Roche Sees Diagnostics Growing as Health-Care Cost Reductions Spurs Demand

Roche Holding AG (ROG) expects government austerity measures to boost its medical-diagnostics unit in the next three to five years thanks to broader use of tests to see which patients should use expensive treatments.

The number of tests to help single out the patients who will benefit most from Basel, Switzerland-based Roche’s medicines should double within two to three years, Roche Diagnostics Chief Operating Officer Daniel O’Day said in an Aug. 23 interview.

“No country is going to be able to afford to increase the percentage of GDP spent on health care,” O’Day said. “What they’re all looking for is how we can take this certain pie we have for health care and better leverage it for society.”

Products such as a test to detect human papillomavirus, a cause of cervical cancer, and a gene test approved this month alongside Roche’s new melanoma drug Zelboraf will be “solutions for how the countries divide the pies more efficiently,” O’Day said. Roche expects growth at the diagnostics unit to exceed the market this year, outpacing the drugmaker’s larger pharmaceuticals unit as sales decline for its best-selling cancer drug Avastin.

Roche is developing a companion diagnostic test for MetMab, being studied together with the company’s lung tumor medicine Tarceva for patients whose tumors have high concentrations of the Met protein. Roche also made a test to be sold together with pertuzumab, a breast cancer drug being submitted to regulators for approval this year.

Acquisition Plans

“We’ll see a greater percentage of the business of Roche being tied up and connected between pharma and diagnostics in the next three to five years,” O’Day said. He met last week with journalists in Frankfurt and Zurich.

Roche continues to plan small- to mid-sized acquisitions to complement its diagnostics business, he said.

Roche got 22 percent of its revenue last year from diagnostics. The unit was largely spared a wave of job cuts announced in November to offset drug-development setbacks and price pressure from changes in U.S. and European health-care systems, O’Day said.

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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