Roche Diagnostics Roundup: Gradual Addition To Portfolio

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Roche Holdings (NASDAQ:RHHBY) has been making small acquisitions to gradually bolster its diagnostics portfolio, which constitutes roughly 15% of the company’s value according to our estimates. The industry’s overall growth has slowed down. Bigger companies are likely to acquire budding diagnostics startups that can bring innovation and new technologies to the table, thereby making a difference. The incremental value addition is likely to be small because we don’t expect any dramatic change in diagnostics profit forecast. However, there have been some notable acquisition in recent weeks that are worth talking about. It is interesting to note that while J&J has been trimming its medical devices and diagnostics division, Roche has been building through small acquisitions.

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Here we list three transactions;

1) Roche has signed a definitive agreement to acquire GeneWEAVE Biosciences, which is involved in developing novel microbiology diagnostics techniques. [1] Roche will make an upfront payment of $190 million, and an additional $235 million contingent on certain milestones.  So what does Roche get out of it? GeneWEAVE can help identify multi-drug resistant bacteria quickly. This is important as it will help in speeding up the treatment process as well as drug development to thwart the threat to bacteria’s growing resistance to antibiotics.

2) Roche is also acquiring Kapa Biosystems, which develops genomics tools to optimize enzymes for DNA sequencing and PCR (polymerase chain reaction) applications. [2] This might help Roche in speeding up the testing and product development.

3) In its latest bid, Roche has agreed to acquire Lumora’s as proprietary nucleic acid Heat Elution purification technology. ((Roche purchases innovative nucleic acid purification technology from Lumora to enhance sample preparation for sequencing, PR Newswire, Aug 24 2015))  The acquisition will help Roche isolate nucleic acid much quicker compared to other technologies in a simple and automated fashion.

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Notes:
  1. Roche acquires GeneWEAVE to strengthen offerings in microbiology diagnostics, Roche Press Release, Aug 13 2015 []
  2. Roche to acquire Kapa Biosystems to strengthen next-generation sequencing product offerings, Roche Press Release, Aug 19 2015 []