Roche wants to expand diabetes business, not sell it

Roche is looking to expand its $2 billion-per-year diabetes business, not sell it or spin it off.

Diagnostics division head Roland Diggelmann dismissed reports the Swiss drug maker was considering options for the diabetes business he oversees, calling them "false."

Speculation may have been triggered by Johnson & Johnson's (J&J) announcement last week that it aims to divest a similar unit, he said.

Instead, Diggelmann is hunting for technologies outside his company to potentially bolster a portfolio that now includes glucose monitoring products and insulin pumps as he seeks to arrest a revenue slump heading into its third year.

"We basically have all of the technologies we need in-house in varying degrees of development, so we have to ask ourselves, 'How far are we along?'" Diggelmann said in an interview. "We're looking around: Are there new possibilities, are there alternatives?"

Diggelmann's pledge to keep the diabetes business, which is the world's biggest ahead of J&J's, chimes with a similar commitment Roche made last year.

Sales of Roche's diabetes products in 2016 slipped 4 percent to 2 billion Swiss francs ($2 billion), hurt by price pressure in the United States and extending a slide that began in 2015.

CHINA DEMAND

One bright spot for the business was Asia, where a 16 percent sales rise was primarily driven by China. Diggelmann estimates 100 million people in China may be diabetics, with only a small proportion diagnosed.

Regulators would block attempts by Roche to snap up J&J diabetes assets, he acknowledged, adding those were not interesting anyway, as they overlap with Roche's existing portfolio.

Acquisitions for the diabetes franchise will likely instead fit the mould of Roche's recent buying: Smaller, targeted purchases aimed at adding novel technologies, said Chief Financial Officer Alan Hippe, describing the company's M&A philosophy.

Roche has the financial clout both to make acquisitions and reduce its 22 billion francs of debt during 2017, Hippe said.

"The capital markets are open to us," Hippe said. "From a financial perspective, we've got room to navigate."