By Sam Cage

sees growth slowing this year after its 2008 profit fell 5 percent and missed expectations, hurt by a loss of pandemic Tamiflu sales and the strong Swiss franc.

Roche, which has made a $42 billion hostile bid for U.S. biotech group Genentech Inc, said on Wednesday it expected mid-single-digit sales growth for both divisions and the group, a cut from its 2008 forecast of high-single-digit growth.

Roche shares were down 7.9 percent at 149.70 Swiss francs at 0911 GMT, compared to a 1.9 percent weaker DJ Stoxx European healthcare index. Shares in rival Swiss drug company Novartis were up 0.8 percent at 48.84 francs.

"The result is clearly under expectations ... above all because of the dollar and Tamiflu," a trader said. "We will probably see further switching out of the stock and into Novartis as we already saw yesterday."

Pharmaceutical companies like Roche have proven relatively resilient during the economic downturn as healthcare is usually one of the last areas where customers cut back spending.

DZ Bank analyst Thomas Maul said Roche was still a good bet: "For long-term investors we see Roche as a basic investment in pharmaceuticals due to its outstanding pipeline and strong position in the cancer market."

Full-year net profit fell to 10.8 billion Swiss francs ($9.30 billion), the company said.

It saw core earnings per share (EPS) remaining at its 2008 level this year, despite expecting a lower net financial result as it ramps up research and development spending, and proposed a higher-than-expected dividend of 5 francs a share.

GENENTECH BID

The Swiss company last week launched a surprise hostile offer for Genentech, at a price below its original rejected bid, reflecting tougher financing conditions and a drop in the U.S. group's shares.

Roche said it expects the acquisition of Genentech to have a positive impact on core EPS within the first year of closing and it will update targets after the deal has been closed.

Chief Executive Severin Schwan told journalists Roche was not buying Genentech shares on the open market and said the company only expected to meet shareholders after the it files the tender offer.

He said Roche had not yet finalized agreements with banks on financing the Genentech deal, but hoped to have enough capital for small and medium-sized buys even after the Genentech deal.

The Swiss group expects to finance the deal through its own funds, bonds, commercial paper and bank loans. Its operating free cash flow rose 16 percent to 12.4 billion francs.

Roche trades at about 13 times forecast 2009 earnings, a premium over its local Swiss rival Novartis AG and other big European drugmakers like GlaxoSmithKline Plc and Sanofi-Aventis SA due to its promising portfolio of cancer drugs and growth prospects.

Roche is also a step ahead of many competitors because it has limited exposure to generic or copycat versions of its drugs and is trying to reinforce that position with its attempt to buy the 44 percent of Genentech it does not already own.

Its cancer drugs posted a solid performance, underpinned by blockbusters MabThera, Avastin and Herceptin, all of which sold more than 5 billion francs.

Roche had been expected to post net profit of 11.4 billion francs and sales of 45.6 billion, according to a Reuters poll. Analysts had seen its dividend at 4.94 francs.

($1=1.161 Swiss Franc)

(Additional reporting by Katie Reid and Rupert Pretterklieber in Zurich; Editing by Hans Peters and David Cowell)