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Roche Diagnostics Keeps Eyes Firmly on China

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NEW YORK – China has been a large and ever-expanding market for Roche, driving much of the company's international growth, and this week, the firm said several initiatives and developments in that country keep it a crucial strategic market for its diagnostics business.

Despite sluggishness in the fourth quarter of 2019 in China due to Roche's inventory reduction in the country, the country remained a strong growth contributor throughout the year, and on its fourth quarter and full-year 2019 earnings call on Thursday, Roche CEO Severin Schwan said "demand in China from the end customers remains strong."

In Q4, the company decided to reduce inventories in China due to the two-invoice policy governing drug distribution. Under the policy, a drug manufacturer can only issue one invoice to its distributor, and the distributor can only issue one invoice to the end customer, usually a hospital.

As a result, Roche decided to reduce inventories rather than negotiate with its multiple distributors. Roche Diagnostics CEO Thomas Schinecker called the decision the "best thing in the future" for the company, although the immunodiagnostics business was most impacted by the inventory reduction, leading to lower growth rates in that sector.

Regardless, in the diagnostics division, Roche is expanding its offerings in the country with multiple assays, including the Elecsys HIV Duo, which tests for the HIV-1 p24 antigen and antibodies to HIV-1 and HIV-2 in one test, reducing the complexity of testing compared to most other fourth-generation HIV screening tests, the company said. It can also discriminate acute infection from chronic infection and runs on the Cobas e 801 module.

Schinecker emphasized on the conference call that the test, which was launched last year, can close the window significantly from the time someone is infected to the time the disease can be detected in blood. He also noted that a similar test isn't available from other large local players in China.

Roche also said that it has partnered with Tib-Molbiol to launch a combination of assays to help screen for the 2019-nCoV coronavirus and identify infected patients quickly. On Thursday the World Health Organization declared the coronavirus outbreak a global public health emergency. Approximately 170 people have died from the virus and more than 7,800 have been infected to date. In response multiple diagnostics companies are trying to develop tests and testing protocols for the virus, including Perkin-Elmer, Danaher's Cepheid, and Illumina.

Roche's products for 2019-nCoV is the Tib Molbiol LightMix Modular assays for screening and confirmation, which includes a Wuhan E-gene assay used to detect severe acute respiratory syndrome (SARS) and the 2019-nCoV virus; a Wuhan RDRP assay specific for the detection of 2019-nCoV; and a Wuhan N-gene assay that detects the presence of coronavirus as well as other SARS-related viruses.

The assays are for use on the LightCycler 480 high-throughput real-time PCR instrument, and are for research-use only, Roche noted in a presentation accompanying its earnings call.

As the coronavirus outbreak continues to spread, Schinecker said the company is working closely with people on the ground in China to "make sure that everyone gets the support that's needed."

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