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Roche To Invest In Diagnostics Manufacturing Unit In China

November 10, 2014
Life sciences
Swiss pharmaceutical giant Roche Holdings has 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. The facility will focus on developing equipment and kits for clinical laboratory testing, and will be fully operational by 2018. However, we believe Roche’s ambitions are not just limited to this as Asia Pacific region offers ample growth opportunities for multiple segments of medical devices and diagnostics market.
 
Our current price estimate for Roche stands at $38.54, implying a slight premium to the market price.
 
Roche is investing in a new diagnostics manufacturing site to become more responsive to the 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. If we just look at point-of-care diagnostics, China is going to lead the growth. There are a number of factors that are expected to drive this, including growing funding and research activities, government initiatives and changing disease profiles. The increasing prevalence of lifestyle diseases such as cardiovascular disorders and diabetes will promote sales of self monitoring devices and rapid diagnosis. Point-of-care diagnostics equipment can do just that. This fits into Roche’s strategy of investing more in this area. 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. It only makes sense to consolidate the market position in Asia Pacific region to fully leverage these acquisitions.
 
Source: Forbes

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