Roche says Chugai deal will delay pharma pft margin goal

10 December 2001 15:58  [Source: ICIS news]

LONDON (CNI)--Roche warned on Monday that the purchase of Japan's Chugai would delay by a year its goal of raising operating profit margins in pharmaceuticals to 20-25% within three years.

The Swiss group announced plans earlier today to purchase a 50.1% stake in pharmaceuticals firm Chugai in a deal worth up to Yen198bn ($1.6bn/Euro1.8bn). It intends to merge its Japanese subsidiary Nippon Roche with Chugai to create a new company named Chugai Pharmaceutical with sales of approximately Yen253bn.

When the alliance has been completed, Roche will rank ninth among the world's top pharmaceutical players, compared with its current position of joint twelfth, a group spokesman told CNI. The alliance is expected to increase Roche's pharmaceutical sales by approximately 15%, to a pro forma total of SF20.5bn ($12.4bn/Euro13.9bn) in 2000.

However, Roche's chief financial officer Erich Hunziker warned: "Our previously stated goal of improving the operating profit margins in the pharmaceuticals division from their current levels of 19% in the first half of 2001 to 20–25% in 2–3 years will be pushed back by roughly one year."

Roche expects its earnings before interest, tax, depreciation and amortisation (EBITDA) to increase by SF500m-600m in the first full year following the completion date, while the EBITDA margin is expected to be slightly lower.

The deal is expected to be completed in Q4-2002, subject to regulatory clearances.

By: Anna Jagger
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