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Roche Diagnostics to get indirect boon from new test

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Last week's U.S. approval of a new Roche drug-diagnostic combo for skin cancer won't by itself produce much revenue for its diagnostic division, but it could indirectly be a boon for the company's U.S. diagnostic headquarters in Indianapolis.

The U.S. Food and Drug Administration approved a new genetic test to go along with a new Roche melanoma drug on Aug. 17. The BRAF V600 Mutation Test for use in Roche’s cobas 4800 fluid analyzers will determine which patients are eligible for treatment with Zelboraf, the new medicine for patients with late-stage, metastatic melanoma, the most dangerous type of skin cancer.

The approval of the drug and test together is a first in U.S. history, although many pharmaceutical and diagnostic firms are working to achieve the same feat.

“That really to me substantiates what Roche has been saying for several years, that personalized health care is ... critical for the future,” Jack Phillips, CEO of Roche Diagnostics’ U.S. operations, said in an interview.

The money in this approval will come from the drug, which will sell for about $113,000 for a year’s treatment, according to an Aug. 17 report by Goldman Sachs Group Inc. Goldman analysts project Zelboraf could reach sales of $535 million by 2015, with other analysts saying it eventually could approach $1 billion per year.

Nearly 70,000 Americans are diagnosed with metastatic melanoma each year. But the number of patients that are in late stages of the disease and have the BRAF V600 mutation likely will only be about 7,000 per year, Deutsche Bank analyst Tim Race wrote in an Aug. 17 report.

Roche Diagnostics will sell the BRAF test for about $120 to $150 for each time it’s run, Phillips said. So if Deutsche Bank’s estimates are correct, the test would generate about $1 million a year in revenue.

But the real value to Roche Diagnostics is if it helps sell more cobas 4800 machines to laboratories, which will then run all of Roche’s other tests. The cobas 4800 runs a variety of DNA-based tests, such as ones for Chlamydia and gonorrhea, as well as for the human papillomavirus, or HPV.

“It really hits medical value and hits a home run around medical value,” Phillips said. He added, “That creates big demand for one test, but it will also drive customers to bring in Roche’s platform to run all our other tests.”

Not to mention that each cobas 4800 system costs between $250,000 and $300,000.

The new combination was developed in California, where Roche Diagnostics’ molecular research and development team is and where Roche subsidiary Genentech Inc. developed the drug. Roche's corporate headquarters is in Basel, Switzerland.

But sales of the test and the cobas 4800 will be handled out of the Indianapolis office.

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