Roche to bring on Lufthansa leader as new chairman

Christoph Franz

After months of searching, Roche will bring on the CEO of Germany's signature airline as its new chairman in 2014.

Bloomberg reports that Roche named Christoph Franz, CEO of Deutsche Lufthansa, to replace longtime chairman Franz Humer next year. In March 2013, the Swiss drug and diagnostics giant ($RHHBY) announced Humer would depart after Roche's 2014 annual meeting, capping 16 years serving as CEO, chairman or in both roles simultaneously.

It's a bit of an ominous choice, considering that Franz spent his two years in charge at Lufthansa slashing thousands of jobs but also modernizing Lufthansa's fleet. Franz has served on Roche's board, and knows the company. Roche also had wanted someone in the slot who spoke German and was knowledgeable about Switzerland, and Franz fits those requirements (among others).

What does this mean for Roche's diagnostics arm? Well, first, let's acknowledge the space that Humer's departure creates. As Bloomberg notes, Humer gets credit for helping to develop Roche's companion diagnostics strategy, which involved linking the company's diagnostics and drug units together. And Roche's diagnostics arm has seen some major expansion in recent years. The company's diagnostics revenue jumped to $5.4 billion in the first half of 2013, thanks, in part, to increases in professional testing and immunoassay sales. Companion diagnostics sales have also grown steadily. And CEO Severin Schwan has said Roche has "55 key diagnostics platforms and tests" now under development.

But Roche's diabetes care segment has continued to struggle, dropping 5% over the first two quarters of 2013, battered by continued pricing pressure and reimbursement challenges for its blood glucose meters. Roche's molecular diagnostics revenue barely grew though in the first half of the year, neutered, in part, by sluggish sales in genome sequencing. (And on the drug side, Roche's development successes have been mixed, with more wins in cancer than in other areas.)

Roche has been restructuring its diagnostics arm and slashing jobs, but CEO Severin Schwan has said he expects new lab tests--plus new drug approvals--to drive revenue growth for the rest of 2013. Will it be enough? Franz has a proven track record at Lufthansa in helping a company revamp itself. But it took a lot of pain to get there. His arrival at Roche may be a sign that the company will be pushing for more aggressive reorganization and change overall. Diagnostics will continue to be an important part of the company's game plan, and further restructuring could give the division even greater influence and weight.

- read the full Bloomberg story
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