Thinking Citizen Blog — Big Pharma III: Roche (Switzerland): Owns Both Genentech (US), and Chugai (Japan)

Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day

Today’s Topic: Big Pharma III: Roche (Switzerland): Owns Both Genentech (US), and Chugai (Japan)

Although the top five best selling cancer drugs are sold by other companies (Merck, Bristol Myers Squibb, Pfizer, JNJ, Ono), three of the top nine are sold by Roche. Roche spends more on R&D: $12.1 bn) than any other drug company except for Merck ($13.6 bn). Founded in 1896, it is headquartered in Basel, Switzerland and is the second largest drug company in the world by market capitalization ($356 bn). This is the third in a series on Big Pharma. Experts — please chime in. Correct, elaborate, elucidate.

HISTORY AND SEGMENTAL BREAKDOWN IN REVENUES AND EARNINGS

1. 1896, founded as a maker of vitamin preparations and derivatives. In 1934 became the first company to mass produce synthetic Vitamin C. In 1957 “introduced the class of tranquilizers known as benzodiazapenes (eg. valium).” In 1991 acquires the marketing rights for PCR testing from Cetus Corporation. In 2004 acquired Chugai Pharmaceuticals for $1.5 billion. In 2009, acquired the US biotechnology company Genentech for $46 billion (it had owned a 60% stake since 1990 when it purchased Genentech stock at a price of $20 down from a peak of $60 in 1987).

2. Drug revenues: $27 billion, Diagnostics: $5 bn.

3. Major drug revenue categories: oncology ($12 bn), immunology ($6 bn), neuroscience ($4bn), ophthalmology ($1.5bn), hemophilia ($1.5 bn).

FIRST PATENT, THE WORLD WAR I CRISIS, R&D SPENDING

1. Its first patent related to the demonstration of the presence of iodine in extracts from the thyroid gland (by chemists Emil C. Barrel and Carl Shaerges).

2. World War I: “The German boycott of its products, Bazel’s isolation from its plant in Grenzach, Germany, the loss of its Russian market and its assets in the revolution of 1917, and sizable foreign exchange losses, combine to create a financial crisis.”

3. R&D: spent $12 billion in 2020, higher than any other drug company except for Merck at $13.6 bn. The next two biggest spenders: Bristol Myers Squib ($11.1 bn), Pfizer ($9.4 bn)

STOCK VALUATION AND PERFORMANCE, REVENUE GROWTH, RATIOS (CHF in chart below stands for Swiss francs)

1.) Market capitalization (share price X shares outstanding) = $356 billion, up 18% year over year (versus 25% for the S&P 500)

2.) Revenues (trailing twelve months): $61 billion. Year over year revenue growth in the last quarter was 5.8%.

3.) Net income (trailing twelve months): $14 billion (down 3.4% year over year).

NB: A few ratios: the companies profit margin is net income divided by revenues = 23%, its price to revenues ratio is 5.8X, and its price to earnings ratio is its market capitalization divided by net income = 25.4X. It is more useful to compare companies within an industry than between industries. Differences in valuation ratios between companies within an industry are usually a function of a.) the quality of the balance sheet, b.) prospects for earnings growth.

Roche

Visualizing the World’s Biggest Pharmaceutical Companies

Top cancer drugs by revenue worldwide 2020 | Statista

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