By Caroline Copley
ZURICH (Reuters) - Roche (VX:ROG) offered investors a lower-than-expected dividend payout on Wednesday and its earnings fell short of forecasts, sending shares in the Swiss drugmaker down more than two percent.
Sentiment towards the stock had already cooled towards the end of last year after two late-stage clinical studies of drugs for breast cancer and Alzheimer's disease failed.
A surprise Swiss move to unpeg the currency from the euro has also added uncertainty over how the franc's strength may impact future earnings for the Basel-based firm.
Chief Financial Officer Alan Hippe said based on the scenario that current foreign exchange rates were to prevail for the rest of the year, it would knock six percent off sales and 9 percent off core earnings.
While cross-town rival Novartis (VX:NOVN) has said it will review its Swiss cost base, Roche Chief Executive Severin Schwan said his company had no plans to move operations.
"I continue to believe that Switzerland and Basel offer a very good framework for our business," Schwan told reporters. "We are committed to Switzerland and will continue to invest in this country."
Roche has around 18 percent of its operating costs in Switzerland.
Stripping out the impact of currency fluctuations, the world's largest maker of cancer drugs forecast 2015 sales to grow in the low-to-mid single digit range. Core earnings per share (EPS) should grow more than sales.
The company reported full-year core earnings per share (EPS) of 14.29 Swiss francs (11 pounds) in 2014, missing an average forecast for 14.7 francs in a Reuters poll.
A strong performance by its mainstay cancer drugs, as well as a jump in sales of flu drug Tamiflu, helped group sales rise 1 percent to 47.5 billion Swiss francs. However, analysts said higher operating expenses weighed on profit.
Roche plans to pay a dividend of 8.00 Swiss francs per share for 2014, coming in below the consensus forecast of 8.19 francs.
Swiss companies with costs at home and sales abroad face a hard time in maintaining their historically generous payouts to shareholders. Roche said, however, that it expects to further increase its dividend in Swiss francs.
CANCER COMPETITION?
Shares in Roche were trading down 2.4 percent by 10:20 a.m, underperforming the European healthcare sector index (SXDP)
The stock has lost over 11 percent of its value since the SNB currency decision on Jan. 15 compared to a 9.5 percent fall in the Swiss blue-chip index (SSMI).
"Roche's relative lack of pipeline catalysts and greater potential generic competition with slower growth from some pipeline drugs are likely to add to share price pressures," said Kepler Cheuvreux analyst Fabian Wenner, who rates the stock 'hold.'
Roche faces increased competition in the field of oncology, as rivals race to develop a promising new class of immunotherapies, which work by blocking a tumour's ability to camouflage itself from the immune system's cells.
Fellow U.S. drugmakers Bristol-Myers Squibb (N:BMY) and Merck & Co (N:MRK) have taken the lead, gaining approval for two immunotherapy drugs to treat advanced melanoma.
Schwan remained sanguine about Roche's prospects, saying the company expects pivotal data for its PD-L1 drug in lung cancer this year, with a potential filing for approval scheduled for 2016. Investors are also awaiting updated data for PD-L1 in bladder and breast cancer.
Roche has pushed back forecasts for cheaper competition to its Herceptin breast cancer treatment and does now not expect copies of the biotech drug known as "biosimilars" before 2017.