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As COVID Testing Demand Wanes, Roche Diagnostics Base Business Grows in First Half of 2023

Note: This story has been updated with comments from the company's conference call to discuss its financial results.

NEW YORK – Roche on Thursday reported its Diagnostics division revenues fell 29 percent year over year in the first half of 2023 as a result of expected lower demand for COVID-19 tests. However, excluding those products, its base Dx business saw 6 percent growth at constant exchange rates, driven by growth in immunodiagnostics and clinical chemistry.

The company also emphasized the importance of recent and upcoming diagnostics product launches that will broaden its portfolio and continue to boost its base business.

For the first half of 2023, the Roche Group reported CHF 29.78 billion ($34.75 billion) in total sales, down 8 percent from CHF 32.30 billion during the first half of 2022. At constant exchange rates the decline was 2 percent. The firm's base business excluding COVID-19 product sales grew 8 percent at constant exchange rates.

Revenues for the Diagnostics division came in at CHF 7.10 billion, down 29 percent (and 23 percent at constant exchange rates) compared to CHF 9.95 billion in revenues during the same period last year. The diagnostics base business saw growth of CHF 421 million, Roche CEO Thomas Schinecker said on a conference call to discuss the firms results.

Schinecker said in a statement that "sales in the base business of both our divisions grew strongly, largely offsetting the impact of declining demand for COVID-19 products."

COVID-19 test sales in the period were CHF 400 million, down from CHF 3.1 billion in the first half of 2022. Schinecker noted on the call that the COVID-19 sales decline was in line with the guidance Roche provided at the beginning of 2023. The "entire impact" of the COVID-19 decline was within the diagnostics business, and the company expects the COVID-19 impact to get smaller over the course of 2023 and the overall impact to disappear completely by the end of Q1 2024, he added. Between 80 percent and 90 percent of the COVID-19-related sales will be "washed out" by Q4 2023, he said.

Roche Diagnostics CEO Matt Sause echoed Schinecker's comments, noting that the decline in the diagnostics business was entirely driven by the decrease in COVID-19 testing sales. The firm expects mid- to high-single-digit growth in the base business for the rest of the year as COVID-19 testing sales continue to decline, he said.

Core lab revenues were up 2 percent (and 10 percent at constant exchange rates) to CHF 3.94 billion from CHF 3.88 billion in the first half of 2022 and contributed 55 percent to diagnostics sales. Excluding the impact of COVID-19, the core lab business was up 12 percent at constant exchange rates, Sause said. The immunodiagnostics business grew 11 percent while the clinical chemistry business was up 10 percent.

Molecular lab diagnostics revenues fell 44 percent (40 percent at constant exchange rates) to CHF 1.12 billion from CHF 1.98 billion in H1 of 2022 and contributed 16 percent to half-year diagnostics sales. The firm's virology base business increased 5 percent during the first half of the year. Sause noted that lower COVID-19 PCR-based laboratory testing sales had an impact, but excluding COVID-19 the molecular base business growth was 6 percent at constant exchange rates due to strong sales in cervical cancer testing and blood screening.

Point of Care revenues fell 76 percent (74 percent at constant exchange rates) to CHF 635 million in the first half of the year, contributing 9 percent to overall diagnostics sales. The POC molecular business declined 40 percent, while the POC immunodiagnostics business dropped 89 percent.

The decline was driven entirely by lower COVID-19 rapid antigen and molecular point-of-care testing sales, but the base business excluding COVID-19 grew 4 percent at constant exchange rates, Sause said. The base business growth was driven by the Q1 sales of the company's molecular point-of-care Liat instrument as a result of the strong respiratory season in the Northern hemisphere, he added.

Diabetes Care sales were down 13 percent (5 percent at constant exchange rates) to CHF 723 million from CHF 832 million in H1 2022 and contributed 10 percent to overall diagnostic sales. The decline was driven by the market's shift to continuous glucose monitoring and is expected to continue, Sause said. Roche is continuing to look into continuous glucose monitoring, as diabetes represents an attractive market, he added.

Pathology Lab revenues rose 5 percent (12 percent at constant exchange rates) to CHF 687 million from CHF 652 million in H1 of 2022 and contributed 10 percent to overall diagnostic sales. The increase was driven by a 10 percent uptick in the advanced staining business and a 20 percent improvement in the companion diagnostics business.

By geography, diagnostics sales at constant exchange rates for H1 dropped 23 percent in Asia Pacific, declined 30 percent in North America, and were down 22 percent in Europe, the Middle East, and Africa. Sales were flat in Latin America.

Sause emphasized key product launches coming down the pike for the business, including the upcoming launch of the Cobas i601 fully automated mass spectrometry instrument that is expected to launch at the end of 2024 in countries accepting CE marking and in 2025 in the US. The instrument will be able to process up to 100 samples per hour and can be combined with Roche's other Cobas clinical chemistry and immunoassay platforms, he said. The launch menu will include more than 40 in vitro diagnostic assays including those for therapeutic drug monitoring and vitamin D, he noted. More than 20 assays will be added to the menu in a second wave including those for drugs of abuse.

Sause also noted the launch of Roche's IDH1 R132H and ATRX immunohistochemistry screening assays, which are currently available in the US on the firm's BenchMark instruments and are intended to identify mutations in patients with gliomas and help clinicians select targeted therapies. The addition of the two tests expands Roche's neuropathology portfolio to 29 biomarkers, he added, and the assays are expected to be available worldwide at the beginning of 2024.

Net income for the Roche Group declined to CHF 7.56 billion, or CHF 10.10 per share, in H1 from CHF 9.16 billion, or CHF 11.76 per share, in the first half of 2022.

CFO Alan Hippe noted on the conference call that although revenue for the diagnostics business declined 23 percent at constant exchange rates, it was offset by a 26 percent decline in costs. 

Roche confirmed its previous guidance for low-single-digit percent sales decline at constant exchange rates for full-year 2023. Excluding COVID-19 sales, the firm said it anticipates solid sales growth in both divisions' base business. Core earnings per share are expected to develop in line with the sales decline at constant exchange rates.