. Evrysdi sales were light at CHF 869 million. Vabysmo, at CHF 2.07 billion, fell slightly short of the CHF 2.11 billion consensus.

The Pharmaceuticals Division’s core margin was 52.2%, above the 50.4% consensus, largely due to reduced R&D expenses.

Diagnostics margin was 17.9%, trailing consensus of 19.1%. IFRS operating profit for the group increased 19% to CHF 10.33 billion.

Group free cash flow declined 37% at CER to CHF 3.32 billion, mainly due to a CHF 1.2 billion payment to Zealand Pharma (NASDAQ:ZEAL) tied to a licensing deal and higher tax payments.

Roche reaffirmed its 2025 guidance, projecting group sales growth in the mid-single digits and high-single-digit growth in diluted core EPS at CER. 

Currency headwinds remain, with the company now assuming a 6% FX impact as of June 30, compared to 8% earlier. Roche now expects CHF 1 billion in loss-of-exclusivity (LoE) erosion for the year, revised from CHF 1.2 billion.

Analysts at Jefferies noted the profit beat was driven by lower R&D and strong pharma execution. 

They cited sector uncertainty as a reason for Roche maintaining its guidance despite strong EPS growth. 

Roche’s revised sales outlook, assuming the updated FX guidance, implies CHF 59.5-61.2 billion, just below consensus of CHF 62.22 billion. 

Adjusted diluted core EPS guidance suggests CHF 19.35-19.90 versus consensus of CHF 19.95.

R&D updates include the delay of the Phase III FENhance 1/2 trial for fenebrutinib in relapsing multiple sclerosis to 2026, the discontinuation of CT-173 (a PYY analogue) in obesity, and the start of the Phase II GYMINDA study for emugrobart (GYM 329) plus tirzepatide in obesity.

Roche completed its $1.1 billion acquisition of Poseida Therapeutics in January and added CHF 1.4 billion in intangible assets through alliance deals, including a licensing agreement with Zealand Pharma.

Net debt rose 37% to CHF 21 billion, and equity declined to CHF 33 billion.