Dive Brief:

• Roche reported a 61% increase in molecular diagnostics revenue across the first six months of 2020 during its second quarter results presentation Thursday. The company said COVID-19-driven demand enabled its testing unit to grow despite a slide in sales in other parts of the company.

• Roche said sales in its largest diagnostic business, which sells centralized and point-of-care products, fell 15% during the first half of the year. But soaring sales of COVID-19 tests offset those losses, causing the overall diagnostics business to finish up around 3%.

• Thomas Schinecker, CEO of Roche Diagnostics, expects a “very good” second half of the year on the grounds that routine testing will return while demand for COVID-19 kits remains high.

Dive Insight:

Sales across all Roche units fell 15% in May as demand for COVID-19 diagnostics failed to fully offset the negative effects of a decline in routine testing and drop in pharmaceutical sales caused by the deferral of appointments. The easing of restrictions imposed to curb the spread of the virus led to a recovery late in the quarter. Overall sales were up 3% in June.

The trend suggests a torrid period for some of Roche’s franchises may be coming to an end. Sales of immunodiagnostics and clinical chemistry products fell 12% and 14%, respectively, over the first half of the year. The products make up most of the sales at Roche’s largest diagnostics unit.

Those downward trends were partly offset by positive developments at Roche’s far smaller molecular diagnostics business, which sold twice as much hardware as usual. Revenue from virology products jumped 115% over the six-month period. Sales of LightMix modular assay systems rose faster still, soaring 171%. Much of that growth came in the second quarter, when sales at the subunits grew more than 200% despite falling revenue from routine testing. This time last year, sales at the subunits were flat to down. 

That sales growth was made possible by novel distribution strategies. With lockdown grounding plans, Schinecker said Roche “had to charter a number of flights” to get its products into countries. The flights contributed to a 5% increase in cost of sales that was justified by the revenue growth and unmet need.

Roche plans to build on its momentum in COVID-19 by introducing four new products. Two of the products are combined coronavirus-influenza tests. A “rapid” antibody test and a Elecsys assay for detecting antibodies to the coronavirus spike protein are also in the works. Roche said the Elecsys assay will be important for vaccines that target the spike protein the virus uses to enter human cells. 

As it stands, Roche also expects to benefit from the return of routine testing. “Clearly there is a certain upside potential. We see the routine business coming back. As far as the molecular diagnostics business is concerned, there is no doubt we will sell anything we can produce over the next half year,” Roche CEO Severin Schwan said on Thursday's earnings call.

Schwan declined to share details of Roche’s capacity to make PCR and antibody tests but did say that the “vast majority” of COVID-19 sales growth is from molecular testing. That reflects the fact that the antibody tests are cheap and have been adopted less due to uncertainty about their ability to show if a person is immune. Schwan expects demand for antibody tests to rise as vaccines come to market.