ROCHE Holding cut a fifth of its pipeline of experimental drugs in recent quarters as its new chief executive tries to revive growth after a series of research setbacks.

Trimmed so far this year were a trio of cancer projects and an experimental psychiatric compound, Roche said on Wednesday (Apr 24) as it reported falling sales for the first quarter. The stock dropped in early trading.

The Swiss drugmaker is halting projects that are not innovative enough and plans to fill the gaps with acquisitions, chief executive officer Thomas Schinecker said.

“We are open for M&A,” Schinecker said on a conference call. Roche will focus on areas including cardiovascular and metabolism disorders, neuroscience and oncology, he said.

“Based on whether or not the deal makes sense, then we are also open to doing larger acquisitions.”

Research setbacks have left Roche – traditionally an innovation juggernaut – needing to convince investors that it has the experimental drugs it needs to fuel growth.

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“Doubts around R&D productivity will take time to lift,” Peter Welford and Lucy Codrington, analysts at Jefferies, wrote in a note.

The stock fell as much as 2.6 per cent in Zurich, bringing its decline for the year to about 8 per cent. That compares to a 5.4 per cent increase for crosstown rival Novartis.

Pandemic impact

Roche’s sales dropped 6 per cent last quarter to 14.4 billion Swiss francs (S$21.4 billion), held down by a strong franc and a lack of revenue from Covid-19 tests and treatments. Analysts surveyed by Bloomberg expected 14.6 billion francs.

The first quarter marks the last time Roche faced an impact from plunging demand for Covid-related products. The company, which makes diagnostics as well as drugs, sold billions of US dollars worth of tests in the course of the pandemic.

Roche’s blockbuster eye treatment Vabysmo beat analysts’ expectations in the quarter with 847 million francs in sales, while cancer drug Tecentriq fell short of estimates with 865 million francs.

Roche reiterated its forecast for sales and earnings per share excluding some items to grow in the mid-single-digit range at constant currencies this year. The pipeline trim affected 20 per cent of new experimental medicines in the past three quarters.

Novartis on Tuesday raised its estimates, helped by blockbuster medicines for heart disease and psoriasis. BLOOMBERG