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F. Hoffmann-La Roche Ltd – Risk Profile

Industry: Healthcare
Current: Company Performance

As per GlobalData’s proprietary risk methodology, Roche’s overall risk score is 3.90, signifying low risk
Country, industry, and operational risk pillars boosted the overall risk profile of the company
Low liquidity ratios compared to its peers negatively impacted the financial risk pillar

F. Hoffmann-La Roche Ltd (Roche) has a solid risk profile based on our proprietary risk assessment of the diversified drug sector in the pharmaceutical industry. Country, industry, and operational risk pillars strengthened the overall risk score. A dominant position in the biotech market, focus on R&D activities and improved business performance are its strengths, even as working capital deficit could cause concern.

About the Company

Roche is a biotechnology company that develops drugs and diagnostics to treat major diseases. The company serves diverse therapeutic areas like cancer, other auto-immune diseases, central nervous system disorders, ophthalmological disorders, infectious diseases, and respiratory diseases. The company also provides in-vitro diagnostics, tissue-based cancer diagnostics, and diabetes management solutions. Roche conducts research to identify novel methods to prevent, diagnose and treat diseases.

Roche is one of the leaders in the diversified drug industry, with reported revenue of $68.71 billion in the financial year 2021 (FY2021), which increased 10.57% over that in FY2020. The company’s net income also increased 0.06% in FY2021 over that in FY2020.

Risk Pillars

Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. The risk scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.

Roche’s overall risk score averages better across all the four pillars in comparison to that of its peers. It is one of the sector leaders, along with companies like Johnson & Johnson and Astellas Pharma Inc.

Country Risk:

Roche has a presence in diverse regions, which insulates it from the risk of operating in a single economy. The majority of its revenue is from the US (46.61%), followed by Japan (7.13%), Germany (5.70%), the Rest of Europe (16.77%), and the Rest of Asia (14.77%). The company has a country risk score of 4.51.

Industry Risk:

The company generates 76.35% of its revenue from the diversified drug sector and the remaining from the medical devices sector. High-profit margins and lower cyclicity characterizes the diversified drug sector but weak growth projection compared to other sectors hinder the sector score, resulting in an average industry risk score of 3.50.

Operational Risk:

The company has a solid operational score of 4.08. The company holds a leading position in cancer treatments and has been at the forefront of cancer research and treatment for over 50 years, with medicines for breast, skin, lung, colon, ovarian, and numerous other cancers. It had a pipeline of 80 new molecular entities (NMEs) in its Pharmaceuticals segment, covering many diseases. The company spent nearly 20% of its revenue on R&D, and these product development efforts allow it to develop new products, which would enable it to gain a large market share. Strong financial performance increases the investors’ confidence and provides a positive outlook for the future. Over 30% profitability margins have boosted the profitability pillar.

Financial Risk:

The company has a financial risk score of 3.48, above the sector average. A low current ratio compared to its peers impacted the liquidity ratios. In FY2021, the company continued to report a deficit in its working capital, which could cause financial instability and make it difficult for the company to meet its short-term obligations.

About our Methodology

GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData’s proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company’s risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.

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