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Decline in Roche COVID-19 Product Demand Offset by Growth of Base Business

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NEW YORK – Roche Diagnostics is continuing to focus on its base business in light of further decline in COVID-19-related sales, the firm said as it reported its third quarter financial results on Tuesday.

In the first nine months of 2022, diagnostics division revenues grew 4 percent to CHF 13.85 billion ($13.91 billion) compared to CHF 13.31 billion last year, or 6 percent at constant exchange rates (CER). Roche's total nine-month revenues grew 1 percent to CHF 47.04 billion ($47.22 billion) from CHF 46.68 billion during the same period in 2021. At CER, total revenues for the period rose 2 percent. Its pharmaceuticals division revenues declined 1 percent to CHF 33.19 billion from CHF 33.38 billion for the first nine months of 2022.

For the third quarter of 2022, Roche Diagnostics reported that its revenues fell 4 percent year over year at CER to CHF 3.90 billion from CHF 4.26 billion. The firm said in a statement that Q3 2022 was "particularly challenging due to base effects" from the same period in 2021. Excluding COVID-19 sales, the base business grew by 7 percent.

Within the diagnostics division, for the first nine months of the year Roche's core lab business revenues rose 3 percent on a reported basis to CHF 5.83 billion from CHF 5.68 billion a year ago. Its molecular diagnostics business revenues were down 10 percent to CHF 2.73 billion from CHF 3.03 billion, while its pathology lab revenues were up 10 percent to CHF 975 million from CHF 889 million a year ago.

The base business saw sales growth across all regions, with the largest contributions from Asia-Pacific and Europe, the Middle East, and Africa (EMEA). Immunodiagnostic products were the main growth drivers, Roche said. Third-quarter COVID-19 test sales declined to CHF 600 million from CHF 1.0 billion in 2021.

Roche CEO Severin Schwan noted on a conference call to discuss the firm's financial results that the company expects COVID-19 demand to remain low for the rest of the year and into 2023. While Roche will "still have some sales" related to COVID-19 in both the diagnostics and pharmaceutical businesses next year, those sales will be at a "much lower level." The planning assumption for next year is a "sharp decline" on COVID-19-related sales, he said.

Roche Diagnostics CEO Thomas Schinecker added that so far in the fourth quarter, the company has seen a continued decline in SARS-CoV-2 demand but noted that it is still early. The market for COVID-19 testing next year could be "low- to mid-single digit billions" and Roche expects to have around 20 percent of that market share, Schinecker said.

The firm had more PCR sales than antigen sales for its SARS-CoV-2 tests in Q3 with a 60/40 split, Schinecker said. Antigen tests were primarily ordered by one large customer, but on the PCR side Roche has "thousands of customers" with a "more stable base." More than 90 percent of Roche's SARS-CoV-2 antigen test orders have come from governments, and as hospitalizations remain low in many countries government focus has shifted away from COVID-19, he said. But a new variant that increases the number of severe infections could lead to more orders. "We'll see how the virus continues to evolve and will be prepared for all eventualities."

Schinecker said that the company has submitted a 510(k) application to the US Food and Drug Administration for its molecular SARS-CoV-2 test on its Cobas 6800/8800 instrument and is expecting approval.

Beyond COVID-19, Schinecker highlighted multiple recent launches within the diagnostics business, including the Digital LightCycler, Roche's new PCR instrument. The platform could be particularly useful for cancer treatment monitoring, transplant rejection monitoring, and tracking the spread of infectious diseases, such as through wastewater, he said.

He also noted the launch of the firm's PRAME immunohistochemistry assay to differentiate between benign and malignant melanoma, which further extends Roche's dermatology portfolio.

Alzheimer's disease is also a significant area of interest for the company in both the pharmaceutical and diagnostics divisions. In diagnostics, the firm's blood-based Elecsys Amyloid Plasma Panel recently received breakthrough device designation from the FDA. It is intended to triage patients who have symptoms of Alzheimer's, weeding out those who don't have the disease and sending others for confirmatory screening and eventual treatment, Schinecker said.

Roche is on track to launch more products in Q4 2022, including the low-volume Cobas 5800 PCR instrument and the Elecsys pTau/AB42 ratio Gen2 cerebrospinal fluid test for amyloid disease in the US, as well as digital solutions for chronic kidney disease patient management and cervical cancer screening program management in countries accepting the CE mark. The firm is also working to expand the Cobas 5800 menu in both the US and CE-mark countries, with plans to launch assays for SARS-CoV-2, chlamydia and gonorrhea, and cytomegalovirus, according to a chart in the company's financial results presentation.

Schinecker also hinted at further plans down the road, including a foray into mass spectrometry in the next couple of years. The firm is "very excited" about the potential of the mass spectrometry instrument it's developing and the opportunity to combine mass spectrometry with its clinical chemistry and immunology offerings, he said.

The firm is also looking to move further into the next-generation sequencing space, although Schinecker declined to give many details, saying only that an NGS product won't launch next year but that the firm is "progressing as planned in that area as well."

Regional sales in diagnostics in the first nine months grew 20 percent in North America and 28 percent in Asia-Pacific at constant exchange rates. EMEA sales fell 13 percent, largely due to the lower demand for COVID-19 tests, and Latin America sales fell 3 percent.

Core lab growth was driven by immunodiagnostics and clinical chemistry products, including cardiac and oncology tests.

The decline in the company's molecular diagnostics business was driven by lower COVID-19-related sales in North America and EMEA but was partially offset by growth in the base business and by the GenMark and TIB Molbiol businesses.

Meanwhile, pathology lab sales were driven by growth in the advanced staining and companion diagnostics businesses. 

The firm's diabetes care business revenues fell 6 percent to CHF 1.22 billion from CHF 1.29 billion, while point-of-care business revenues was up 28 percent to CHF 3.09 billion from CHF 2.42 billion year over year. The main growth driver in the point-of-care business was Roche's SARS-CoV-2 Rapid Antigen test, particularly in Asia-Pacific and North America, the company said.

Roche confirmed its full-year 2022 guidance, expecting stable sales or growth in the low-single digit range at constant exchange rates. Core earnings per share are targeted to grow in the low- to mid-single digit range at constant exchange rates. Roche also said it expects to increase its dividend in Swiss francs further.