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Roche Holding AG ROG

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Morningstar’s Analysis

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Slightly Raising Our Roche FVE on Pipeline Progress, Diagnostics Demand, and Tax Rate Assumptions

Karen Andersen, CFA Sector Strategist

Analyst Note

| Karen Andersen, CFA |

We're slightly raising our Roche fair value estimate to CHF 460/$63 after making several small changes to our valuation model. First, we've added advancing pipeline programs beyond Roche's core oncology focus to our model, including crovalimab (hematology), rhPTX-2 (immunology), and fenebrutinib (neurology). We've also boosted our assumptions for COVID-19 diagnostics demand in the fourth quarter of 2021 and first quarter of 2022, removing the near-term diagnostics headwind and slightly smoothing out the expected decline in demand for full-year 2022. Finally, while we had assumed that passage of the Build Back Better Act could result in a U.S. statutory tax rate of 26% starting in 2022, we now assume the rate will remain at 21% at least through Biden’s remaining term, which ends in early 2025. We've therefore slightly lowered our long-term tax rate assumption for Roche from 21% to 18.5%. We continue to view Roche's oncology and diagnostics leadership as supporting a wide moat, and shares remain undervalued.

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Company Profile

Business Description

Roche is a Swiss biopharmaceutical and diagnostic company. The firm's best-selling pharmaceutical products include a variety of oncology therapies from acquired partner Genentech, and its diagnostics group was bolstered by the acquisition of Ventana in 2008. Oncology products account for 60% of pharmaceutical sales, and centralized and point-of-care diagnostics for more than half of diagnostic-related sales.

F. Hoffmann-La Roche Ltd
Basel, CH-4070, Switzerland
T +41 616888880
Sector Healthcare
Industry Drug Manufacturers - General
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 101,465