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Roche Diagnostic Revenues Grow 2 Percent in First Nine Months of 2020

NEW YORK – Roche said Thursday that its diagnostics division revenues grew 2 percent  percent year over year, or 9 percent on a constant exchange rate, in the first nine months of 2020, driven mainly by COVID-19 testing.

For the nine months of 2020, the Basel, Switzerland-based company's total revenues declined 5 percent to CHF 43.98 billion ($48.12 billion) from CHF 46.07 billion during the same period in 2019. At CER, total revenues for the period rose 1 percent.

For the third quarter of 2020, Roche Diagnostics reported that its revenues rose 18 percent year over year at CER to CHF 3.81 billion from CHF 3.23 billion. 

For the first three quarters of 2020, diagnostics revenues grew to CHF 9.66 billion compared to CHF 9.51 billion last year, while the pharmaceuticals division revenues decreased 1 percent to CHF 34.32 billion from 36.56 billion in 2019. 

Within the diagnostics division, Roche's centralized and point-of-care solutions business revenues declined 13 percent on a reported basis to CHF 5.03 billion from CHF 5.77 billion a year ago. Its molecular diagnostics business revenues were up 67 percent to CHF 2.58 billion from CHF 1.55 billion, while its tissue diagnostics business revenues were down 1 percent to CHF 795 million compared to CHF 799 million a year ago. The firm's diabetes care business revenues were down 10 percent to CHF 1.26 billion from CHF 1.40 billion. 

Sales for Roche's centralized and point-of-care solutions business made up 52 percent of Roche's diagnostic sales. Within that segment, immunodiagnostics declined 8 percent at CER, impacted significantly by COVID-19's effect on routine testing across the globe, the company said. However, some COVID-19 products, including the Elecsys Anti-SARS-CoV-2 test, the Elecsys IL-6 test, and the SARS-CoV-2 rapid antigen point-of-care test partly offset the impact, Roche added. The antigen test was launched at the end of the third quarter so it didn't significantly impact the financial results, although the company is expecting acceleration in the fourth quarter, Roche Diagnostics CEO Thomas Schinecker said on a conference call to discuss the earnings results.

CEO Severin Schwan added that demand for the antigen test is higher than the supply. "It's only a matter of how much we can produce, and of course we have a good line of sight of what we can produce in the fourth quarter," he said.

Earlier this week, the firm announced a rapid antigen test for the clinical lab would launch by the end of 2020. Schwan said that bringing an antigen test to high-throughput systems in the central lab would be "a big relief for the overall healthcare system," and noted that antigen testing could be scaled up more effectively than PCR testing.

Schinecker also said the company is working to develop a combined SARS-CoV-2 and influenza rapid antigen test to launch in the fourth quarter.

Growth in the company's molecular diagnostics business was driven by an 88 percent increase at CER in the underlying molecular business, including growth in virology, quantitative PCR and nucleic acid purification, molecular diagnostics systems, and molecular point-of-care.

Tissue diagnostics sales were driven by advanced staining, instrument sales, and companion diagnostics, although Roche noted the overall sales in this division were also impacted by the pandemic.

The decline in the diabetes care business sales was partially due to a contraction in the blood glucose monitoring market as a result of patients switching to continuous glucose monitoring, Roche said. The COVID-19 pandemic also had an effect.

Schinecker noted on the call that although the company's core business was not 100 percent back to pre-pandemic levels, it had started to come back significantly. He also said the company was able to combat the decline in routine testing from patients not visiting hospitals with high uptake of COVID-19 testing.

Regional sales in diagnostics were driven by growth in North America, which was up 22 percent at CER year over year. Asia-Pacific excluding Japan was down 4 percent, with Japan ticking up 5 percent. Asia's sales were impacted significantly by the pandemic, especially in China, Roche said. Schwan said on the call that business in China was actually growing quarter over quarter in 2020, but declining compared to last year's results. The decline in China was impacted by capacity constraints in Chinese hospitals leading to fewer patients being seen and fewer tests being performed, and he added that the company expected to see "good development" in the country in the fourth quarter, especially compared to 2019.

Latin America was up 12 percent.

The majority of sales in diagnostics are concentrated in Europe, Middle East, and Africa, with 38.4 percent of sales. EMEA growth increased 9 percent compared to 2019.

Roche confirmed its full-year 2020 guidance, expecting low- to mid-single digit percent sales growth at constant exchange rates. Core earnings per share are expected to grow broadly in line with sales.