Healthy Skepticism Library item: 11029
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Publication type: news
Whalen J.
Roche's Pick for Next CEO Marks a Bet on Diagnostics
The Wall Street Journal 2007 Jul 20B2
http://online.wsj.com/article/SB118482329460271440.html?mod=yahoo_hs&ru=yahoo
Full text:
Schwan to Push Technology That Spots, Tracks Disease; First-Half Net Grew 24%
The designation of Severin Schwan as the next chief executive officer of Roche Holding AG marks the Swiss drug giant’s growing emphasis on machines and other tools that help diagnose and monitor disease.
Mr. Schwan, 40 years old, currently leads Roche’s diagnostics division. His elevation, set to take place in March, emphasizes the importance Roche places on that business. While Roche has said diagnostics will be crucial to treating disease in the future, few other drug companies have bet so heavily on the field.
Franz Humer, Roche’s 61-year-old chairman and CEO, will remain chairman. The company said it is splitting the chairman and CEO jobs to ensure better corporate governance, following a trend in Europe. Mr. Humer said Roche looked inside and outside the company before deciding on Mr. Schwan as CEO.
Roche announced the appointment as it reported that net income grew 24% in the first half of 2007 to 4.92 billion Swiss francs ($4.09 billion), from 3.97 billion francs in the first half of 2006. Sales grew 15% to 22.83 billion francs from 19.85 billion francs in the first half of 2006 because of brisk sales of cancer drugs and the flu treatment Tamiflu. Roche doesn’t report quarterly earnings.
Roche’s results contrasted sharply with those of Pfizer Inc., Novartis AG and Johnson & Johnson, which all disappointed investors earlier this week.
Mr. Schwan, an Austrian with a law degree from the University of Innsbruck, has been with Roche 15 years, becoming chief executive of diagnostics last year. In recent weeks, Roche has announced plans to make nearly $4 billion in acquisitions in the diagnostics field, including a $3 billion bid for Ventana Medical Systems Inc. of Tucson, Ariz. Ventana’s board last week rejected the offer; Roche has suggested it could raise its bid.
Diagnostics made up 20% of Roche’s total sales in the first half of this year, with prescription drugs representing the rest. Some analysts have questioned Roche’s diagnostics strategy, concerned that the market is growing too slowly. Roche’s diagnostic sales grew by 5% in the first half, while drug sales rose 18%.
Roche says it believes that as diagnostic tools become more sophisticated, they will make up a greater share of health-care spending and help doctors better diagnose and treat disease. Big advances in genetics are making it easier to diagnose the exact type of cancer a person has, for example, allowing physicians to choose the most-targeted medicine.
One reason Roche wants to buy Ventana is that it sells a tool that tests human tissue to diagnose women with a genetically determined form of breast cancer. Roche sells a drug called Herceptin that targets this kind of cancer.
Separately, Wyeth reported that second-quarter profit rose about 13% on strong sales of arthritis drug Enbrel and the vaccine Prevnar.
While net income — which totaled $1.2 billion, or 87 cents a share, compared with a year-earlier profit of $1.06 billion, or 78 cents a share — topped expectations, Wyeth stock slipped yesterday. The shares were off 28 cents, at $56.33, in 4 p.m. New York Stock Exchange composite trading. Some analysts said it was due to wariness about an experimental treatment for hot flashes and depression.
The Madison, N.J., company said it now expects a profit for the year, excluding items, in a range of $3.48 to $3.56 per share. Analysts expected earnings of $3.49 per share for the year.
—Anita Greil contributed to this article.
Write to Jeanne Whalen at jeanne.whalen@wsj.com
