U.S. President Trump’s potential tariff imposition on imported pharmaceuticals raises concerns for Roche, Switzerland’s largest pharmaceutical firm, which derives 54% of its revenue from the U.S. Despite significant investments and contributions to the American economy, Roche faces challenges from a protectionist administration. Recent substantial write-offs from acquisitions have impacted profits, prompting a conservative growth outlook, while the new CEO aims to maintain the company’s record of meeting financial forecasts.
Trump’s Tariff Threat: Implications for Roche
Will U.S. President Donald Trump follow through on his threats to impose tariffs on imported pharmaceuticals? This question looms large, especially for Roche, the largest pharmaceutical company in Switzerland, as there are concerns about how Trump’s potential second term could affect operations in the American market, which is by far Roche’s largest.
Roche’s Revenue and Investments in the U.S.
In the previous year, a striking 54% of Roche’s pharmaceutical revenue originated from the United States. This figure marked an increase of one percentage point from the year before, with American sales experiencing robust growth of 7%. Remarkably, in the fourth quarter, sales surged by an impressive 15%.
During a press conference at Roche’s Basel headquarters, CEO Thomas Schinecker highlighted the company’s significant contributions to the U.S. economy, noting that Roche is one of the largest taxpayers and the top employer in the country, with a workforce of 25,000. Over the last decade, Roche has also invested $11 billion in new facilities and assets in the U.S., which Schinecker stated provides a solid foundation for the company’s operations.
However, the question remains whether the new protectionist U.S. administration will view Roche’s contributions positively or impose obstacles. Notably, Roche’s actions, such as the sale of its large biotech facility in Vacaville, California, to Swiss contractor Lonza, may not paint the company as a quintessential “model citizen.” Despite these changes, Roche continues to produce significant quantities of its innovative, high-cost medications in Switzerland, which have contributed to a noteworthy increase in Swiss pharmaceutical exports to the U.S. over the past two decades.
Last year’s financial results were negatively impacted by write-offs totaling 3.2 billion francs due to two major U.S. acquisitions. The largest of these was the 4.3 billion dollar acquisition of Spark Therapeutics in late 2019, which has since been significantly revalued to just 800 million francs due to disappointing developments in gene therapy for hemophilia. Similarly, the 1.8 billion franc acquisition of Flatiron Health in 2018, focused on collecting cancer patient health data, also fell short of expectations.
As a result of these substantial write-offs, Roche’s net income for 2024 plummeted by 25% to 9.2 billion dollars. This decline is likely a key factor behind the board’s decision to propose only a modest 1% increase in dividends for shareholders, raising it to 9.70 francs.
Both acquisitions, which significantly impacted financial performance, were made during the leadership of former CEO Severin Schwan, who transitioned to the chairmanship in March 2023. According to the previous year’s annual report, Schwan’s compensation reached 5.7 million francs, making his role one of the highest-paid in Switzerland. In contrast, CEO Schinecker’s total compensation for 2024 amounted to 10 million francs.
In terms of revenue, Roche reported a 3% increase to 60.5 billion francs last year, grappling with the strong Swiss franc. When adjusted for constant exchange rates, the growth rate was 7%. Looking ahead to 2025, management aims to achieve mid-single-digit revenue growth in local currencies. Analysts at Bank Vontobel have labeled this target as “conservative,” noting that the cautious budgeting approach remains consistent under the new leadership.
In this context, Schinecker emphasized Roche’s remarkable track record, stating that the company has never missed a forecast since its inception. He expressed a strong desire not to be the first CEO to break that streak.