UPDATE 2-Roche takes $1.7 billion charges as it confirms outlook
* H1 sales 22.4 bln Sfr vs 22.1 bln in Reuters poll
* Restructuring costs of 1.677 bln Sfr hit net profit
* Pegasys sales up 31 pct, Actemra up 39 pct
* Focus on small to mid-sized buys after Illumina bid failed
* Progress in debt collection in southern Europe
BASEL, July 26 (Reuters) - Swiss drugmaker Roche Holding AG took $1.7 billion in restructuring charges it said should lead to big savings as it confirmed its outlook on Thursday with first-half sales beating expectations.
Roche, the world's largest maker of cancer drugs, is better positioned than most in the global drugs industry to weather patent expiries and government price cuts since its top-selling cancer medicines do not face imminent generic competition.
First-half sales rose 3 percent to 22.4 billion Swiss francs ($22.61 billion), compared with the average analyst forecast of 22.1 billion in a Reuters poll.
Sales at the dominant pharmaceuticals division beat forecasts, driven by strong growth for cancer medicines, hepatitis drug Pegasys and arthritis treatment Actemra.
Roche, which holds an investor day on Sept. 5, reiterated that it hoped sales would grow in the low-to-mid single digit range at constant exchange rates this year, while core earnings would grow in the high single-digits.
"Roche delivered strong operating results in the first half of 2012, driven by the solid performance of our existing portfolio as well as new product launches," Chief Executive Severin Schwan said in a statement.
Roche shares, which have gained 5.5 percent this year but underperformed a 9 percent firmer European health sector , traded 0.1 percent lower to 167.7 francs at 0712 GMT, amid a 0.2 percent fall in the Stoxx 600 healthcare index.
Analysts at Notenstein private bank said the results were largely positive even if the restructuring costs might disappoint as well as dashed hopes that Roche could hike its outlook for the year.
"The increase in revenue and core profit as well as the solid cash flow are gratifying and should really outweigh. In addition the long-term potential for Roche still seems to be healthy," they wrote in a note.
Roche said last month it was overhauling its research operations by closing the 80-year-old New Jersey facility where Valium was discovered, cutting 1,000 jobs and replacing its drug research chief.
It said on Thursday that those steps would result in annual savings of 370 million francs, to be largely allocated to the development of Roche's growing late-stage pipeline.
It reported one-off closure costs of 858 million francs, of which 446 million is cash relevant, plus 289 million francs for measures to overhaul its applied science and diabetes business.
It also reported further costs of 530 million as a result of other global restructuring plans, including the termination in May of clinical trials of dalcetrapib -- a drug aimed at boosting levels of "good" HDL cholesterol.
Those costs resulted in a 17 percent fall in net income to 4.4 billion francs, well below average analyst forecasts, but core earnings per share, which strip out those costs, rose 4 percent to 6.94 francs, at the top end of most forecasts.
LIFE AFTER ILLUMINA BID
Schwan told journalists Roche was sticking to a strategy of looking for small to mid-sized acquisitions after its $6.8 billion hostile takeover bid for the U.S. gene sequencing firm Illumina failed in April.
Roche is also investing in its own gene sequencing research, which is the technology Illumina has that would have helped Roche in its bid to develop targeted patient therapies.
Roche said it made good progress in collecting money owed to it by the indebted states of southern Europe, with trade receivables down to 1.5 billion francs from 2.1 billion six months ago, helped especially by a Spanish plan to settle debts.
It said it was on track to file for approval later this year in the European Union and United States for T-DM1, a drug for advanced breast cancer that is seen as a successor to Herceptin.
Sales of key cancer medicine Avastin rose 3 percent, continuing a recovery started in the first quarter after a period of decline for what used to be Roche's top-selling drug.
Avastin, hit last year when the United States revoked its conditional approval as a treatment for breast cancer, has been overtaken by Roche's other cancer drugs Rituxan and Herceptin, which saw sales growth accelerate to 9 percent and 11 percent respectively in the first half.