RHHBY Roche Holdings Ltd AG (QX)

(Adds breakdown of revenue figures, patent-expiry details, geographical analysis of result)

--Roche reported 2018 revenue increased 7% as U.S. drug sales rose 13%

--Swiss pharmaceutical facing challenges in Europe from competition for its two top-selling drugs

--Positive 2019 forecast based on strong sales growth from newer drugs

By Denise Roland and Donato Paolo Mancini

Roche Holding AG (ROG.EB) said Thursday that sales and profit rose last year as strong growth in the U.S. offset a decline in Europe, where lower-cost drugs are chipping away at sales of its top two medicines.

The Swiss pharmaceutical giant said revenue increased 7% to 56.8 billion Swiss francs ($57.2 billion), while net income rose 23% to CHF10.9 billion. Core operating profit grew 8% to CHF20.5 billion.

Those results masked a decline in Europe, where Roche is for the first time facing competition for its two top-selling drugs, Herceptin for breast cancer and Rituxan for certain immune diseases and cancers. In Europe, pharmaceutical sales declined 4% to CHF8.7 billion, while in the U.S., where the company as yet faces no competition for its top medicines, drug sales rose 13% to CHF23.2 billion.

Roche faces a number of new challenges this year. Chief Executive Severin Schwan said Roche expects lower-cost versions of Herceptin, Rituxan and Avastin, another bestseller, to start eroding U.S. sales of those drugs in the second half of this year.

At the same time, the company is losing a lucrative revenue stream after a patent protecting a key process in the manufacture of antibody-type drugs expired at the end of last year. The Cabilly patent, as it is known, allowed Roche to collect hundreds of millions of dollars in royalties a year relating to some of the world's biggest-selling drugs, including AbbVie Inc.'s Humira. The patent generated CHF834 million for Roche in 2017.

Even so, the company expects sales and core earnings per share to rise by a low-to-mid single-digit percentage this year.

That upbeat forecast is in large part thanks to strong sales from Roche's newer drugs. Mr Schwan said such drugs, like multiple-sclerosis treatment Ocrevus and cancer drug Tecentriq, accounted for almost 90% of pharmaceutical sales growth last year.

Roche's smaller diagnostics division also contributed to the growth, with sales rising 7% to CHF12.9 billion.

Write to Denise Roland at denise.roland@wsj.com and Donato Paolo Mancini at donatopaolo.mancini@dowjones.com

(END) Dow Jones Newswires

January 31, 2019 03:18 ET (08:18 GMT)

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