Who Is Roche?
I was intrigued to find that my assigned company was Roche, a multinational healthcare company based in Switzerland. I had mixed emotions at this point as I originally thought I was doing an assignment on my favourite chocolate, unsuspecting that in fact it was big pharma. Not being a peace-loving hippy protestor or political lobbyist, I knew very little about the big pharma industry or Roche. So, as step three instructed I began this journey with their website and 2018 annual finance report.
Unlike the chocolate, Ferrero Rocher, Roche is based in Switzerland and is one of the oldest, and largest pharmaceutical company in the world. Upon researching further, I found that Roche is the second biggest pharmaceutical company in the world, generating $57 Billion in revenue in the last financial year. This was almost an incomprehensible amount. The financial reports were staggering and almost overwhelming in the size and the amounts of the figures that were being discussed.
In terms of difficulties faced by Roche, I found limited. Being such a large corporation and holding more revenue than some countries, they seemed too big to fail (although this was said in regards to the banking sector prior to the 2008 Global Financial Crisis, so who knows). There was media articles relating to the increase of legislation needed throughout many countries on the pharmaceutical sector, mainly regarding the ‘price fixing’ of medicines or the hugely inflated prices of medicines that they held patents to. Another interesting aspect I discovered regarding their business policies was that Roche tends to expand through the purchasing of other companies. These deals tend to get a lot of media attention and scrutiny by the regulatory authorities as the pharmaceutical sector becomes more and more monopolistic. There is an article concerning the Federal Trade Commission in Americas investigations into the purchasing of a smaller pharma company that can be found here.
Another aspect of their financial report which can be seen as a large challenge for the Roche group was highlighted in their auditor’s report. The Roche group has a large liability in regards to commercial arrangements they have in the United States. In the governmental scheme of Medicaid, the Roche group has provided consumers of their products a right of reimbursement, that in some cases extends years. Due to this arrangement, the Roche group has a $1.4 Billion liability listed as a component of the sales that they make under these schemes in the United States. This is based on a judgement by the company of the amount that could be collected through this liability, but due to its nature, and a lack of similar schemes, is hard to define an appropriate amount for this. This was an aspect of the financial statements that I found incredibly interesting, particularly the way this was interpreted by the auditing group. It is such a staggering number and a large component of the group. I look forward to further interacting with the financial statements to see further aspects like this that provide greater insight into the “goings-on” of the firm.
A further aspect of the firm’s financial reports that was nearly incomprehensible was the amount of goodwill that the Roche group has acquired. As mentioned earlier, a key expansion policy of Roche is the purchasing of pre-existing pharmaceutical companies to gain control over them. At the 1st of January 2018, the Roche group had acquired almost $78 billion in Goodwill. This is a staggering amount, particularly when I read further that they have impaired goodwill by over $2 billion in revaluation, that year alone.
The whole exercise of reading the financial statements really opened my eyes to the complexity and vastness of ‘big pharma’ companies. It was, at times, difficult to understand how much money that they were talking about. I am really excited to continue my learning into this business and to further get an idea of really, how powerful these large corporations are.
Acct11059 Blog 