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Roche Diagnostics Reports 8 Percent Increase in Revenues for H1

This article has been updated with additional information from Roche's earnings call.

NEW YORK (GenomeWeb) – Roche today reported an 8 percent year-over-year increase in revenues for its Diagnostics division for the first half of 2018, driven primarily by demand for immunodiagnostic solutions, which are part of the Centralized and Point of Care Solutions business segment.

For the first half of the year, the Roche Group reported CHF 28.11 billion ($28.34 billion) in total sales, up 7 percent from CHF 26.34 billion during the first half of 2017.

H1 revenues for Roche Diagnostics came in at CHF 6.26 billion, up 8 percent (6 percent at constant exchange rates) from CHF 5.82 billion during the same period last year. For the second quarter, diagnostics sales totaled CHF 3.35 billion, up 9 percent from CHF 3.06 billion in Q2 of 2017.

"It's been a good first half year for the diagnostics division," said Roland Diggelmann, CEO of Roche Diagnostics, in a conference call to discuss the firm's half-year earnings.

Molecular diagnostics revenues grew 6 percent (5 percent at constant exchange rates) to CHF 979 million from CHF 920 million in H1 and contributed 15.6 percent to half-year diagnostics sales.

Within that segment, virology sales were up 4 percent year over year at constant exchange rates, with strong growth of 7 percent in HIV monitoring.

In addition, the firm saw continued strong demand for tests for the Cobas Liat, the firm's new system for molecular point-of-care testing, which saw 229 percent revenue growth. "We were able to benefit from the very strong flu season in the United States and across the Northern Hemisphere," Diggelmann said.

He also noted a steep increase in human papillomavirus (HPV) revenues, which grew 30 percent year over year. The "outstanding" growth, Diggelmann said, "has a lot to do with us winning the majority of the primary screening for HPV in Australia."

Meanwhile, blood screening revenues grew 1 percent compared to a year ago.

The firm said it recently launched the Cobas CT/NG test for sexually transmitted infections for the Cobas 6800/8800 system in the US. It has an installed base of about 500 instruments so far and plans to launch two additional infectious disease tests (Mycobacterium tuberculosis and Mycobacterium avium) this year and three more (rifampicin/isoniazid resistance in MTB-positive samples, Epstein-Barr virus, and BKV) next year. In addition, it plans to launch the Babesia blood screening test as an IVD in the US next year.

Centralized and Point of Care Solutions revenues increased 9 percent (6 percent at constant exchange rates) to CHF 3.76 billion in the first half of the year from CHF 3.46 billion in H1 2017, contributing 60 percent to diagnostics sales.

Within that segment, Integrated Serum Work Area solutions grew the most. It comprises immunodiagnostics, which grew 9 percent, and clinical chemistry, which grew 5 percent, both at constant exchange rates.

Roche is preparing to launch the Cobas Pro Integrated Solutions system, a Serum Work Area solution that targets medium- to high-throughput laboratories, in the third quarter in countries that recognize the CE mark. Diggelmann called this "a very important part of our portfolio," noting that the company will continue "to build this portfolio in a very modular fashion, seamlessly integrating it into the integrated core lab, and really focusing on everything that has to do with the simplification of laboratory work. Many features, such as improved maintenance, on-board stability of reagents, and others will be found in this system, and we are very confident that we will continue to capture share also in the medium-throughput segment."

In addition, the US Food and Drug Administration recently granted breakthrough device designation to Roche's Elecsys beta-amyloid (1-42) CSF and Elecsys Phospho-Tau (181P) CSF assays, both in vitro diagnostic immunoassays in cerebral spinal fluid to evaluate patients for Alzheimer's disease and other causes of dementia. Diggelmann said the firm has a concordance claim for the tests as a reliable alternative to amyloid PET scans and is working on a progression claim to identify patients who are at high risk of disease progression.

Diabetes Care sales rose 3 percent (1 percent at constant exchange rates) in H1 to CHF 991 million from CHF 962 million in H1 2017 and contributed 15.8 percent to diagnostic sales. Growth was mainly driven by the new Accu-Chek Guide and Accu-Chek Instant systems, though the company said there were "continued pricing and reimbursement pressures."

Roche's small tube-free Accu-Chek Solo micropump for diabetes patients recently obtained the CE mark, and Diggelmann said the company is now introducing it in countries that accept the CE mark, starting with a controlled launch in Europe this year. In addition, it plans to file for FDA approval of the system in the future.

Tissue Diagnostics grew 11 percent (also 11 percent at constant exchange rates) to CHF 539 million from CHF 485 million and contributed 8.6 percent to diagnostic sales.

Specifically, the advanced staining business grew 12 percent and the primary staining business grew 16 percent.

Diggelmann said that the lab diagnostics business, which includes centralized, molecular, and tissues diagnostics, grew very well, at 7 percent. "Generally and overall, we see good continued momentum in the lab business, and we expect to carry that forward in the second half," he said.

Besides new instruments and assays, the Diagnostics division recently released a decision support software, called Navify Tumor Board, which Diggelmann said can integrate EMR data and which will further evolve to be able to integrate imaging information.

Roche recently signed a definitive merger agreement with Foundation Medicine and launched a tender offer earlier this month. The acquisition is expected to close in the second half of 2018 and "broadens Roche's personalized healthcare strategy and aims to further advance molecular insights and the broad availability of high-quality comprehensive genomic profiling, both key enablers for the development of new cancer treatments and optimal patient care," according to the firm.

Further, Roche signed a collaboration agreement and made an investment in Care Innovations and will offer mySugr, its digital diabetes management solution, to Care Innovations' customers in the US and Canada.

Diagnostics sales grew 14 percent year over year in Asia Pacific in the first half of the year, 7 percent in North America, and 6 percent in Latin America, while growth was slower in Europe, the Middle East, and Africa, at 1 percent, and decreased in Japan by 2 percent. Diggelmann pointed out Mexico, Turkey, and Russia as examples of emerging markets with particularly strong growth, at above 20 percent.

R&D spending by the Diagnostics division increased 10 percent to CHF 715 million during H1, compared to the first half of 2017, when R&D costs only increased moderately, according to Diggelmann. R&D spending focused on larger systems, such as the upcoming Cobas Pro, as well as on digital platforms and sequencing, he said.

Roche's net income increased to CHF 7.52 billion, or CHF 9.84 per share, in H1 2018, from CHF 5.58 billion or CHF 8.23 per share in the first half of 2017. Part of the increase is due to lower intangible asset impairment charges of CHF 0.3 billion, compared to CHF 1.5 billion in the first half of 2017.

In response to the half-year results, Roche increased its guidance for full-year 2018. The company now expects mid-single digit sales growth and mid-teen digit core earnings per share growth, both at constant exchange rates.