Roche exec sees brighter days for company's flailing diabetes testing biz

Roland Diggelmann, COO of Roche Diagnostics Global--Courtesy of Roche

Some have speculated that Roche ($RHHBY) would sell off its diabetes testing business amid floundering sales. But at least for now, the company is holding on to the unit.

"It's still a good business. We don't disclose the margins but it is a cashflow-generating business and it's a business with a future," Roland Diggelmann, head of Roche diagnostics, told Reuters.  

For the past three years, U.S. price cuts have taken their toll on Roche's diabetes testing business, but the Swiss testing giant thinks the unit will bounce back in the near future. Increasing obesity and Type 2 diabetes rates, particularly in emerging markets, translates into more demand for blood glucose meters, Diggelmann said.

"You shouldn't expect growth this year, but next year I think it will go back to growth. That's definitely our vision," Diggelmann told the news outlet.

Roche, which leads the market in diabetes testing ahead of Johnson & Johnson ($JNJ), Abbott ($ABT) and KKR/Panasonic, has stumbled in diabetes care in recent years. The company's diabetes care sales fell to 2.13 billion Swiss francs ($2.19 billion) in 2015 from 2.39 billion Swiss francs in 2014. Roche recorded another 13% drop in sales for the unit during the first quarter this year.

Those numbers prompted rumors that Roche would follow in the footsteps of Bayer. Last year the company sold its diabetes testing business to KKR and Panasonic for $1.1 billion to lighten its load and concentrate on more profitable units.

But Diggelmann thinks things are on the upswing for Roche's diabetes business. U.S. pricing pressure is leveling out, Diggelmann told Reuters. "I can't say where the bottom is but I think we are pretty close to it," he said.

And the company is working hard to distinguish itself from the pack. Roche is launching new products, Reuters points out, and plans to roll out a continuous glucose monitor this year.

But the company is taking a more reserved approach toward innovation. It won't be easy or quick to develop a good alternative to finger-prick testing for diabetes, Diggelmann told Reuters, even though companies such as Novartis ($NVS) and Google ($GOOG) are making headway on a smart contact lens that could monitor blood sugar.

- read the Reuters story