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Roche Reports Diagnostics Revenue Up 51 Percent in H1

NEW YORK – Roche on Thursday reported a 51 percent increase in half-year revenues for its Diagnostics division, largely thanks to demand for its COVID-19 products.

For the first half of 2021, the Roche Group reported CHF 30.71 billion ($33.42 billion) in total sales, up 5 percent (and 8 percent at constant exchange rates) from CHF 29.28 billion during the first half of 2020.

Revenues for the Diagnostics division came in at CHF 9.04 billion, up 49 percent (and 51 percent at constant exchange rates) compared to the CHF 6.08 billion in revenues during the same period last year. In a conference call to discuss the financial results, Roche Diagnostics CEO Thomas Schinecker said the company saw very strong growth in its base business and routine testing.

Core lab revenues were up 32 percent (and 34 percent at constant exchange rates) to CHF 3.73 billion from CHF 2.82 billion in the first half of 2020 and contributed 41 percent to diagnostics sales. The increase was due to ongoing recovery of routine testing across the globe and COVID-19 testing. The immunodiagnostics business grew 40 percent while the clinical chemistry business was up 25 percent.

Molecular diagnostics revenues increased 42 percent (and up 45 percent at constant exchange rates) to CHF 2.22 billion from CHF 1.56 billion in H1 of 2020 and contributed nearly 25 percent to half-year diagnostics sales. The increase was driven by COVID-19 testing. The firm's virology business increased 60 percent during the first half of the year and lower-throughput LightMix systems for pathogen detection grew 44 percent.

COVID-19 tests contributed CHF 2.5 billion to total sales. The company said in a statement that the demand for COVID-19 tests will likely decrease in the second half of the year.

CEO Severin Schwan said on the conference call that there would be a base effect in H2 due to significant COVID-19 testing demand in 2020. He noted that in the first half of 2020, COVID-19 sales weren't as strong because the company was ramping up its manufacturing capacities, but it was able to provide much more testing later in the year. "As a consequence, what you will see year-on-year, you will see a decline of growth versus the previous year," Schwan said.

Absolute growth will depend on how the pandemic evolves, he said. He noted that there is "significant uncertainty" and that no one knows how the pandemic will play out. However, the firm is not assuming there will be another severe wave of COVID-19, he said.

Schinecker added that the demand for testing will depend on the progress of vaccinations and the effectiveness of vaccines against new variants of SARS-CoV-2. He said the firm saw a decline in demand for its more manual instruments and a move towards the firm's automated instruments, such as its Cobas 6800/8800 system. Schinecker said he expects countries that placed Roche instruments to test for COVID-19 will continue using them for other tests, including for infectious diseases and cancer screenings.

He also said he believes PCR testing demand will hold up, particularly for automated instruments, due to its accuracy, but that rapid antigen test demand will continue to decline. He added that the firm saw "much more of a decline" toward the end of the second quarter of 2021 and expects the decline to continue throughout the summer.

Point of Care Solutions revenues more than tripled to CHF 1.62 billion in the first half of the year, contributing 18 percent to overall diagnostics sales. Roche's SARS-CoV-2 Rapid Antigen test was the main growth driver, particularly in Europe, the Middle East, and Africa. The POC molecular business tripled, while the POC immunodiagnostics business grew by more than 2,000 percent.

Diabetes Care sales were up 7 percent (and 10 percent at constant exchange rates) in H1 to CHF 894 million from CHF 832 million in H1 2020 and contributed 10 percent to overall diagnostic sales. The growth was driven by the blood glucose monitoring business, which increased 13 percent. Insulin delivery system sales were down 7 percent.

Pathology Lab revenues rose 16 percent (and up 20 percent at constant exchange rates) to CHF 590 million from CHF 508 million in H1 of 2020 and contributed nearly 7 percent to overall diagnostic sales. Growth in the advanced staining business by 20 percent and companion diagnostics business by 15 percent drove the increase, Roche said.

In April, Roche acquired GenMark Diagnostics for $1.8 billion to complement its portfolio of molecular tests. Currently, GenMark has two ePlex Respiratory Pathogen Panels and three ePlex Blood Culture Identification Panels on the market. The firm is developing additional panels, including one for gastrointestinal diseases. Schinecker said Roche plans to use its development and manufacturing expertise to expand the rollout of GenMark's tests across the world, since its current products are mostly on the market in the US.

Roche CFO Alan Hippe said the sales impact from the GenMark acquisition was CHF 21 million in the first half of 2021.

By geography, diagnostics sales for H1 grew 44 percent in Asia Pacific, increased 25 percent in North America, and were up 70 percent in Europe, the Middle East, and Africa. Sales grew 77 percent in Latin America.

R&D spending by the Diagnostics division totaled CHF 807 million in H1, and general and administration expenses amounted to CHF 274 million. Marketing and distribution spending grew by 8 percent to CHF 1.33 billion, largely due to higher costs from distributing high volumes of the company's SARS-CoV-2 rapid antigen test, Schinecker said.

Net income for the Roche Group decreased 3 percent (but was up 2 percent at constant exchange rates) to CHF 8.22 billion, or CHF 10.56 per share in H1, from CHF 8.47 billion, or CHF 10.44 per share, in the first half of 2020. The appreciation of the Swiss franc against most currencies had a negative impact on the results expressed in Swiss francs compared to constant exchange rates, the company said.

As a result of the half-year results, Roche confirmed its previous guidance for full-year 2021 of 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.

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