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Roche Touts New, Upcoming Launches as Dx Revenues Drop 31 Percent

The story has been updated to include additional comments from Roche's conference call.

NEW YORK – Although the declining demand for COVID-19 tests has had a significant impact on Roche, the firm is continuing to focus on recent and upcoming non-COVID-19 product launches in its diagnostics division.

On Wednesday, Roche reported its diagnostics sales in the first quarter fell 31 percent year over year due to lower demand for COVID-19 tests. Total diagnostics sales dipped to of CHF 3.62 billion ($4.06 billion) for Q1, down from CHF 5.29 billion in the year-ago quarter. The firm saw sales of COVID-19 tests decrease 85 percent to CHF 300 million from CHF 1.9 billion in Q1 2022. At constant exchange rates, diagnostics sales fell 28 percent year over year, the Basel, Switzerland-based firm said. The base business, meantime, grew 4 percent. Roche Diagnostics CEO Matt Sause said on a conference call to discuss the financial results that the decline in diagnostics sales was "entirely driven by the expected decrease of COVID-19 testing sales."

On the call Roche CEO Thomas Schinecker noted that the decline in COVID-19-related sales was in line with the company’s expectations. Despite the COVID-19 testing decline, he noted that the division has a "strong pipeline of upcoming launches" and has launched multiple new products recently. The firm has rolled out several new oncology tests, such as the Ventana FOLR1 RxDx companion diagnostic test for ovarian cancer, as well as additional products within its Navify digital solution.

In the presentation materials that accompanied the firm's conference call, Roche listed five launches for 2023: the CCM vertical, a modular transportation system that can be integrated into existing Cobas connection modules; the LightCycler Pro, a real-time PCR instrument with dual in vitro diagnostic and research modes; the Anti-HEV IgM and Anti-HEV IgG immunoassays to diagnose acute hepatitis E infection and recent or past hepatitis E infection, respectively; and the HBeAg Quant immunoassay to help with diagnosing, monitoring, and predicting treatment response for patients with hepatitis B. The firm is also adding a claim extension to its Elecsys IL-6 assay for diagnosing neonates with sepsis.

Sause also mentioned the buildout of Roche's digital solutions under its Navify brand, noting that all of the company's laboratory customers are potential customers for its digital solutions. The addition of those products can improve customer retention in labs and hospitals that adopt digital solutions, along with adding revenue, he noted. The portfolio includes the Navify Portal, which allows existing customers to access digital applications, the new Navify Marketplace, which provides those digital applications to non-customers, and the new Navify Algorithm Suite, which includes algorithms for clinical decision support and which the company will update with additional clinically validated algorithms, Sause said.

Within  diagnostics, core lab revenues, which comprised 53 percent of total diagnostics sales, increased 2 percent to CHF 1.93 billion from CHF 1.90 billion, driven by immunodiagnostics products, which grew by 9 percent largely thanks to demand for cardiac tests. The clinical chemistry business was also up 9 percent, and the base business grew 10 percent, Sause said.

Molecular lab sales fell 50 percent to CHF 593 million from CHF 1.19 billion in 2022 due to lower COVID-19 PCR testing sales and contributed 16 percent of total diagnostics sales. The virology base business was up 12 percent, the blood screening business rose 15 percent, and the cervical cancer detection and monitoring solutions business was up 22 percent, the firm noted. The COVID-19 business was down 87 percent. Excluding COVID-19-related sales, Sause said the molecular lab segment grew 7 percent.

Roche's diabetes care business dropped 10 percent to CHF 376 million from CHF 417 million in the year-ago quarter, as the market shifts from traditional blood glucose monitoring to continuous blood glucose monitoring, Sause said.

Sales in the pathology lab segment grew 3 percent to CHF 329 million from CHF 318 million in 2022 resulting from 11 percent growth in the companion diagnostics and 6 percent growth in the advanced staining businesses.

Point-of-care testing sales, which contributed 11 percent to diagnostics sales, fell 73 percent to CHF 397 million from CHF 1.47 billion last year. POC rapid antigen test sales dropped 87 percent year over year, while POC molecular sales were down 27 percent. The base business grew 13 percent due to a "high incidence of seasonal respiratory virus testing," particularly in the US, Sause said.

Sause touted the expansion of the firm's instrument installed base over the past three years as a result of the COVID-19 pandemic has driven the diagnostics base business growth, noting that its Cobas Pro and Pure core laboratory instruments grew 122 percent in 2022. Meantime, the molecular Cobas 5800, 6800, and 8800 instruments grew by 30 percent and will serve as an "engine for future growth and menu expansion," while the point-of-care molecular Cobas Liat platform grew 24 percent in 2022.

The firm's digital pathology scanners, DP 200 and 600, increased 29 percent, its HE600 staining instrument grew 12 percent, and its Benchmark Ultra and Ultra Plus immunohistochemistry platforms grew 10 percent, he added.

Sause also noted that the company will continue to grow its neuroscience testing portfolio after two cerebrospinal fluid-based Alzheimer's tests received 510(k) clearance from the US Food and Drug Administration in December. As the adoption of disease modifying therapies and reimbursement for those therapies continues to increase, that will lead to an increased need for diagnostic modalities, he said, and Roche is optimistic about the potential of that market. Beyond cerebrospinal fluid, the firm is also developing blood-based tests for Alzheimer's.

He added that Roche expects diagnostics base business growth in the mid- to high-single digit percent range for upcoming quarters.

Overall, Roche posted CHF 15.32 billion in sales in the quarter, down 7 percent from CHF 16.45 billion in Q1 of 2022. At constant exchange rates, sales dropped 3 percent year over year. Excluding the effect of lower demand for COVID-19 tests, sales grew 8 percent, the company said in a statement.

The pharmaceutical division had CHF 11.70 billion in Q1 sales, up 5 percent from CHF 11.16 billion in Q1 of 2022.

Roche confirmed its full-year outlook with sales expected to decrease in the low-single digit percent range at constant exchange rates. The firm added that EPS for full-year 2023 is expected to be in line with the sales decline.