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Genentech Costs Drive Down Roche Profit

Swiss drug maker Roche reported a 22 percent drop in full-year net profit to $8.06 billion, citing costs linked to the takeover of California-based Genentech.

GENEVA (AP) -- Drug maker Roche Holding AG on Wednesday reported a 22 percent drop in full-year net profit to 8.51 billion Swiss francs ($8.06 billion), citing costs linked to the takeover of California-based Genentech.

Discounting one-off expenses, net profit attributable to Roche shareholders would have fallen 9 percent to 9.8 billion francs, it said.

The results fell just short of analyst expectations. Shares in Roche, which reports earnings figures only for the half year and full year, opened 2.2 percent lower at 176.60 on the Zurich exchange.

"In a turbulent external environment Roche performed extraordinarily well," Chief Executive Severin Schwan said in a statement.

Roche lagged behind Novartis AG, which posted a full-year net profit of $10.27 billion last month, but once again edged out its cross-town rival on sales, which rose 8 percent to 49.05 billion francs compared with $44.27 billion at Novartis.

Core earnings per Roche share were up 10 percent to 12.19 francs. The Basel-based company plans to raise its dividend per share by 20 percent to 6 francs.

Schwan said the integration of Genentech, which cost Roche some 2.4 billion francs in restructuring expenses last year, was "a major step." Roche completed its $46.8 billion takeover in March after overcoming strong opposition from a skeptical Genentech board. The move helped boost Roche's income from cancer drugs Avastin and Rituxan, which were both developed by the South San Francisco biotech firm.

Roche expects mid-single digit growth in the coming year and Schwan said the company has 10 new products in late-stage development.

Sales of its best-selling antiviral drug Tamiflu, which soared last year due to the swine flu pandemic, are predicted to fall to 1.2 billion francs from 3.2 billion francs in 2009, Roche said. Tamiflu has proven effective in treating swine flu cases.

Roche, which relies heavily on its palette of anticancer drugs, is seeking new uses for Avastin, Rituxan and Herceptin, its top three selling products last year with combined sales of over 17.5 billion francs.

For Avastin, which is already prescribed to combat advanced colorectal, breast, lung and kidney cancer, Roche is seeking regulatory approval for use against Gastric, ovarian and prostate cancer.

Overall analysts appeared satisfied by the results, despite lower than expected sales due to Roche's decision to reduce locally stored stocks.

Zuercher Kantonalbank noted that Roche plans to use the integration of Genentech to reduce costs by about 1 billion francs by next year. Analysts also highlighted Roche's goal of wiping out its debt by 2015. The drug maker borrowed almost 24 billion francs last year to finance the Genentech takeover.

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