Roche ekes out diagnostics growth as diabetes biz falters

Roche's ($RHHBY) colossal diagnostics arm inched upward in the first 9 months of the year, growing 2% over 2012 as the company restructures its diabetes and applied science segments.

Diagnostics sales came in at about $8.5 billion for the period, fueled by the $4.6 billion professional diagnostics segment, which grew 5% thanks to strong demand for immunoassays and the launch of the Cobas 8100 platform. Molecular diagnostics revenue stayed flat at about $1.3 billion, as a continued slump in life sciences sales dragged down growing revenue from HPV tests and oncology companion diagnostics.

Diabetes, long the blighted spot on Roche's balance sheet, fell another 3% to about $2 billion on the period as pricing pressures around the globe tanked sales of blood glucose monitors. Roche is counting on some new product launches in its Accu-Chek franchise to pay off down the road, and the company said it is in the midst of broad-based restructuring of its diabetes segment, rethinking cost structure, sales, marketing and innovation. So far, that has amounted to hundreds of job cuts and the separation of its blood glucose testing business from the insulin pump R&D unit.

Roche CEO Severin Schwan

Roche is also still in the throes of dissolving its applied science business, cutting 170 jobs as it shifts still-profitable research products over to diagnostics and pulls the plug on some gene sequencing bets that never panned out.

But it's not all slash and burn in Basel. The Swiss giant is still spending money to expand its share of the testing market, last quarter dropping $220 million on Constitution Medical, a hematology specialist Roche said will give it a broader stake in the $2 billion blood-testing space. And while CEO Severin Schwan has rejected the idea of a megamerger with Novartis ($NVS), he maintains that Roche won't be shy with its checkbook if it sees an attractive deal in diagnostics.

Overall, Roche hauled in $38.5 billion in the first three quarters, 3% growth driven by the strong sales of the company's banner cancer therapies, led by Herceptin, Perjeta and Kadcyla.

- read Roche's full results (PDF)