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Roche Reports Flat Q1 Diagnostics Sales

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

NEW YORK (GenomeWeb) – Roche today reported flat sales for its diagnostics division in the first quarter of 2019, driven by decreased sales in the centralized and point-of-care business and diabetes care business that were partially offset by strong growth in its molecular diagnostics business.

Roche as a whole, including both its pharmaceutical and diagnostics divisions, had CHF 14.83 billion ($14.70 billion) in sales in the quarter, up 9 percent from CHF 13.58 billion in Q1 of 2018.

The Swiss company's diagnostics division reported sales of CHF 2.90 billion for Q1, essentially flat compared to sales of CHF 2.91 billion in the year-ago quarter. At constant exchange rates, diagnostics sales increased 1 percent. The pharmaceutical division had CHF 11.93 billion in Q1 sales, up 12 percent (10 percent at constant exchange rates) from CHF 10.67 billion in Q1 of 2018.  

Michael Heuer, CEO of Roche Diagnostics, said during a conference call to discuss Roche's earnings that the centralized and point-of-care solutions business continues to bring in the most revenue for the division, but the molecular diagnostics business was the largest contributor to growth in the quarter. 

Revenues for the centralized and point-of-care solutions business, which contributed 58 percent to diagnostics sales, decreased 2 percent (1 percent at constant exchange rates) to CHF 1.68 billion from CHF 1.72 billion. While the immunodiagnostics business grew 3 percent, clinical chemistry sales were down 2 percent, and point-of-care products decreased 12 percent. Sales in China were impacted by reduced distributor inventory levels, though Heuer said that "a return to normal ordering patterns was observed at the end of Q1 already." Also, sales in the US were affected by free-of-charge deliveries following the recall of CoaguChek test strips last November.

Molecular diagnostics revenues, contributing 17.3 percent to overall diagnostics sales, grew 7 percent (same at constant exchange rates) to CHF 502 million from CHF 468 million. The unit was the largest contributor to diagnostics sales growth in the quarter. Sales in cervical cancer diagnosis grew 52 percent and sales in blood screening grew 14 percent. Also, microbiology sales grew 40 percent, point-of-care molecular diagnostics grew 18 percent, and virology sales were flat. Sales in liquid chromatography, qPCR, and nucleic acid purification systems declined 5 percent.

Diabetes care revenues, contributing 16 percent to sales, shrunk 3 percent (but grew 1 percent at constant exchange rates) to CHF 465 million from CHF 478 million. Sales were driven by Roche's new Accu-Chek Guide and Accu-Chek Instant blood glucose monitoring systems. While blood glucose monitoring sales, which make up the majority of the diabetes care business, grew 1 percent, insulin delivery systems sales decreased 4 percent. Roche also expanded its agreement with Senseonics in the quarter for the distribution of the Eversense XL insertable continuous glucose monitoring sensor in 17 additional markets in Europe, Latin America, and Asia Pacific.

Tissue diagnostics revenues, which contributed 8.7 percent to sales, grew 1 percent (and decreased 1 percent at current exchange rates) to CHF 251 million from CHF 249 million. Sales were impacted by BenchMark and Discovery Ultra instrument shipment delays during the quarter, which resulted in lower instrument placements in North America and the Asia-Pacific region. Heuer said Roche expects "to completely resolve the issues within the next few months." Advanced staining sales, which account for the bulk of the tissue diagnostics business, grew 2 percent, primary staining sales remained flat, and companion diagnostics sales shrunk 19 percent.

Heuer pointed out the March FDA approval of the Ventana PD-L1 (SP142) test as the first companion diagnostic to identify triple-negative breast cancer patients eligible for treatment with Tecentriq (atezolizumab) plus chemotherapy. The assay measures PD-L1 on tumor-infiltrating immune cells to identify patients most likely to benefit from the treatment.

He also highlighted the recent launch of the Cobas VivoDx system for antibiotic resistance testing, which provides results in under 6 hours and can perform 96 tests per 8-hour shift. Heuer said that Roche is "currently in the process of engaging and organizing early access to key customers in Europe to work with the CE-marked Cobas VivoDx system" and featured the system at the European Congress of Clinical Microbiology and Infectious Diseases in Amsterdam this week.

He also mentioned the recent launch of version 3.0 of the Cobas Infinity Laboratory Solution, a software management solution for diagnostic laboratories.  

In addition, Heuer talked about the launch of the Navify Mutational Profiler and Navify Therapy Matcher, a clinical decision support solution for next-generation sequencing labs, in March. The software is "aiding labs to overcome a major workflow challenge in clinical next-generation sequencing – interpreting complex NGS datasets to identify clinically actionable findings and treatment options," he said. "Navify Mutational Profiler combined with Navify Therapy Matcher offers curated knowledge-based genetic variants to help interpret the clinical significance of mutations and identify suitable therapies."

Roche increased its revenue guidance for 2019 and now expects growth in the mid-single-digit range at constant exchange rates, and core earnings per share growth broadly in line with sales.