Roche’s Expands Diagnostics Position With The Acquisition Of Ariosa
Swiss pharmaceutical giant Roche Holdings (NASDAQ:RHHBY) recently announced the acquisition of Ariosa Diagnostics, which makes non-invasive prenatal testing equipment. The terms of the deal were not disclosed by Roche in its press release. According to WHO, there are over 200 million pregnancies worldwide annually and prenatal testing to detect Down syndrome is gaining strong traction. [1] This move not only allows Roche to establish a foothold in a new and growing market, but also emphasizes the company’s confidence in the overall diagnostics industry. Given that J&J’s medical devices and diagnostics business hasn’t grown much in recent years, Roche’s acquisitions and investments may indicate that it is doing something better than its competitor and perhaps knows which key markets to target.
Our current price estimate for Roche stands at $38.54, implying a slight premium to the market price.
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Earlier this year, Roche announced that it will invest 450 million Swiss Francs or $463 million (at current exchange rates) to set up a new diagnostics equipment manufacturing facility in China. [2] The facility will focus on developing equipment and kits for clinical laboratory testing and will be fully operational by 2018. Asia Pacific region offers ample growth opportunities for multiple segments of the medical devices and diagnostics market. Roche is investing in a new diagnostics manufacturing site to become more responsive to the local market, and expand its presence in Asia-Pacific region. The demand for diagnostics and testing equipment is growing in China in particular, and Asia Pacific in general. We believe that the increasing prevalence of lifestyle diseases such as cardiovascular disorders and diabetes will promote sales of self monitoring and rapid diagnosis devices. In early April 2014, Roche announced the acquisition of IQuum, which is involved in developing point-of-care molecular diagnostics systems. Roche stated that it will make an upfront payment of $275 million and additional payments of upto $175 million on achieving certain development milestones.
In mid 2014, Roche announced the acquisition of Genia Technologies in a bid to further strengthen its diagnostics portfolio. Genia is involved in developing a next generation, single-molecule, semiconductor-based DNA sequencing platform using nanopore technology. Roche will make an upfront payment of $125 million in cash to Genia, with additional payments of upto $225 million on achieving certain development milestones. The company is hopeful that by leveraging Genia’s technology, it will be able to bring the cost of DNA sequencing down and at the same time, improve its speed and sensitivity. DNA sequencing refers to the process of determining the accurate order of nucleotides in a DNA molecule. This helps in recognizing new genes and their association with diseases, and also helps in identifying drug targets.
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- Roche acquires Ariosa Diagnostics and enters the non-invasive prenatal test (NIPT) and cell-free DNA testing services markets, Roche’s press release, Dec 2 2014 [↩]
- Roche to invest 450 million Swiss Francs in new diagnostic manufacturing facility in China, Fierce Pharma Manufacturing, Nov 5 2014 [↩]