By Katie Reid
ZURICH (Reuters) - Swiss drugmaker Roche Holding AG <ROG.VX> raised its full-year earnings target for 2011 on Thursday as cost-cutting protected its first-half profitability from the impact of the strong Swiss franc.
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The Basel-based group posted a 4 percent fall in first-half core earnings per share to 6.68 Swiss francs ($8.11), but this still beat the average estimate of 6.48 francs in a Reuters poll.
Roche raised its 2011 core EPS growth target to around 10 percent in local currencies, but left its sales guidance unchanged as it continues to grapple with austerity measures on both sides of the Atlantic.
The impact of these measures is likely to level off later this year and have an overall impact of 1 percent on pharma sales in 2011, Chief Executive Severin Schwan told reporters.
The group said it was on track to shave off 1.8 billion francs in costs this year, and to realize annual savings of 2.4 billion francs by the end of 2012, in line with its Operational Excellence program set out last year.
"We further improved profitability, mainly due to the ongoing implementation of our Operational Excellence program. We are therefore raising our earnings target for the full-year," Schwan said in a statement.
Roche's core operating profit margin rose to 38.1 percent from 37.2 percent last year.
"Overall, a solid set of numbers highlighting good cost control and lower financing costs," analysts at Jefferies said in a note, but they cautioned the stock may show only a neutral response due to the slightly weaker top line.
At 0725 GMT shares in Roche were up 0.2 percent, broadly in line with the European pharmaceuticals stocks sector <.SXDP>.
The world's largest maker of cancer drugs is looking to regain investor confidence after a string of product setbacks last year, and some investors are fairly upbeat about its prospects thanks to promising drugs coming down its pipeline.
The group has been battling lower sales of key cancer drug Avastin after U.S. authorities proposed revoking its approval in advanced breast cancer.
Schwan told reporters the group was sticking to its peak sales estimate of 7 billion francs for Avastin, which is used to treat a number of different cancer types.
Demand for the medicine in ovarian cancer, as well as use in emerging markets, should bolster sales, Schwan said.
First-half Avastin sales fell 8 percent to 2.726 billion francs and were lower than expected.
The strong Swiss franc, which has soared from one record high to another against the euro and the dollar this year, also dented Roche's group sales, which tumbled 12 percent to 21.7 billion francs in the first-half of the year, missing expectations.
In local currencies and including sales of flu drug Tamiflu, group sales were flat for the period. Excluding Tamiflu sales, which have fallen sharply after strong demand last year due to the H1N1 swine flu pandemic, group sales rose 2 percent in local currencies to 21.4 billion francs.
Group and pharmaceuticals sales, excluding Tamiflu, are seen growing at low single-digit rates in local currencies this year.
The strong Swiss franc also took its toll on Swiss biotech Actelion Ltd <ATLN.VX>, which swung to a first-half net loss of 262.3 million Swiss francs.
Actelion was also hit by a provision of $577 million it had to take for legal damages.
($1=.8232 Swiss Franc)
(Additional reporting by Emma Thomasson and Paul Arnold; Editing by Greg Mahlich and Sophie Walker)