Roche bets big on companion diagnostics

Roche CEO Severin Schwan--Image courtesy of the Roche Group.

More than 60% of Roche's ($RHHBY) pipeline drugs will come paired with companion diagnostics, the company's CEO said, as the Swiss pharma giant follows through on its heavy investment in personalized medicine.

Severin Schwan told investors that the company's long-term plans are heavily focused on targeted treatments, and Roche's large in-house diagnostics division is responsible for more than 200 companion diagnostics projects. Roche's pipeline boasts treatments for cancer, Alzheimer's and schizophrenia, most of which will be coupled with diagnostic assays when they reach the market, the company said.

All this comes as Roche faces a 2014 patent cliff for Herceptin, a blockbuster breast cancer treatment whose companion diagnostic tests patients for a protein called HER2 to ensure the drug's effectiveness. With its focus on biomarker discovery and diagnostics development, Roche is looking to duplicate that drug's success with its pipeline treatments, Schwan said.

The drugmaker's focus on companion Dx comes as little surprise: Schwan and Roche Pharma COO Daniel O'Day are both veterans of the company's diagnostics division, and Roche has invested heavily in the unit of late. Since its well-publicized failure to acquire Illumina ($ILMN) for $6.7 billion this year, Roche has said it plans to build its molecular diagnostics business through internal projects and partnerships. And it's done just that, committing $300 million to expand Roche Diagnostics' Indiana headquarters.

The bet has already started to pay off. Roche Diagnostics reported $1.4 billion in sales in the first half of 2012, a 5% uptick from the same period in 2011. About $511 million of that came from professional diagnostics equipment, and Roche has continued to get FDA approvals and clearances for clinical test kits, this week scoring a sign-off on two new herpes assays.

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