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Roche Dissolves Applied Science Unit as It Ends IBM Alliance

(Updates with analyst comment in the fourth paragraph.)

By Thomas Mulier and Naomi Kresge

April 23 (Bloomberg) -- Roche Holding AG will dissolve its Applied Science laboratory supply business because of cuts in research funding and price pressure, affecting 170 jobs and ending an alliance with International Business Machines Corp.

Roche said two types of products the unit sells to scientists working with samples of genetic material will become part of its Molecular Diagnostics unit. Roche’s custom biotechnology portfolio will join the Professional Diagnostics business, while the company will create a unit to focus solely on gene sequencing, the drugmaker said in a statement today.

Roche may be reacting to its competitors Life Technologies Corp., acquired by Thermo Fisher Scientific Inc., and Illumina Inc. having developed faster, cheaper ways to sequence genes, said Fabian Wenner, a Zurich-based analyst for Kepler Capital Markets. The Basel, Switzerland-based maker of drugs and medical technology abandoned a hostile takeover bid for Illumina over the U.S. sequencing company’s price demands.

The latest changes are a “defensive move, and the acquisition would have been defensive as well,” Wenner said in a telephone interview today. He has a buy rating on Roche’s shares.

The reorganization will affect 110 jobs in Penzberg, Germany and 60 in Branford, Connecticut, Roche said, adding its outlook for 2013 remains unchanged.

Roche shares rose 1 percent in Zurich at 10:30 a.m. local time, giving the drugmaker a market value of 196 billion Swiss francs ($209 billion).

Roche and IBM agreed in July 2010 to try to make genome sequencing for medical purposes cheaper and more common. The drugmaker said today it had ended its partnership with IBM for the development of a nanopore-based sequencing platform, due to high technical risks involved.

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